Before You Sign With a Cash Buyer

If you own a home in Texas, you’ve probably gotten the postcard, the text, or the handwritten-looking letter: “We buy houses for cash. Any condition. Close in seven days.” For some homeowners, a quick cash sale really is the right move. But many of those offers don’t come from people who plan to buy your house at all.

A lot of them come from wholesalers. Signing with one isn’t always a problem, but it can be, and the trouble usually starts with a signature the homeowner didn’t fully understand. Here’s what to know, and how to check things out for yourself before you sign anything.

A wholesaler isn’t really a buyer

A wholesaler signs a contract to buy your home, usually at a steep discount. Then, instead of closing on it, they look for someone else to take over that contract and pay them a fee for it. In many cases, the company whose name is on your contract never intended to own your house.

That matters because your sale now depends on whether they can find that second buyer. If they can’t, the deal may fall apart late, after you’ve already turned down other options or made plans to move. And the price you agreed to was set to leave room for their fee, not to reflect how homes like yours are selling on the open market.

How one signature can tie up your home

Once you sign, some investors record the contract, or a short notice of it, at the county clerk’s office. That puts the whole world on notice that someone claims a right to buy your house. Any future buyer’s title company will find it, and it can stop a different sale cold until it’s resolved.

If you change your mind and try to walk away, the investor may sue to force the sale. When a lawsuit involves real estate, a notice of it can also be recorded with the county, and that notice follows the property until the case is settled. Homes can sit frozen for months this way.

It gets worse if a homeowner signs with more than one investor. Each one may believe they have the right to buy, and the homeowner ends up in the middle of a fight over their own house. I’ve seen property records where this kind of tangle took a home completely off the market.

What Texas law says they have to tell you

Wholesaling is legal in Texas, but there are rules. Someone who plans to sell their contract rights instead of actually buying your home has to tell you that in writing. They also can’t act like your real estate agent, such as negotiating on your behalf or putting your home on the MLS, unless they hold a real estate license.

If the paperwork you’re handed doesn’t clearly say whether the buyer plans to close themselves or pass the contract to someone else, ask. Look for words like “and/or assigns” after the buyer’s name, or an addendum about “equitable interest.” Those are signs the contract is meant to be sold. You can read about these rules yourself on the Texas Real Estate Commission website and in the Texas Legislature’s analysis of the law.

How to check out a cash buyer yourself

You don’t have to take anyone’s word for who they are. Most of this is public record, and you can look it up for free.

• Look up the company. Search its exact name on the Texas Comptroller’s or Secretary of State’s business search. You’ll see whether it’s registered in Texas, where it’s based, and how long it’s been around. An out-of-state mailing address on a “local” buyer is worth noticing.
• See whether they actually buy homes. Your county clerk’s online records let you search by name. A real buyer will show up on deeds as the new owner. If you mostly find recorded contracts or assignments instead, they’re probably selling contracts, not buying houses.
• Check for lawsuits. Search the same name in your county’s district clerk case records. A pattern of suits against homeowners tells you how they handle a seller who wants out.
• Call the title company yourself. Find its number on your own, not from the investor’s paperwork. Ask whether they have an open file on your address and whether earnest money has been deposited.
• Look at the earnest money. That deposit is what the buyer stands to lose if they walk away. A token amount, like $10 or $100, means they have almost nothing at risk while your home is tied up.
• Read reviews in more than one place. Look past the company’s own website. Complaints filed with the Better Business Bureau or the Texas Attorney General’s office are worth checking too.

Before you sign anything

Take the contract home and read every page. Don’t sign at the kitchen table on the first visit, no matter how good the deadline sounds. A buyer who’s serious will still be serious tomorrow.

Find out how homes similar to yours have been selling on the open market, so you can see what the cash offer is really asking you to give up for speed. Ask in writing what happens if you change your mind, and what happens if they can’t close. For a contract this important, paying a real estate attorney to look it over is money well spent.

A fast cash sale can be the right answer for some homeowners. The goal is just to make that choice with your eyes open.

If you have questions about selling your home, I’m happy to help.

This article is general information, not legal advice.

Sources

• Texas Real Estate Commission
• Texas Legislature: bill analysis for SB 2212, equitable interest disclosure
• Texas Comptroller: taxable entity search
• Texas Attorney General: file a consumer complaint