Unwrapping the Property Wrap

Unwrapping the Property Wrap

What to look out for when selling your own home (Part 1)

In any market, property or otherwise, there are those participants you can trust and those who I like to call ‘Buzzards’, or if they are really of questionable integrity – ‘Bottom feeders’ – like the fish you might see skimming along the bottom of a body of water for easy food pickings.

Picking the good guys from the bad guys can be tricky, but I will give you some tips to weed out the ‘Quick Buck Merchants’ from the ‘Straight Shooters’. The particular un-conventional property transaction method I would like to bring to your attention in this blog is called ‘Wrapping’.

In over a decade of front-line marketing, negotiation and sales of hundreds of residential properties, I have spoken to at least 20,000 enquirers, lookers and buyers. A small proportion of these have been individuals or groups looking to acquire property well outside of the conventional and trusted transaction methods we all know.

The Property Wrap

Several Property ‘Gurus’ are espousing the ‘virtues’ and money making capabilities of property wrapping as an acquirement method with headlines such as “Buying Property for Just a Dollar Down” and the like.

As a Home Seller, whether privately or through an Agent, be on the lookout. Some of these wrappers are also preying on the less switched on Agents, trying to source ‘desperate’ or unsuspecting home sellers.

To simplify the modus operandi of a property wrapper…

They will present as an ordinary everyday, garden variety buyer. They may have indicated that their reason for buying a property is for investment purposes. If they are interested in your property and it meets their criteria, they will immediately offer full listing price or close to it. Great!!! Is it? No, then they will propose this:

  1. A part payment to you, maybe 10 -20{5be8b5650852dcf96a34828ba5a88d9285f6c7439f02c8133f6b05e7d943eaff} or a bit more, up front.
  2. The balance of the price of your property payable to you over three or so years paid either weekly, fortnightly or monthly until the full agreed price is paid out.
  3. As soon as you leave your property on the agreed date, the buyer installs a tenant/buyer into the home who pays weekly rent/purchase instalments well above normal principle/interest rates.
  4. If that tenant/buyer defaults by just one week, the buyer (new owner) has the legal right to evict the tenant/buyer, source a new one.
  5. So, a portion of the money being paid by the tenant/buyer is forwarded to you (the previous owner) as the part payment for the balance of your agreed price. The buyer (new owner) is a ‘go between’ and has little financial ‘skin’ in the game.

The risks for sellers are fairly self explanatory. Signing a deal to receive full payment for your property sometime in the future has inherent risks no matter how a contract is worded and put together. Someone else had possession of your home without you having been paid full value up front.

For those who take up one of these deals as the tenant/buyer, be aware that you will pay well over market price for your rent/repayment and just one payment default could have you on the street, losing any payments you have made up until that point.

In a nutshell, avoid this type of purchase method like the plague and only do business with buyers who have money ready to go or are being financed by a reputable lending institution, and will pay you the FULL agreed amount on settlement day.

As the market segment increases for those Australian home owners selling their house privately, with it comes those who look to prey on the uninformed or the potentially desperate. More and more, the decision to sell your own home will be seen as a savvy business decision, especially with the new marketing, knowledge and support platforms offered to home owners. Saving $10,000, $15,000, $20,000 or more and getting the same result, a successful sale, is nothing to be sniffed at. However, it can also make you a target for the bottom feeders. Take care.

……and that’s a wrap.

Published by

Craig - Agent in a Box

Sharing 18 years of frontline real estate sales experience to help you be better prepared to sell your own home.