We found this great house a few weeks ago for a client of ours. We’d been looking for months in a particular subdivision and this house was just what she wanted and the list price was reasonable for a bank owned property that needed just a little TLC. We went to make an offer and were directed to “GoHoming.com”…..uh oh…. I remembered running into this before with another client…this was not going to be pretty.
GoHoming is an auction format, marketing platform for bank owned properties. It’s just like Ebay, but they’re selling houses. Sounds kind of fun…until you dig a little deeper. Anyone can make an offer, you don’t have to be a realtor, which is fine. I’m ok with people who want to do it themselves, we used to do that too. The problem is GoHoming is set up entirely for the ease and benefit of the sellers and Buyers put themselves at great risk in purchasing a home from them, whether you work with a realtor or not. Here’s our story as a case in point.
Our client really wanted to make an offer on this house, so we started reading everything on the website and making countless calls to the call center in India to ask follow up questions. We read the sample purchase contract. We did all the due diligence we could to make sure that we weren’t putting our client at risk. Here’s what we found.
- Unlike most real estate contracts, which are set up with the Buyer in mind and provide numerous contingencies for the Buyer to get out of the purchase without losing their earnest money, GoHoming’s contract provides no such contingencies for the Buyer.
- For the house we were interested in, there was no Inspection contingency, meaning, if we did an inspection and found something grossly wrong, we could not cancel the contract. We got an inspection done before considering making an offer on our own to be sure there were no surprises.
- In Colorado, where we work, Buyers have the opportunity to get out of the contract for any of the following issues: Inspection; Title; Survey; Loan; Appraisal and HOA policies. GoHoming’s contract did mention the Title and Loan contingencies but when I pressed them about it on the phone, their response was…”it is up to the Seller’s discretion”….meaning, the Seller gets to decide if the Buyer’s concerns with the Title or the Loan they are trying to acquire are valid. In our standard, state approved real estate purchase contract in Colorado, if the Buyer objects to something, that’s good enough and they can pull the plug on the contract and get their earnest money back. The Seller doesn’t get to decide or object.
- What this means, is that the Buyer’s earnest money is at risk. And the earnest money is steep!! In our case for a $190,000 home it was $10,000!! That is 4 or 5 times the norm in our area where earnest money is usually 1 or 2% of the sale price. Once you’ve signed the contract, you are all in. There are no guaranteed ways to get out of the contract, even with totally legitimate cause. That’s not a good thing.
- Even knowing all of this, our Buyer still wanted to proceed. So we said, ok, we’ve done the Inspection, we know the house is basically ok. We’re confident of your loan and the appraisal. How about the Title? So, we had an O&E (Ownership and Encumbrance) report done by our Title company. This is something anyone can have done by a Title company. It’s a quick snapshot to see if there are any liens on the property and who the owner is. Lo and behold, we found 5 or 6 liens on the property, including $140,000 federal tax lien, an HOA lien, a car lien…even though the house had gone through foreclosure.
- That was the straw that broke the camels back. It’s possible that these liens could have been cleared up in the foreclosure process already and they just hadn’t been recorded properly yet. In a normal purchase situation, it may have been possible to explore that and resolve it. But in this case…..no way we’d get into that. We’d heard horror stories online about dealing with GoHoming and we could just imagine what this process would have looked like dealing with call center employees in some distant land. Let alone the fact that we would have had no clear means to cancel the contract and get our earnest money returned.
So, bottom line, we would recommend staying far away from GoHoming.com. This is not because we are opposed to the concept of selling property in different ways. It’s possible that a process like this could work well. The problem is, this particular process is completely unfair and risky for Buyers. I can’t imagine what it would be like as an innocent buyer stepping into a home purchase in this way. Your everyday home buyer has no idea of the risks and what they’re getting themselves into. It’s amazing in a way that something like this is allowed at all. This is not like purchasing an Ipod or even a car on Ebay….these are houses, costing Hundreds of Thousands of Dollars! It’s pretty scary.