Is a Cash Real Estate Buyer Trying to Rip You Off?

Making a cash sale is about working with someone who’s ready to buy your home without needing a mortgage to do it. Without a financing contingency, a cash sale is a simple, reliable, quick process. Or is it?

Sad but true: Scammers, posing as would-be cash buyers, are out there. All-cash home sale scammers want to swindle sellers out of their hard-earned cash. Some don’t care about buying the home and are really looking for their targets’ personal or financial information.

“We’ll Buy Your Home” 

Many of the “We buy homes!” advertisers are out to take advantage of deed holders struggling to make their mortgage payments. They’re not actually interested in the home. But they are interested in prying the deed out of its owner’s name.

It could be an LLC, trying to get control over the deed to be able to rent out the home. Some manipulators evict the struggling homeowners they promise to help. One thing they will not take on? The mortgage debt. An owner can give up a deed, and be left holding the bag on the mortgage balance—which is suddenly due in full.  

Renters can be taken in by these scams, too. Rent-to-own agreements that come with fees are not always what they seem to be.

Too Good to Be True?

Maybe you’re getting an attractive cash offer, and maybe it’s legit. But if you’re not absolutely sure who your buyer is, look for these red flags:

• It’s an international buyer, or someone who’s hard to reach due to time zones. Granted, some legitimate buyers do buy real estate without seeing it, or from long distances. But most at least want their agent to visit.

• The buyer emails with their financial information. It appears to be legit; but it’s falsified. As a rule, financial account information isn’t something to send in an email.

• It’s an investor who’s eager to send money. Later, if it’s a scam, the investor might ask the deed holder to wire a partial refund. The investor’s payment is forged. The victim’s is real. 

• The advertising is done through mailings and corner road signs. Or from email accounts that aren’t branded with their company’s online presence. Cheap advertising should make viewers think twice (and double down on diligence).

• An investor or LLC puts pressure on the target to get documents signed as soon as possible. The target isn’t given ample time to speak with advisers.

• The investor has no references to other people they’ve engaged, to demonstrate that their offer is valid.

A lot of scammy “cash buyers” don’t actually buy at all. And many assign their agreements to other parties for commissions.

A local, experienced real estate agent performs a screening role for clients who sell. Agents flag unusual conduct or requests. An agent puts your interests first.

How an Honest Cash Deal Works

Normally, it’s the seller who goes looking for offers. So, if you want to sell your home to a company, you can scout for reputable buyers yourself.

Your buyer is a company or an individual who can demonstrate access to ready funds. An authentic cash buyer will need a title search. The title agent will work to find and resolve clouds on the title. It’s important to clear up any boundary disputes, mortgages, recorded judgments, liens, or unpaid taxes from your home’s title.

So, yes, real companies do buy homes from deed holders as-is for a reasonable discount. These sales can go much faster, and spare the seller from a lot of time dealing with the maintenance of the home just waiting for a buyer’s final mortgage approval to come through.

Legitimate buyers will assess the condition of the homes they buy, have them appraised, and make clear offers. They pay the seller by electronic transfer or check. The seller receives payment in full at closing.

iBuyers, where available, generate reliable cash offers online. While not as active in most markets as they were a few years back, iBuyers (like Opendoor and Offerpad) are still around.

iBuyers will ask the seller for photos and live video clips from the seller’s smartphone. They’ll run computerized searches of public property records and local housing market information. They’ll make a starting offer. If that sounds good to the seller, they’ll send out an inspector. Then they will make a revised offer, accounting for fees, repairs and closing costs. Those costs, according to Kiplinger, usually come out to 7% to 18% of the home’s value—generally somewhat higher than in a traditional deal.

An iBuyer company gives you a matter of days to refuse or accept the offer. Closing can happen in two to eight weeks. That’s great if you need to sell fast. If an iBuyer agrees to buy your home (it doesn’t have to, of course), that company will handle the needed repairs.

What did you give up? The ability to bargain with a range of buyers, if you happen to be in a strong real estate market. To know how much more you may receive from a regular sale, do ask a local real estate agent for an analysis.

Deeds Are Precious. Guard Yours.   

Deed holders should guard their titles from people who promise to resolve a mortgage balance and save the home from foreclosure. If the investor or company needs to hold the deed temporarily, this is a major red flag. To stay safe:  

• Don’t sign any papers without getting time to review them with an adviser. Do not allow yourself to be pressed into making on-the-spot decisions unless you have an agent or independent professional assisting you.

• If you’re worried about a mortgage default, speak with the mortgage company about any possible options for bringing your account back into good standing. Be transparent with your mortgage representative.

• Don’t work with a buyer whose history is impossible to review. The buyer should be able to identify previous homes they have purchased. The seller should be able to review deed records to see that the buyer really did buy, as claimed. Legitimate buyers have plenty of client reviews available online. A seller should spend some time verifying the buyer’s history and anticipating how a buyer will likely respond to any questions and problems.

Steer clear of anyone wanting money upfront before a purchase or rental agreement is signed.  Renting to own? Find out for sure that the person with whom you sign a legal agreement is the deed holder.

In Short, Don’t Let Shady Buyers Mess With Your Deed

Companies that focus on buying homes with cash have moved into the mainstream. Over the recent decade, online technology has made selling for cash much more straightforward than it used to be. So there’s generally no good reason not to work with a known company.

Even a deal between perfectly responsible friends or family members can benefit from the knowledge of experienced real estate professionals.