|Traps for Buyers
In the more than twenty five years of experience in specializing in the brokerage of income properties, exclusively, we have encountered many potential traps that a buyer can fall into. Many of these can result in sever financial loss. The vast majority of these traps are inadvertent and not maliciously planned in advance. Some are. Here are examples of both:
- Self eliminating contingency periods which obligate a buyer without his knowledge. These are not uncommon in boilerplate clauses used in pre-printed generic contract forms.
- Having the good-faith deposit tied up for periods well beyond when the transaction is terminated.
- Conditions of the property not disclosed even to the listing agent, or which were disclosed but withheld from the selling agent.
- Clauses in a purchase agreement that require that further funds are needed to close a transaction but are not revealed to the buyer until it's too late to back out of the transaction and the deposit is at risk.
- Being encouraged to make an offer on a property that is not truly for sale, even where the agent doesn't even know who the identity of the seller. This can lead to:
- An arrangement where the buyer's agent secretly becomes an agent for the seller with financial repercussions that can be most unfavorable to the buyer.
- The offer submitted by the buyer is not presented and that agent becomes the listing agent for the seller .
- The offer is "shopped" to other prospective buyers to motivate them to offer a higher price.
- The agent constructs a counteroffer when the seller rejects the buyer's original offer, the terms of which satisfy the seller but the disadvantages to the buyer are not disclosed to the buyer.
- Allowing the agent to arrange for the loan funds and arrange for the loan agent to pay him a undisclosed fee for bringing the loan agent some new business.
- Allowing the escrow to be handled by an escrow officer who is on friendly terms with the seller's agent, or the seller himself. The disadvantages to the buyer (traps) are so subtle that they may never be discovered.
- Having a binding purchase agreement that allows for circumstances to eliminate the advantages of an exchange relied upon by the buyer. This can happen in several different ways.
This is only an example. There are at least a dozen more traps that even the most knowledgeable buyer can fall into. There may be some that we haven't yet come across, but after 25 years of specialization it would be rare.