Written by Miguel Fernandez Morales | Published on November 6, 2023
More than once I have received those hand-written-looking cards in my mail offering to sell my house for cash with no realtors. As a realtor myself, I always thought there was a catch. Until I saw an article in CBC news about a woman who used this service and lost around $60,000 to save $25,000 in commission hiring a realtor.
How It Worked for Her
Laurie was having troubles with her finances and had seen street signs and posters in her neighbourhood — companies offering to pay quick cash for houses. She'd even received what appeared to be a hand-written flyer in the mail, advertising a hassle-free cash sale — no renovating, open houses, or Realtor commissions.
She found a company called Honest Home Buyers Incorporated (HHBI), based in nearby Hamilton. Her contract was with HHBI, so Laurie thought she was selling directly to them. "I thought I sold my house to him, right there. Done deal."
But the buyer didn't actually buy Laurie's house. He secured the option to sell it to someone else before the closing date — at a potentially higher price. It's called an "assignment" contract — the house can be sold to another buyer before the closing date. In Ontario, and across the country, all residential real estate contracts can be assigned to another buyer unless there's a clause explicitly stating that isn't allowed.
Any profit made on the sale goes into the company's pocket, not the seller's — different from licensed real estate agents, who take a commission but leave any profit beyond that for the seller. Laurie said the fact that the contract could be assigned to another buyer was news to her — there was no language explaining that was allowed.
Some contracts are weighted even more favourably for cash-for-houses companies; they contain a clause that lets the company back out of a deal completely if no buyer makes an offer by the closing date. "In most of the cash for homes contracts I've seen, there's a lot of wiggle room for the buyer to get out of that contract. It's literally, 'Heads I win, tails I don't lose.' It's a zero-risk business model."
Three weeks later, the company flipped the house to new buyers who paid $610,000 — $60,000 more than her contract, which they pocketed.
The lesson: Always work with a licensed real estate agent to protect your interests when selling your home. If you're considering selling, contact Miguel Fernandez Morales at 647-894-0553 or visit www.yourfamily.incomrealestate.com for expert advice.
Source: CBC News