Wednesday, August 20, 2008

When Things Sound Too Good To Be True

Recently, a colleague contacted me to talk about listing her home. Funny thing was, when I got there, a sign from another company was already placed. I rang the doorbell and proceeded to tell her I could not even discuss listing her home as she already had it listed with another company. And that's when things got really confusing.

She did not know who this company was or why the sign was in her yard. I scratched my head quite abit. What she did have was an agreement from one of the "we buy houses" companies. Then things started to make sense. I looked at the copy of the agreement and realized what had happened. The agreement was an option to buy her house at a set price. The company had 90 days to purchase her house at the agreed upon price or the option would expire, plain and simple, right?

Only in the option it allowed the company to market her home through a third party (the real estate company whose sign was in the yard) who listed it at much higher than the option price. Are you following me yet? Because it took me awhile to get what was going on. The "we buy your house" company and the listing company would split the profit should it sell at the listed price and the "we buy your house" company would pay the owner the much lower option price.

What was really funny was the "we buy houses" literature stated one reason to use them versus a real estate agent was avoiding paying "high commissions" to the agent. Even at the higher listed price, my commissions would likely have been significantly less than the money to be split by the two companies. That is, unless I can negotiate a 25% commission and if I am able to do that, I am better than I think I am.

So, you ask, what did my friend do? I'm not sure. I did not advise her on anything as these are legal matters and I am not an attorney. I told her I could not be of any service at the present time.

Just remember, the old adage is so true, a deal too good to be true probably isn't.

1 comment:

Mark Coker said...

Good work Myra! I've always wondered what the catch was whenever I saw those signs on every street corner.