How to Avoid ‘We Buy Houses’ Scams
One drawback to selling your house to a cash buyer is “we buy houses” scams. Avoid these scams by understanding how off-market buyers work and being able to spot red flags.
There are many ways to sell a home today. From listing it with an agent to selling it yourself, your first thought is usually to put your house on the market. This strategy means preparing your home for potential buyers to view, and possibly letting it sit, for sale, for a long period of time.
But not everyone has the luxury of waiting for the perfect buyer to come along. Many lack the time to risk an offer falling through at the last minute, forcing them to begin the selling process all over again.
For those looking to sell their home safely and quickly, an off-market buyer presents the perfect opportunity. Most homebuyers put in an offer with your home “as is,” so no need to stage the place or make any repairs. A quick assessment is all it typically takes to receive an offer, and closings can happen on your timeline. Even better, most off-market buyers are paying in cash. There’s no risk of financing falling through, even if you want to close within the same week.
On the downside, there is a drawback to working with off-market buyers. There are no regulations governing who can claim they offer this service. And the cash homebuyer landscape is dominated by small mom and pop operators. Unfortunately, this opens the door to scam artists.
Often they appear legitimate. They may present a sensible buying process and promise a quick purchase. But something always seems a little off. By knowing what the off-market buying process looks like, and recognizing common red flags, you’ll be able to easily walk away from we buy houses scams.
How to spot ‘cash offer’ we buy houses scams
Whether they claim to buy homes fast, or offer up a willingness to buy the ugliest homes, not all cash homebuyers are created equal. In fact, predators abound. Watch out for these potential clues that you’re about to be scammed.
Do your own due diligence
The first clue that you’re entering into a scam is if the business wanting to buy your home doesn’t actually exist.
They may have business cards, or a simple website, but you should always dig deeper. Especially if the person is interested in purchasing your home as fast as possible. Take a moment to investigate.
If you’re already talking to an individual, ask them to verify their company’s name, phone number, and physical address. While a scammer may take the time to create a website, it’s difficult to fake an actual address and have it show up in a Google search.
Do a quick search on the Better Business Bureau website as well. There you can also check for complaints and see if someone has listed them as a scam previously. Your last line of defense is to look up previous customer reviews online. See what others are saying. Is it good? Do the reviews look genuine?
The more information you can find on a business the more likely you’ll be to avoid we buy houses scams. Any missing information that feels vital to you, like an address, website, or contact info is enough to walk away from an interested cash buyer. If they aren’t providing basic business info, there’s a good chance they’re not a quality business.
Keep the investor’s behavior in check
A cash homebuyer should approach buying your home with an even keel. They shouldn’t seem overeager or hesitate when you make reasonable requests. Any extreme behavior or reaction is a strong clue you’re talking to a scammer.
When an investor is in a rush to purchase your home, there’s no way they have time to collect the proper amount of information to make a legitimate cash offer. Especially if they never see the property or ask questions about its condition.
A proper investor won’t want to offer you money for a property they know nothing about. There’s no way they can fairly assess your home without taking time and following an organized process.
A good rule of thumb to avoid we buy houses scams is: if you feel rushed to sign a contract, back away. You deserve time to think about their offer just like they should have thought through before giving it.
The same is true on the flip side. If an investor moves very slowly, especially when it comes to revealing documentation, something isn’t right. Ask for proof of funds, or other financial information to make certain the sale is good. If you don’t get it, you’ve got a scammer. A legitimate real estate investor should have all this documentation at the ready, because they buy houses for a living. They should want you to feel comfortable about the sale.
Wait until closing to exchange money and sign over the deed
Two of the most important pieces to selling your home, no matter how you do it, are the money and the deed.
When you sell a home, the proper process is someone buys your house, they give you money, then you sign over the deed. This is the only order things should go in. A request to do something different raises a major red flag.
Most of the money exchanged when using a cash homebuyer flows to the seller. You may have to pay a small fee based on the percentage of the sale, but not every homebuyer asks for that. Even if the homebuyer charges a fee, you shouldn’t have to pay it until closing.
Any other fees, especially those that pop up after you’ve signed a contract, are suspicious. So-called “hidden fees” like service charges or market risk fees are likely a scammer’s attempt to get cash out of you without true intent of purchasing your home. Don’t pay anything upfront, even if the fee sounds reasonable.
Signing over the deed is another task that should only happen during closing, in the presence of a real estate attorney. If your investor wants you to sign it over in advance, and then rent the property back to you, just say, ‘no.’
The homebuyer doesn’t get ownership until you receive money for the sale. Even if you end up renting the place back, you should still have the money from the sale of the property in your possession first. Signing over ownership early can open the door for scammers to take a huge advantage, leaving you high and dry with the remaining mortgage payments and no cash for the house.
When it comes to legal documents, don’t sign anything until you have money in hand or have consulted a lawyer.
Make the experience personal
Another way to weed out we buy houses scams is to force a personal connection. Expect to talk to a real person. If possible, meet them and walk through your home together. Discuss the sale with that same person and make sure they’re the one sending you the offer.
If you’re only dealing with emails and internet forms, this could be a problem. While many homebuyers, including iBuyers, today rely on digital communications, you should still expect personal attention before the deal is closed. Digital- or phone-only communication protects a scammer’s identity, so when they take advantage of you, it’s hard to track them down.
When there’s a real person, putting in real time to work with you on the sale, there’s a greater chance you’re talking to a legitimate homebuyer.
Related: How Is Sundae Different From an iBuyer?
Understanding the real off-market buying process
Knowing the irregularities to look out for is only half the process of understanding cash homebuyers. While these investors may all function a little differently, the process should feel relatively similar. If you know what to expect, in addition to what shouldn’t happen, you can quickly identify when things are off.
A legitimate investor begins by asking for details about your home. Some will make an appointment to do an assessment in person. They’ll collect information and make you an offer based on the home’s condition and other market factors. Ideally, it will be as close to market value as possible. You shouldn’t have to pay any fees to get to this point.
Offers may come in in as little as a day, but sometimes take longer. You’ll also have a window to sign the contract, which you should read over carefully. Make sure everything is to your specifications, including when the actual closing is scheduled.
Check the contract to see what the policy is on making changes, and whether you have an option to back out if things go sideways for any reason. Small changes are acceptable, but the original offer should be somewhat firm.
Closing should run smoothly since it’s a cash offer for the house. There’s no financing to approve, and a lot less paperwork. By the end of the meeting, you should have a large sum of money and the legitimate cash homebuyer should own your home.
The best of the best in off-market buyers
Most cash homebuyers want to do right by sellers when purchasing their home. But you have to do your homework.
Skip the hassle of finding the right off-market buyer altogether by working with Sundae. Sundae is one of the largest marketplaces that connects homeowners looking to sell their house as-is to the largest network of investors to ensure the highest possible offer.
All offers on our marketplace are non-contingent, meaning investors can’t change their price while in escrow. No need to deal with any investors. We do all the work and help you sell your home as-is. We handle all communication with investors so you interact only with Sundae throughout the process. And remember, the only favorite we have is you. We are incentivized to get you the highest possible offer. Once you accept, we work with you directly to create a timeline toward the actual sale, and can even provide up to a $10,000 cash advance before closing for eligible sellers.
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