I am selling my primary residence (fsbo), and instead of fixing it up myself I'm marketing it as-is to local investors (basically wholesaling my own house) becuase I am settling on my new house soon and don't want to extra work or expense right now. So far I've had a lot of intereset. Some low-ball offers, some just below what I owe, and one that will net me about $5K...And that's the one I find myself questioning. Here's why: • Investor said she and partner are paying cash (not hard or private), but still want 30 days to close. • They only want to put down $10 in EM, which I feel let's them walk from the deal REAL easy. • Contract is contingent on inspection (even after walkthrough). • Contract is contingent to (and I quote) "Buyer's Partner's approval". What do you all think of this? I'm new to REI and this will be my first sale. I would love this deal to go through but I'm seeing red flags. Am I imagining them, or should I trust my gut on this one?

If there is a particular term for such a clause I'm not aware of it. The experienced RE attorney who shared this tactic described it as providing the seller a contractual remedy that allowed them to give a 60 day notice for nonpayment and then taking title if the payments didn't resume, similar to a foreclosure, but without the credit hit or auction). Said attorney recommended that I as a Sub2 buyer put this clause in for the seller so that if I become unable to pay, my seller will have a contractual remedy. The purpose for giving the seller a remedy is a) to increase the seller's comfort with the Sub2, and b) if things go south, having an alternative to litigation in the contract reduces my risk of litigation. It simply occurred to me that you could use the same type of clause when selling. I'm not a lawyer and I have never sold via Sub2; I underscore again the need to work with a really good lawyer if you or anyone else wants to go down this road.

@David Weiss , I could see the need for a larger down payment. One of the issues is that the house still needs work, but on the other hand there is a good bit of equity to be had when considering the ARV. Is there a term for the clause that would let me reacquire the property easily-ish if they fail to pay @Jeremiah B. for me it's about getting it done and protecting myself. Right now they have 2.75 stikes against them, so it won't take much to push me over the edge. @J Scott I really like the kickout clause suggestion. I'm going to be looking into that one. Now that we're on the subject of sub2, perhaps this is another means of me selling my house. Has anyone sold to an end buyer (person who will be living in the house) using sub2? Thanks everyone.

The other option is to enter into the contract with a kickout clause. This basically allows them to get the property under contract, but you can keep marketing it, and if you get a better offer from someone else, you have the right to terminate the contract and move on to your new buyer. That way, if a new buyer doesn't come along and these guys actually are able to close/assign the contract, you can get the house sold. Win/win for you...

I agree with @Wayne Brooks - Cut this person loose. Even if Sub-2 was a good solution, I wouldn't enter a contract with this person. They have already miss-represented themselves which speaks to their integrity. With that said - props! You smelled out a sleezeball and protected yourself against a bad deal. Well done.

I'm not sure I'd agree this is categorically true. For example, if you have enough equity in the house you can require a large down payment (10% or 20% down or something like that--you'd want more than $5k) when selling Sub2 and include a remedy in the contract that allows you to reacquire title if they fail to pay. You'd then save enough of the DP to be able to make payments yourself while you reacquire your title and find another buyer. Using this strategy, you can turn a Sub2 borrower's inability to pay into an advantage instead of a disadvantage (because you end up being able to sell your house twice, the second time with more equity). You also avoid the foreclosure, credit damage and deficiency judgment. Of course, this doesn't create a risk-free opportunity: the house might come back to you with extra damage, etc. Note that based on the discussion to date, I don't think these buyers would agree to the above. My purpose is to speak in a more general way that a smart Sub2 agreement coupled with significant cash reserves can mitigate some of the aforementioned risks. In short, get a good RE lawyer with deep experience in creative financing transactions to review your situation and you may find that (if no better options come along) it may be possible to sell via Sub2 with a level of risk you are comfortable with.

Not sure why you'd continue talking with these people as they are clearly misrepresenting their intentions from the get go. If you are so inclined, I'd have a little fun with them and ask for POF of the $5k. They thought 1k EMD was too much, now it's no problem to bring 5k to closing? This is a perfect example of the problem I have with wannabe wholesalers. Good wholesalers provide a valuable service and are worth their weight in gold, but these wannabes are not only wasting your time and money (you have to make mortgage payments, taxes, insurance while your property is tied up), but they could potentially wreck someone's credit and cost them a lot of money and grief if the seller blindly entered a sub2 deal with them. Ugh...

Thanks, @Tiger M. & @Wayne Brooks . I'm not going to take them up on the offer, but it is a chance for me to learn about these things as I go. I want to be able to get some use out of them since they are tyring to pull one over on me. As for my marketing, I've been marketing to investors and to the retial market on my own. Craigslist, postlets, zillow etc., sign in the yard, FaceBook page & ads, and the BP marketplace. The property has been pickup up by zbuyers (I think that right) and I got two investor referrals for that today alone. I'm getting lots of exposure, but only one solid offer (for 10K less than I owe) right now. As for agents, I have had several offer to be my lister, and until recently haven't had one propose a plan of action more comprehensive than just putting it on the MLS (which I could do for $150 on my own). I finally found one that is offering to do more than just that, so I'm considering it now.

Cut this person loose, right now. Do NOT enter into a sub2 deal. If you do, they get title, and if they don't make the payments you'll be foreclosed on by your bank before you can foreclose on them, your credit gets trashed, and you'll get stuck with a deficiency. They were Obviously trying to wholesale from the beginning. The "subject to partner's approval" is the classic "I'm not going to buy your property, I'm trying to flip it" clause.Do some better marketing, consider using an agent and getting it into the MLS, where it will be seen by everyone, including the investors they were trying to shop it to at a marked up price.

@Justin Prevatte Where do I start....? I have purchased and sold on wraps, All Inclusive Trust Deeds and Contract for Deeds. Its a great leverage play buying but selling is a challenge, especially if you care about your credit. Do you really want to foreclose on them while making the payments to protect your credit? The potential for them to rent it and skim the rents while not making payments would rank pretty high as a concern. I think they already revealed that they are not shooting straight and you were smart enough to call them out. Why put yourself through the potential headache?

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Does this 'cash' offer sound legit?

Justin P.

Investor · Brandywine, MD · Member since 2013 · 84 posts · 21 votes

I am selling my primary residence (fsbo), and instead of fixing it up myself I'm marketing it as-is to local investors (basically wholesaling my own house) becuase I am settling on my new house soon and don't want to extra work or expense right now. So far I've had a lot of intereset. Some low-ball offers, some just below what I owe, and one that will net me about $5K...And that's the one I find myself questioning. Here's why:

Investor said she and partner are paying cash (not hard or private), but still want 30 days to close.
They only want to put down $10 in EM, which I feel let's them walk from the deal REAL easy.
Contract is contingent on inspection (even after walkthrough).
Contract is contingent to (and I quote) "Buyer's Partner's approval".

What do you all think of this?

I'm new to REI and this will be my first sale. I would love this deal to go through but I'm seeing red flags. Am I imagining them, or should I trust my gut on this one?

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Does this 'cash' offer sound legit?

Does this 'cash' offer sound legit?

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