Getting a cash offer for your house may be tempting, but watch out for scammers!

You’ve probably seen signs in your neighborhood that say, “We Buy Houses.” Or maybe you’ve gotten a flyer, email, or call offering to buy your home for cash. If you’re looking to sell your home, you may be tempted by a cash offer. Believe it or not, more all-cash homebuyers are out there than ever before. Some sellers prefer the convenience and simplicity of dealing with a cash buyer. Are these offers legit? Many are – but others are scams.

Unfortunately, not all cash buyers are trustworthy, and there are lots of “We Buy Houses” scams.

In this article, we’ll look at some legitimate homebuyers who pay in cash, a few common scams, red flags to watch out for, and ways to stay safe.

How Cash Offers Work

Cash buyers range from sketchy speculators to legitimate online businesses. Accepting a cash offer is a fast way to sell your house, but the downside is that you might get less than your home’s market value. Why would someone sell their home for less than it’s worth? Maybe the homeowner is in foreclosure or maybe they have a home that needs repairs they can’t afford to make. Because some fast cash offers waive inspections, it can be easier to sell an older, rundown home. Sellers may choose this option if the offer is close to the home’s open market value.

Legitimate Cash Offers

Individual buyers and companies may be interested in purchasing your home for cash, and both can be legitimate.

• Private Individuals: Some homebuyers pay cash to purchase a home instead of taking out a mortgage. In this scenario, you’ll still need to put your home on the market, wait for an offer to come in, and then go through the closing process. Cash purchases can close in as little as a week, and, because there’s no bank involved, there’s no risk of the deal falling through at the last minute because of the buyer’s inability to qualify for a mortgage.

• iBuyers: These are legitimate online companies like Opendoor, Offerpad, Zillow, and Redfin that use technology to find properties and make instant offers. Some might even buy your home sight unseen. These cash homebuyers work fast because they need to turn over a high volume of homes to make a profit. If you work with an iBuyer, you can expect to pay fees that run between 5% and 15% of the purchase price.

• Investors: Cash homebuyers in this category include individuals or groups who simply want to make a fair profit by fixing up, flipping, or renting out the home in the future. Like iBuyers, investors generally close deals quickly.

“We Buy Houses” Scams

Unfortunately, not all cash homebuyers are trustworthy, and “We Buy Houses” scams are everywhere. Scammers often prey on homeowners who are experiencing financial hardship because of bankruptcy, illness, or job loss. Here are two common scams:

• Foreclosure Relief Scam: A con artist might target homeowners who are struggling to pay their mortgage, offering to take their deed and pay off their mortgage balance. However, it’s important to remember that transferring the deed doesn’t change the fact that the mortgage is yours and you’ll still have to pay it. The scammer will take the deed, and they might even move in new tenants, but they’ll go back on their promise and leave you on the hook for the mortgage.
• Predatory Buyers: This is the dark side of the legitimate cash buyer. A predatory buyer often targets a cash-strapped homeowner who is desperate to sell. They may agree to buy the home as is for a set price, but then pressure the homeowner into paying out of pocket for costly repairs before they will complete the deal. They may also take advantage of the seller’s sense of urgency by making an especially low-ball offer.

Red Flags to Watch Out For

If you’re working with a buyer who offers cash for your home, proceed cautiously and watch out for these red flags:

• Posting Illegal Signs: Scammers often advertise through signs illegally nailed to telephone poles or staked on the side of roads.

• Being Unprofessional: If the investor you’re working with doesn’t have a business email address or valid references, steer clear!

• Buying Your House Sight Unseen: Some legitimate iBuyers may do this, but in general, if an individual doesn’t want to see the home before buying it, that can be a warning sign.

• Asking You to Reveal Your Mortgage Balance: Dishonest buyers want this information to put together a low-ball offer.

• Using High-Pressure Tactics: Watch out for buyers who pressure you to sign documents before you’ve had time to properly review them.

• Demanding Upfront Fees: Be cautious if a buyer or investor wants to be paid an upfront fee.

• Endlessly “Updating” the Sales Agreement: Once you’ve settled on a price, a legitimate buyer won’t keep revising the agreement.

• Mistakenly “Overpaying”: Some scammers may send you money for a down payment but tell you they accidentally sent too much and ask you to deposit the check and wire the difference. The check will bounce, and you’ll be on the hook for the cash you sent.

• Asking For Your Deed Before Closing: Never transfer your deed to someone else without consulting a trusted attorney or housing counselor.

Ways to Protect Yourself

Here are some quick tips to help you stay safe from cash-offer scams.

• Get a professional, impartial appraisal so you know the true value of your home.
• Take your time reading over contracts, and don’t sign anything you don’t understand.
• Ask for references and verify businesses through the Better Business Bureau® at bbb.org and read online reviews. Do an online search using the company’s name and the words “scam” or “fraud.”
• If you’re struggling to pay your mortgage, contact your lender directly. You can also check into government programs, such as makinghomeaffordable.gov, and get no-cost support from an approved housing counselor.
• Work with a real estate attorney.
• Most importantly, don’t sign over the deed to your home until you receive payment at the closing table.

What to Do If You’re a Victim of a “We Buy Homes” Scam

If you believe you’ve been the victim of a scam, here’s what to do.

• Contact your financial institution immediately if you’ve sent money to a scammer.
• File a report with the Better Business Bureau’s Scam Tracker℠ at bbb.org.
• Notify your state attorney general of the scam at naag.org.

Depending on your situation, selling your home quickly for cash can be a valid option. Just remember that because you aren’t working with a licensed real estate agent, you’re on your own when dealing with high-pressure sales tactics or sketchy buyers. Keep these tips in mind, and if a scammer comes knocking, say, “NO SALE!” If you have questions about selling your home or managing your mortgage, contact your financial institution.

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