PURCHASE CONTRACT AND ESCROW INSTRUCTIONS - Any downsides

[Kasi V Thiagarajan]

Hello fellow investors,

I recently listed my property on Zillow as FOR SALE BY OWNER. Within days, I received several calls and emails with offers to buy under PURCHASE CONTRACT AND ESCROW INSTRUCTIONS. They sent me a contract to sign with the purchase price and timeline.

My concern is how they can provide a price without even inspecting the property. Additionally, repair costs (if any),  all closing costs are covered by the buyer, and there is no commission!

Is there a catch? What are the potential downsides of this process? What clauses should we be careful of? While under contract, can we still offer to sell to others?

Thanks for the help.

[Bob P.]

Quote from @Kasi V Thiagarajan:

Hello fellow investors,

I recently listed my property on Zillow as FOR SALE BY OWNER. Within days, I received several calls and emails with offers to buy under PURCHASE CONTRACT AND ESCROW INSTRUCTIONS. They sent me a contract to sign with the purchase price and timeline.

My concern is how they can provide a price without even inspecting the property. Additionally, repair costs (if any),  all closing costs are covered by the buyer, and there is no commission!

Is there a catch? What are the potential downsides of this process? What clauses should we be careful of? While under contract, can we still offer to sell to others?

Thanks for the help.

Lol. It's probably a wholesaler. Lots of "catches". The P&SA "can be cancelled at anytime for any reason" from their end but not from yours, the EMD is fully refundable to them, and you can't be trying to sell while "under their agreement". It's pretty one sided.

During their "inspection period" they will list everything wrong with the property, "real or imagined" and try to get you to reduce your price. They will probably file a memorandum that prevents you from selling without giving them a substantial amount of money. That is a very devastating position to be in.

Before you sign anything, have an attorney look over the agreement and explain it to you.

You want to ask the "buyer", "what is the name of the person that will take title",(if they are not taking it into their name or entity, it is a wholesaler. Also ask "are you covering closing costs", "please provide proof of ability to close." You do have to know how to read these, but at least ask for them.

If you aren't familiar with this process, have someone help you through it.

[Kasi V Thiagarajan]

Thank you so much, Bob. 

I greatly appreciate your quick response. You've clarified my doubts, and now I can make a fully informed decision.

[Casey CJ Noble]

Hi Kasi - there are certainly some red flags here as to the legitimacy of the buyer(s).  Like Bob, mentioned, perhaps they are wholesalers looking to take advantage of an unrepresented seller.  Give me a shout if you'd like to connect to discuss the offers and best options to most efficiently sell your property!

[Corby Goade]

I don't mean to be rude here, but the fact that you are getting offers and you aren't sure what they are or the strategy behind them tells me that you shouldn't be doing a FSBO.

Understanding the strategy and terms behind offers and a P&S is where hundreds of thousands of dollars can be won or lost. The purchase price is just one, small piece of the puzzle.

I'd reccomend that you interview a few agents or brokers to help you list. You'll get better exposure and professional representation. A good agent will more than pay for themselves in profit, time and stress. 

[Ken Holifield]

Totally agree with all the comments so far.  There are many good agents/brokers around here who understand the investing side of real estate.  Find one that you feel comfortable with and use them for their knowledge and expertise.  The real agents/brokers have a license and would not jeopardize their license to make a quick buck like some of the people shooting you quick offers.  Hope this helps, good luck!