A new job, impending divorce or falling behind in your finances can lead you to putting your home on the market for a quick sale.
Keep in mind that not all cash buyers or “we buy houses companies” are the same. A large majority of these people have no intention on buying your home.
So, I’ve put together a “How To” document below that will educate and guide you through the process of spotting scammers and liars.
Among the most notorious “we buy houses” scams, this allows the buyer to swipe your equity. First they’ll get you to transfer the deed into their name.
Then the scammer will take payments from you so that you can remain in the home. Or, they’ll rent to another party.
Here is how the predator makes money.
- Taking rent from you or a renter
- Use the property’s equity to secure a loan
- Resell the home
Once the predator has milked any financial benefit from the property, they can just stop making the mortgage payments. Remember, the scammer never assumed the loan. That leaves you responsible for the payments and no property. Either you come up with the money, or your credit is ruined.
The Old Bait and Switch
This scam is common to those who used to be referred to as “confidence men.” They gain your trust and then take advantage of your good nature.
First they spend some time with you, view the house, and make you an offer. Later they come by with a written agreement, just to formalize the details, and tell you it says what you talked about. You take a quick look and sign.
The confidence man comes by a few times with small changes to the agreement and gains more trust. You start to read less closely each time.
Before the closing, the last document you sign is vastly different. It costs you big time.
The Foreign Buyer, For Sale By Owner Scam
People get things like this in their email all the time. Someone from another country says they saw your house listed online and will pay cash.
They have a terrific story that touches your heart. The goal is to get you to send them money to overcome some glitch, or to get your bank account info and pull money out.
They don’t worry about getting caught because they are not in the country and know how difficult it would be for you to recover your money.
How To Protect Yourself from Cash Buyer Scams
If you find yourself in the position of needing to make a quick home sale, consider these rules for self-protection as your go through the selling process.
Keep it Professional: By sticking with industry people that have a credible work history you can avoid being conned by fringe predators. Don’t be swayed by fancy titles. True professionals think in terms of the reputation and longevity of their business.
Background Checks: If any of the above or other red flags pop up in your mind, don’t hesitate to call your Attorney General’s office, Real Estate boards, Consumer Fraud agencies or the Better Business Bureau. Legitimate businesses should pass muster.
Understand Anything You Sign: Legal jargon can be confusing to non-lawyers. Make sure you use a reputable title company or closing attorney.
Get Everything in Writing: Verbal agreements seldom work out. One party understands things one way. The other may see them entirely different. Verbal agreements tend to lead to litigation.
Just Say No: If you’re getting a bad feeling about a deal or think it may not be the best solution to your problem, time is on your side. There will be other buyers. Walk away and don’t look back.
The Highest Offer Is Not Always The Best Offer
Don’t be fooled by high offers because they’re not always the best offer. Scammers use this tactic all the time. They’ll give you a high offer price and get you to sign a purchase and sale agreement.
Then they wait a couple of weeks to come back to you. Usually, right before you go to closing to get paid.
They’ll come up with a bunch of excuses on why they can’t pay you the amount you agreed to and ask for a price reduction. At this point you’re too tired to back out of the contract and you’ll give in because you want to go to closing and move on with your life.
You can stop this from happening by doing the following. Demand 2% of purchase price as the earnest money payment.
For example; if you get an offer on your home for $200,000 then the cash buyer would provide an earnest money check equal to or greater than $4,000 ($200,000 x 0.02).
The one thing that the home buyer scams has in common is that the fake buyer has no money. The large earnest money check will make these guys go away.
Work With A Reputable “We Buy Houses” Buyer
Don’t allow yourself to get caught up in the stress of needing a quick fix to your problems and don’t let emotions impede good business sense. Predators are experts at exploiting human weakness and can do it to the best of us.