Home Selling in Cleveland>Question Details

Kokie, Home Buyer in Cleveland, OH

Home builder buying our existing house? Scam or not?

Asked by Kokie, Cleveland, OH Mon Aug 4, 2008


We are currently working with a builder. They have a deal that if you build through them, they will pay for the construction and have an onsite realtor to help you sell your existing home. Then, if our house doesn't sell by the time the new house is done, they have agreed to buy it from us for whatever our mortage is worth. This would give us 4-5 months to try and sell it through their realtor and make a little money on it.

This seems like a pretty good deal to us. We have been in our current home for about 3 years and don't have a ton of equity built up, so I feel like we'd be lucky to be able to get anything for it above what our mortage is worth after realtor fees, etc.

Any thoughts on this, good or bad? Any questions I should be asking that I haven't already?


Help the community by answering this question:


It sounds like a good builder incentive program especially since you do not have much equity in a down market. However, be sure to have a real estate attorney review the contract before you sign on the dotted line. It is impossible for us to know what caveats might be lurking in the fine print. Besides we are not attorneys.

Right now it is their Realtor and their contract. Get your attorney to review with your best interests in mind -- worth the money! Good luck.
1 vote Thank Flag Link Mon Aug 4, 2008
In addition to the suggestions below, ask the builder for a current list of clients that have done this program, and interview them on how the process went. If it is that good, then the other buyers will sing thier praises!

Good Luck!
0 votes Thank Flag Link Mon Aug 17, 2009
I would recommend doing a comparison. Interview a couple of Realtors, have them analyze your situation, then compare their proposals to the builder's. If you can get the builder's proposal in writing you might want to have an attorney or Realtor look it over.

Good luck.
0 votes Thank Flag Link Mon Aug 17, 2009
Keith Sorem, Real Estate Pro in Glendale, CA
Ryan Homes?
Kokie, very rarely is anything in this life for free. With so many home owners having mortgages higher than what the property is worth, why would a builder/bank pay that off in full for you? Because they're making the money elsewhere. And, of course, they have a side arrangement with the "provided" real estate agent. The question is: if what they're doing worth what you're getting in exchange?
0 votes Thank Flag Link Mon Aug 17, 2009

There are a variety of companies that do this, not only builders but there are a few real estate brokerages that will offer this as well. Generally speaking, the deals are for real, however you'll end up paying a load of fees. Think about it this way...is another company (who we assume to be professionals in this industry) going to buy your home for more than they can turn around and sell it quickly for? They are going to make their profit somehow. And regardless where that profit shows up, you are going to be paying for it. And chances are, you're going to pay a considerably higher price to do things this way, especially in this market.

My advice to you would be to simply sell your home "normally", by using a reputable, local, full-service real estate brokerage. Once you start adding additional forms, charges, and legalese to an already complicated process, you're going to end up with a heavy bill.

Sell your home then build the new one. Too many homeowners have gotten in way over their heads by not doing things the right way. If it sounds too good to be true, it most likely is.

John Mizerek
RE/MAX Pros, Westlake, OH
0 votes Thank Flag Link Sun Aug 10, 2008
Kokie, I think that the question lies with the real estate agent doing the buyout (although the builder is likely paying an amount in commission on your deal in order to assist). If the real estate agent has a strong line of credit, and has performed buyouts before, it may be OK. Did you get the buyout amount in writing? Make sure that you're very clear on the terms, and that the agent is capable of making the purchase with a new loan (no assumptions or owner carry). Good luck!
Web Reference: http://optionsrealty.com
0 votes Thank Flag Link Mon Aug 4, 2008
Caveat Emptor -Let the buyer beware.
Have you asked them for an Estimate of Seller's Net Proceeds for your home's sale?
The fact that they are "providing" a Realtor sort of concerns me. Do you get to interview them?
Not all Realtors are created equal.
You still want to net as much as possible right?

Have you had anyone give you an estimate of your home's market value? You might want to look at the link below. It appears that prices are falling...
0 votes Thank Flag Link Mon Aug 4, 2008
Keith Sorem, Real Estate Pro in Glendale, CA
Just make sure that if the builder agrees to buy back your home, then he pays the Realtor fees, not you. Also, make sure the fees are paid from the equity in the house and not in addition to the purchase price. Having a lawyer take a look at the contract, which will most likely be from the builder is wise.
0 votes Thank Flag Link Mon Aug 4, 2008
It works well unless the builder goes bankrupt in which case someone is left holding an empty bag. Unfortunately, many builders are facing difficult financial circumstances and bankruptcy is never completely out of the question in this day and age.
0 votes Thank Flag Link Mon Aug 4, 2008
Sounds good to me. Just have a good contract that spells all that out to your satisfaction. Good luck.
Web Reference: http://www.liveinakron.com
0 votes Thank Flag Link Mon Aug 4, 2008
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