Watch ID theft when selling by-owner

Q: I placed my home on a for-sale-by-owner Web site and was contacted by someone who said he wanted to buy it.

He provided an offer via e-mail and I found that price to be acceptable provided that he put down some earnest money. The buyer asked for a contract offer sheet, which I filled out to include both the price of the home and the earnest money to be required.

I didn't sign the contract but asked him to sign it and forward it to me along with the earnest money. I had an expiration date on the contract to make it null and void if I did not receive it within a certain period of time.

He responded to my e-mail stating that no earnest money was required, as he intended to pay cash. I ignored that e-mail, and have assumed that since he didn't want to put down any cash, he wasn't that interested in the house.

Here's my question: What risk have I taken by providing this individual with an unsigned "contract to sell" for my house?

A: As long as you didn't have a lot of personal information on the contract (such as your Social Security number, name, etc.), you're probably OK in terms of identity theft.

But your guard should have been up when the buyer made an offer to purchase your home without having seen it. While that does happen from time to time, it's still rare, and I think it raises a lot of red flags.

What could you have done differently?

When selling a house, particularly when you're selling without an agent, you should hire an attorney to help you handle situations like this. Having an attorney on board can help you weed out potential scam artists who won't want to tangle with your legal team.

If you had said, "Joe, thanks for your offer. I'm glad we agree. My attorney will call you to discuss the contract and arrange for a good faith deposit," I'm guessing that you would have figured out before a contract was sent that this guy wasn't legit.

If you work in a state that does not generally use real estate attorneys and you opt not to hire one, your personal information should be given only to the closing agent or escrow agent.

In general, you should never give anybody any of your personal information when selling your home in this manner.

It's terrific if you can sell by owner and save yourself the commission. But you should have a solid team on hand who can help you get through the process of selling your single biggest asset. A good real estate attorney is at the top of my list.

Q: I recently made an offer on a pre-foreclosure home in New Jersey. The process has taken an extremely long time. Now that it's time to close on the deal, I find myself unable to purchase the home because after having two offers and two failed attempts at selling my own home, I am now unable to afford both mortgages at the same. Because I can't sell my home, the mortgage company has declined to lend me money.

Because we thought we were going to get the house and time was running out on our contract's inspection contingencies, we went ahead and paid for a home inspection and well water inspection.

Soon after receiving these reports, we learned we would be unable to get a mortgage. I informed my lawyer and asked him if we could try and recoup some of the money we paid by offering the inspection reports to another potential buyer.

A day after sending my lawyer this e-mail, he gave both of the inspection reports to the sellers' lawyer.

Can my attorney give this information to the sellers without my permission, especially under the circumstances? And, can the sellers' lawyer then just go ahead and give this information to the next potential buyer?

If so, how do I go about getting reimbursed for this information that I paid for?

A: Let's review the situation: You made an offer for a house and now you can't go through with the purchase because your house hasn't sold. But because you thought it was going to happen, you paid to have several different inspections performed. That's what you were supposed to do.

But why would you think that someone else would reimburse you for these expenditures? You paid for these as part of the process of buying this house. It's part of the due diligence that buyers should go through. Any smart buyer would likely discard your inspections and pay to perform new ones to be sure the information was solid.

Your attorney may have had an obligation to deliver these inspection reports to the sellers under the terms of your contract. Have you asked your attorney why he delivered the reports to the sellers? Perhaps by delivering the home inspection report and well water inspection report, he believed that you would have a better shot at getting back your earnest money -- the cash you put down as a deposit to buy the house.

As for the sellers, if they now know that something is wrong with their property, they'll have to fix it or disclose it on their seller disclosure form. It's unlikely that these reports you paid for would be passed along to anyone.

But to go back to your original question, unless your contract provides for your seller to reimburse you for your home-buying expenses, you may be out of luck. In some states under certain limited circumstances, if a seller delivers a seller disclosure report to a buyer with statements that are not truthful and the buyer then terminates the contract, the buyer may be entitled to recover from the seller the costs the buyer incurred associated with the home purchase.

You may want to talk further with your attorney, but it's likely that you're going to have to accept the cost of these inspections as the cost of buying a home and terminating the deal.

Good luck with the sale of your house.

To get even more valuable advice from Ilyce, visit her Personal Finance and Real Estate Center.

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