Stagnant home-sales market invites doubtful purchase schemes

Home sales have fallen to their lowest level in the last six years, according to the National Association of Realtors. The market is so tight, in fact, that it is forcing some property sellers to accept offers that are potentially disastrous to their best interests.

One such far-out-type offer - cash to buyer - is surfacing with increasing frequency in California. Despite substantial risks, these offers are being seriously considered and even accepted by a surprising number of sellers.

Persons making the offers are, for the most part, the same type of individuals who were pushing for ''no down payment'' acquisitions a year ago. But now that the sales market is even tighter today, the same people want more than property without down payment. They're demanding cash along with their acquisition.

It's basically a con game whereby potential buyers are exploiting the urgent needs of sellers in a buyer's market. The seller is often the loser in a big way.

Government real-estate regulators are concerned about the newly emerging scheme and are beginning to crack down.

In a ''cash to buyer'' transaction, as the name implies, cash is transferred to the buyer along with a deed to the property. Most of the deals are basically set up this way:

The buyer arranges for the largest ''first'' or ''second'' mortgage loan he can find to finance the purchase. He then persuades the seller to carry back a large junior note, secured by a mortgage or trust deed on the purchased property.

The combination of the new outside loan and seller carry-back loan usually far exceeds the current market value of the property.

Regulatory officials call such an arrangement a ''buyer walk-away'' transaction because that is what often happens. The buyer simply takes his money and walks away. The seller is stuck with the loss.

As an example, in a case now under investigation by the California Department of Real Estate the seller had an equity of $237,000 in a home valued at $275,000 . The seller accepted an offer calling for a new institutional ''first'' loan of the amount of another $165,000, secured by a second trust deed.

In return for the seemingly high price (on paper), the seller agreed to share the cash received from the new first loan with the buyer.

Predictably, after the transaction closed, the buyer made no payments on either his first or second loan and the seller did not have sufficient cash to reacquire the property at the trustee's sale.

In this case the seller's net loss was about $184,000.

The walk-away buyer was a person who had been involved in several previous ''cash to buyer'' schemes.

This is not an isolated or small-potatoes problem. It started to emerge as a significant trouble spot in the real-estate market about a year ago and has grown ominously since then.

''The incidence of 'cash to buyer' problem cases has increased markedly in recent months,'' the California Department of Real Estate reports. ''We are currently investigating more than 20 such cases,'' it adds.

A department spokesman says a form of the ''cash to buyer'' scheme already is involved in about 1 percent of all real-estate transactions in the state. ''No study has been made yet, but that's a fair estimate,'' he asserts.

The department notes that one key cause of the growing problem is the increasing number of books, speakers, and seminar sessions that focus on methods to acquire real estate with no down payment or with a ''cash to buyer'' bonus. The subject seems to effectively sell books as well as seminar attendance.

These promoters overlook the moral and ethical aspects of the methods they espouse. In many cases, it's simply a con game against unknowledgeable property sellers.

Indeed, it's a problem that is causing increasing concern by many ethical real-estate professionals and government regulators. The best solution, it is suggested, is probably more and better consumer education on the subject.

A knowledgeable seller, or one guided by competent counsel, is in the best position to avoid high-risk propositions that might seem tempting when presented.