I've been dealing with a seller recently that has been approached by one of these "We Buy Houses" people. The snake oil salesmen are back at it again with these people... Promising them the world!
If you are in a situation that you need to sell your house be very careful and talk to a real estate agent that has dealt with a short sale and the loss mitigation department of the bank.
Here is what they were promised and it was amazing to me. They were promised if they sell their home with a real estate agent that they would have to pay 7-10% and they would lose all that equity in their home, where as if they sold it to them, they wouldn't have to pay a cent.
But, if you read the fine print of their paperwork, it states they negotiate with the bank to buy it from them for 70-75% of what it is worth and then they sell it quickly at 90-95% of the appraised value. This way they guarantee they have a quick sale and a hefty profit for them selves.
Now, it is true the home owner doesn't have to pay a dime to a real estate agent or the bank. But what they don't tell you is that if you had any equity in the home that you would lose that even if it was 10-15%. You pay nothing, but you also get nothing and most of the time they lie to you about what your home is worth. They ask you what you think your home is worth and if the number they have in mind of buying for and that number match, they will try to purchase it.
Now, here is what they never tell you, even in the fine print, and it really can get you into trouble at the end of the year. If your home is worth $250,000 and you owe $230,000 and just to avoid paying a real estate agent you sell it to a person that negotiates with your bank to get the price lowered to say, $200,000, then at the end of the year you get what is called a 1099 from the bank for the difference. So when you go to turn you your taxes, that $30,000 between what is owed and what the person bought it for now becomes income on your taxes. So you are paying for someone to buy your home, just at a later time, and you never get to see that $30,000. (Consult your CPA for more information on foreclosure and the 1099 and how it may affect your tax liability)
For more information on selling your home prior to the bank taking it back, feel free to contact me anytime.
Todd Clark - broker
Kastings & Associates
(503)524-9494
Todd@IFoundYourNewHome.com
www.IFoundYourNewHome.com
Unfortunately, most people don't read the fine print and believe the guy that is promising to rescue them from their financial woes. You are so right that the IRS will collect payment for the difference.
You can't escape the IRS.
Patricia Aulson/Lic REALTOR/NH/ME/MA
Jeannette,
Lucky for me I usually talk to these people prior to them signing anything with these other companies and I show them the fine print. They quickly realize that the buyers math does not work out!
It is always a bad situation when people are taken advantage of.
John it is even worse when it always seems to be do to job loss, medical bill or death in the family. I feel like these people couldn't make it as an ambulance chaser, so they found themselves a new job.