Let the Buyer Beware? How About Let the Seller Beware?

By Deborah Lambeth

So, you’re selling your house and it’s been sitting on the market for months. After turning down a couple of lowball offers you finally get an offer that is exactly what you’re asking for! Within the offer, though, is a request to make a donation to a company that will assist the buyer in purchasing the home. Sound strange to you? It is. And instead of a "buyer beware" situation, this is a case of "seller beware."

The IRS has been investigating these so called "non-profits" and has made a ruling that they are illegal. The way the organization works is that a potential home buyer completes paperwork and sends it into one of these companies. The company, in turn, sends a letter (or includes as part of the offer to purchase contract), a form the seller needs to complete as well as send in a prescribed amount of money. This prescribed amount is added on to any closing costs that the seller may be assisting the buyer with, so it becomes a huge financial investment on the part of the seller. The scam is that you are paying for the buyer to buy your house.

Consider the case of Ms. Miller. Ms. Miller had moved out of town and was trying to sell her house so that she wouldn’t have two monthly payments. The house had been on the market for 9 months with only one offer, and that offer fell through. Finally, an offer came in and because Ms. Miller really wanted to sell her house, after much thought she agreed to pay $4500 in closing costs (which is about double the normal amount). She and her agent got the offer to purchase and looked over it.

Within the offer to purchase was a form that stated if Ms. Miller made a donation of $4500 to a non-profit organization and paid closing costs, then there would be a deal. Keep in mind; the buyer’s agent had not said anything about this "donation" to Ms. Miller’s agent. In the small print, Ms. Miller also discovered that the company charged a $500 fee to the seller to process the application for the donation.

Even though these organizations call themselves non-profit and are registered as such, the government is saying these are scams and they really are for-profit agencies. Fortunately for Ms. Miller, she did some investigating on the company in question and found the information from the IRS. She contacted her agent and said no to the offer.

Buying and selling a house can be a fun and exciting time. But the fun and relief shouldn’t overshadow having clarity of thought and paying attention to your gut feeling if something just doesn’t feel right. More often than not, your gut is right!