Real Estate Alert: Summer Scam – Cash Offers

I received this alert from the Colorado Department of Real Estate and thought it was applicable to all real estate markets. If you are selling a property take a minute to read this important information.

Real Estate Alert: Summer Scam – Misrepresentation of Cash Offers

The summer selling season is warming up and the inventory of available homes for sale is very low. As a result, sellers are receiving multiple offers, often times higher than the asking price and many of these offers are written as an all cash purchase. As such, buyers are structuring offers to be the most attractive for the sellers given their individual circumstances.

The Division of Real Estate has received reports of real estate brokers submitting offers as an all cash purchase based on a buyer’s pre-approval letter for financing. A pre-approval letter is not a commitment to lend or a guarantee that a buyer will receive a loan, but rather an estimate of purchasing power and the ability to repay the loan based on information provided by the buyer to the lender. Pre-approval letters are usually subject to verification of the buyer’s employment, assets, credit, and collateral. Under no circumstance would a buyer be considered as a “cash buyer” when they have engaged the services of a lender for the purposes of obtaining a mortgage loan for the purchase of the subject property.

The Real Estate Commission would consider it a misrepresentation and a possible violation of license law for a real estate broker to submit an all cash offer based on a buyer’s pre-approval letter.

Regardless of the working relationship, single agent or transaction broker, a broker has a duty to exercise reasonable skill and care. The omission of information in section 3 (Dates and Deadlines), specifically the loan objection deadline, and misrepresenting the purchase price and terms in section 4 of the Contract to Buy and Sell Real Estate may be considered negligent and subject to disciplinary action. Additionally, pursuant to sections 12-61-805(3)(a) and 12-61-807(2)(b)(VII), C.R.S., a broker has an obligation to disclose all adverse material facts concerning the buyer’s financial ability to perform the terms of the transaction. Care should be taken in accurately completing the sales contract.

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Department of Real Estate

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Kimberly Smith is an accomplished entrepreneur and published author with more than 20 years experience as an entrepreneur in the areas of real estate, property management, corporate housing, website development and franchising. In 1999 Kimberly and her husband/ business partner, Eric, launched AvenueWest Corporate Housing, Inc., a multi-million dollar success story. AvenueWest provides real estate property management of furnished residential properties offering full service corporate housing services to upscale executive travelers in need of a monthly lodging solution. A recognized leader in the industry, they were awarded CHPA’s 2010 Provider Company of the Year Award and listed for 3 consecutive years on Inc Magazine’s Inc 5000 list of the countries fastest growing businesses. Inspired to help people find corporate housing and real estate solutions on a national basis, Kimberly and Eric came up with a business idea to create a national resource dedicated to connecting furnished rental properties with executive renters. In 2006 (CHBO) was launched, the first-of-its-kind online portal connecting furnished rentals and the traveling public. In 2013 CHBO was recognized by CHPA as the Associate Company of the Year. In 2009 AvenueWest Global Franchise was launched allowing for the national expansion of the AvenueWest Managed Corporate Housing product. Current offices are located in Phoenix, Atlanta, Fort Collins, San Francisco, Boston, Dallas, Denver and Colorado Springs.

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