Cash offers are common in hot housing markets, but how do you know the potential buyer truly has the cash on hand? It’s not uncommon for sellers to get taken in by the lure of seemingly profitable cash home buyer scams. Watch out for these six warning signs when vetting buyers.
The Buyer Seems to be Taking a Blind Leap
While the news would have you believe foreign buyers are swooping in to invest in American real estate, it’s not as common as they make it out to be. While you shouldn’t turn away from every foreign buyer, you should be wary in most instances. The vast majority of people want to see a property and get familiar with an area before purchasing a home. If neither seem important to the buyer, you should be concerned. If the buyer wants to purchase a property sight unseen or appears to have no knowledge of the local community, it’s a good sign you may have been targeted for a real estate scam.
The Buyer Seems Overly Eager to Share Financial Details
Most savvy cash buyers play things close to the vest, so they can get the best possible deal and ensure a greater profit. If your cash buyer is all too happy to share financial statements, bank account records and financial details over email, you may have a problem. Quite often, these will be bogus – though believable – records to serve as “proof of funds.” Do your due diligence to confirm the accuracy of any records, and always be wary of any buyer who sends you financial information before you ask for it.
The Buyer Makes an Error
Intentional mistakes are a popular tactic for real estate scammers. Many times, they will send too much money and ask you to refund a portion of the funds through a wire transfer right after you deposit their check. When the check ultimately clears, you discover it’s a forgery. Unfortunately, you are still out the portion you wired to the scammer. If the scammer sent you $35,000 for a $30,000 down payment, you could be out $5,000. With this in mind, you should always regard any overpayment as a huge red flag.
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The Buyer Is Unprofessional
Reputable real estate investors are experienced professionals who take their business seriously. Valid real estate investors will usually refrain from high-pressure tactics. Make sure you never sign any documents unless you fully understand them. A reputable cash buyer will not be offended if you express your wish to have documents reviewed by a third party.
Things Don’t Add Up
Most wealthy, trustworthy cash buyers are well-connected. If you meet a “world-traveler” with self-reported success and wealth, ask yourself why this person would trust an agent he or she found on the internet without a referral. It simply doesn’t make sense for wealthy buyers to trust unknown agents to lead them through the purchase of a home they’ve never seen.
The Buyer Has Few, If Any, References
Serious real estate investors will be able to provide contact information for people they’ve purchased from in the past. If they have no references or refuse to share them, you are probably dealing with a scam artist. Before you spend any time negotiating a cash-only sale, ask for a list of the properties the buyer has purchased in the past. Then, take the time to check the courthouse records to verify the accuracy of this information.
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FAQs
However, cash offer is a legal and viable way of selling your home. If you're not sure whether or not a cash offer makes sense for you or if you're worried a cash offer you received may be a scam, reach out to one of the top real estate agents in your area to discuss your options.
How to spot a real estate scammer? ›
Fortunately, there are some common red flags that can indicate a real estate scam:
- Pressure to act quickly. ...
- Offers that seem too good to be true. ...
- Requests for money upfront. ...
- Poor grammar or spelling in emails and texts. ...
- Asking for payment via Cash App, Venmo, Zelle, Western Union, or other suspicious payment methods.
A fake buyer will typically bid more than your asking price then never pay or proceed with the transaction.
Does cash have buyer protection? ›
Unlike your bank account, money sent via Cash App (or other mobile payment apps such as Zelle and Venmo) isn't FDIC insured. This means that you don't have access to any buyer protection programs.
Is buying a house in cash a red flag? ›
It's good to take a cautious approach when dealing with cash sales, but keep in mind, not all cash sales are fraudulent. In tight housing markets, a cash offer is often used to help it stand out above the rest.
Are cash offers usually lower? ›
Con: Cash may be lower than other offers
Typically, the sales price for most cash sales is going to be lower than what you'd get from a mortgage-backed buyer. Some cash buyers, like flippers, may offer substantially less than market value.
How do you know if a buyer is scamming you? ›
A legitimate buyer will more than likely ask for additional information about the item for sale, such as the condition of the item. Potential buyers who ask for personal information like your email address or phone number or request the funds quickly are most likely scammers.
What steps should a buyer take before purchasing a house? ›
8 Steps to prepare to buy a house:
- Check your credit and improve your score.
- Lower your debt-to-income ratio.
- Save for a down payment.
- Determine your home buying budget.
- Research loan programs.
- Get pre-approved.
- Find a real estate agent.
- Be ready to make a deposit when your offer is accepted.
Verifying buyer information can be done by searching their name, email, phone number, or address on Google or social media platforms. This can help you confirm their identity or spot any red flags.
What is a bogus buyer? ›
Bogus buyers are internet dwellers who either make a living or are just lurking around feigning interest in your products, only to leave you hanging at the last minute. The ultimate goal is to scam or fool an online seller.
Only accept payment through approved methods
If you're using Craigslist, Amazon, or eBay, ask that the buyer pays through the website's recommended channel. Do not accept personal checks, cashier's checks, wire transfers or money orders. If a buyer insists on these payment methods, they may be planning a scam.
What is the best payment method to not get scammed? ›
By and large, credit cards are easily the most secure and safe payment method to use when you shop online. Credit cards use online security features like encryption and fraud monitoring to keep your accounts and personal information safe.
How can you tell if someone is scamming you on the Cash App? ›
So remember — if something sounds too good to be true, it's likely a scam.” If some unknown person is suddenly offering concert tickets, expensive electronics, or other valuables in return for a Cash App payment, it's possible that they'll take your money and disappear without ever providing the goods you paid for.
Is it an advantage to be a cash buyer? ›
Paying in cash means you get to skip the mortgage process and all the costs and fees that come with it, including interest rates or mortgage insurance. Skipping out on interest can save you a lot of money in the long run.
How do I know if my cash offer is legit? ›
In a legit cash offer, no money should be exchanged before the sale has closed. This ensures that both parties are safe and do not lose any money during the process. If someone is too eager to send you money or even ask you for money, this is a sign that this might be a scam.
Why do home sellers prefer all-cash offers? ›
While all-cash offers might not earn you the best possible price, they do provide significant perks for sellers: Less waiting: Accepting an all-cash offer means that you avoid time-consuming steps like waiting for the buyer's financing to be approved, and thus get to the closing table faster.
Are instant cash offers legit? ›
Instant cash offers are one of the easiest ways to sell a car, and in some cases you can offload the vehicle without leaving home. You end up paying for that convenience, though, as most instant cash offers are lower than the real offer you'd get from a private buyer.
