We Buy Unwanted Houses…Or Do They?

Brad Jones

The Charlotte area real estate market remains hot and with that comes opportunists looking to make a dollar in real estate.  I receive solicitations from investors who claim to want to buy my house weekly (sometimes, three or more per day in my mailbox).  Telephone posts across the city are adorned with advertisements proclaiming to “Buy Unwanted Houses” or “Pay Cash for Your House”.  No doubt, it is tempting to want to cash in on the appreciating value of homes in the area.  However, homeowners should be cautious if they are approached by persons or companies who “pay cash for houses”.

This is not to say investors who want to buy your house are trying to use a ruse to take advantage of homeowners, but a homeowner giving serious thought to such a sale should know what questions to ask.  You, as the seller of a property, will want to know the circumstances under which the transaction will close.  Is an attorney closing the deal?  Who does the attorney represent and will they represent multiple interests in the transaction?  How will their mortgage payoff be handled?  Who will the end buyer be?  The investor?  An unknown entity that is a stranger to the negotiations and contract?  A trustee of an unknown trust?

If your sale does not involve the full and complete payoff of all mortgages you have outstanding on your property, this is a major red flag that danger is ahead.  There are investors who will “buy” a seller’s equity in the property (in essence, pay the seller the net amount of money they would realize from a sale), but use not-so-obvious methods to keep the seller’s existing mortgage open.  This frequently involves conveying the property to a trust arrangement of which the seller will have no control.  From there, the investor may use its own funds to make mortgage payments until the property sells to a third party for a profit, or rent the property out and use rent monies to pay the mortgage.  The seller, meanwhile, is unaware until the property does not sell or is unrented, and the investor stops paying the mortgage.  It is only then the seller realizes they are still on the hook for the mortgage they thought was paid when they “sold” the property.

Every deal is different, but homeowners should be particularly cautious of sale arrangements that are not traditional arms-length sales to a buyer who intends to live in the house.  You could find yourself on the wrong end of a deal that puts your credit and financial well-being at risk, and could cost you thousands of dollars in lender fees and legal expenses to clean up.  Don’t let someone else use your credit to finance their deal.  Call an attorney at Black, Slaughter & Black, P.A., in Charlotte or Greensboro if you have concerns about the terms of any real estate transaction you are contemplating.