Cash Buyer Contract Red Flags: 10 Things to Check Before You Sign

The checklist

1. The buyer's name and assignment terms: check “and/or assigns” or “and/or assignee” against the actual clauses
2. Whether it uses a commonly used standard contract in your state, its edition and any amendments
3. A written answer to “Will you assign or resell this contract?”
4. The deposit: how much, who holds it, and which contractual or statutory refund rights apply
5. Cancellation clauses: conditions, notice requirements and deadlines
6. Deadlines and extensions: can the buyer push the closing date on their own?
7. Access rights: can they bring other investors through or put on a lockbox?
8. Recording clauses: can they record a memorandum against your title?
9. Default terms: the remedies available if either side breaches
10. “Subject to” financing and the title company

1. Who is the buyer, really?

If the buyer's name includes “and/or assigns” or “and/or assignee,” check the assignment clause and any amendments to see whether, and on what terms, the buyer may transfer their interest.

A wholesaler may plan to make a profit by selling or assigning their interest in your purchase contract to another buyer. Ohio's required seller disclosure describes this model and says the wholesaler may also charge the third-party buyer a separate fee.^[1]

The Texas Real Estate Research Center says adding “and/or assigns” can satisfy the assignment-intent notice to the seller; Texas law also requires a separate disclosure to the prospective buyer of the assigned interest.^[2][3]

Ask whether the original buyer remains responsible after assignment and who will actually fund and close the purchase. See assignment of contract.

2. Does it use a commonly used standard contract in your state?

Assignment terms vary by form and edition. Compare the proposed contract with the cited examples below. Forms and editions change; review the exact contract and its amendments.

If a buyer proposes their own contract, ask what it changes from a commonly used standard contract in your state and why. Have an attorney review its edition, assignment terms and amendments.

Colorado's clause is a default in the specified form, not a statewide ban on assignment. Review the signed contract's Additional Provisions and amendments.^[5] Ohio's cited rule covers defined one-to-four-unit residential transactions and excludes specified family and affiliated-entity transfers; it is not a nationwide definition.^[1]

3. Ask about assignment in writing

Ask directly, by email or text so there is a record: “Do you intend to buy this house yourself, or might you assign or resell the contract?”

Fraud and cancellation rights depend on state law and the facts. Ask a real estate attorney whether the buyer's written statements give you a claim or a right to cancel.

Specific states require wholesale disclosures. Ohio's cited statute requires a disclosure in the transactions it covers.^[1] See wholesaling laws by state for other state-specific rules.

4. The deposit

A small deposit provides little money to recover from that deposit itself. It does not necessarily cap the buyer's liability. Check the holder, payment deadline, cancellation and refund rights, and default remedies. See earnest money and the reduction call.

5. Cancellation clauses

The cited California sample includes inspection and cancellation provisions with deadlines.^[9] It is a December 2018 sample, not a verified current form. Watch for broader, open-ended conditions such as “subject to partner approval” or “subject to buyer's inspection and approval” with no deadline.

A wholesaler may plan to assign the contract to a third-party buyer before closing.^[1] Ask who will fund your sale and which contract terms let the buyer cancel.

6. Deadlines and extensions

The cited California form requires extensions and amendments to be in writing and signed by buyer and seller. Check your contract for any built-in extension rights.^[9] This example is from § 29 of the December 2018 sample. Ask how an extension would affect your moving plans and obligations.

7. Access to show your house to others

Connecticut's consumer agency describes wholesale contracts that let buyers show or market property before closing.^[10] Ask whether your contract permits other investors, marketing photos or a lockbox. If you allow access, spell out who can enter, with how much notice, and who is responsible for damage.

8. Recording clauses

Ask whether the contract permits a memorandum or affidavit to be recorded against your title. Have an attorney explain its effect and any applicable restrictions. Connecticut's consumer agency says no lien or encumbrance may be placed on property under a wholesale contract in that state.^[10] Louisiana Act 807 prohibits covered residential wholesalers from recording documents to cloud the owner's title; the Act's scope is defined one-to-four-unit residential wholesale transactions.^[11] See memorandum of contract.

9. What happens if either side breaches

• If the buyer defaults: If the buyer defaults, check whether the contract makes the deposit your only remedy or allows other claims. A small deposit provides limited recovery if an enforceable clause limits you to that amount.
• If you breach: If you breach the contract without a valid contractual or statutory cancellation right, the buyer may seek to enforce the sale, depending on the contract and law. Get legal advice before canceling.
• Compare each side's cancellation rights and remedies. Ask an attorney to explain any imbalance before signing.

10. “Subject to” financing and the title company

In a subject-to sale, the buyer acquires the property while the existing loan remains in the seller's name. A lender may be able to enforce a due-on-sale clause after a transfer without its consent, subject to federal exceptions and the loan's terms. Have the lender and a real estate attorney review the proposal before you sign.^[12]

The title or escrow company handles your money and title. If the buyer proposes a company, look it up yourself and call it at an independently verified number.

Before agreeing to leave a loan in your name, compare the proposal with how a mortgage is paid off in a standard sale.

This guide provides general information. Have a real estate attorney review the proposed contract and the law that applies to your transaction before signing or canceling.