Are “ We Buy Houses ” Companies a Scam? Here’s How to Tell

It’s a misconception that selling your home to a “ We Buy Houses ” company is a scam because many legitimate, family-operated businesses actually exist. 

we buy houses scam

The problem is this: it’s getting harder and harder to distinguish genuine residential real estate investors from scam artists.

It may be tempting to accept the first all-cash offer that comes your way when you sell your house, but keep in mind that today’s housing market dynamics are unique. Mainly, the inventory of available homes for sale is still historically low nationwide, meaning you absolutely and positively don’t have to accept a low cash offer from an investor.

Home sellers have substantial leverage to get the best value for their property in today’s real estate market – if they work with a reliable, trustworthy realtor.

There’s nothing sketchy or illegal about buying homes for cash as long as it squares with local and state property law, yet you still have to watch out for the scam or con artists who are abusing the “ We Buy Houses ” promotion to rip off vulnerable sellers.

So, with that in mind, here’s how to tell whether or not you’re dealing with a scammer or an authentic real estate investor.

Possible scam and tactics

Are ” We Buy Houses ” companies a scam? Unfortunately, the real estate industry is full of sharks, hunting and stalking unwitting homeowners who they can pressure into making a mistake or utterly scam them from the very beginning.

You might be thinking that you could never fall victim to a “ We Buy Houses ” con artist, but not many homeowners can turn down over $100,000 in cash because something just doesn’t feel right about the whole process. Many people eventually allow their financial motivations to override their better judgment.

Let’s go over a few common ” we buy houses ” companies scam to explain what we mean before you sell your house.

The FOMO scam

FOMO, or fear of missing out, is a time-tested marketing tactic that relies on intriguing and teasing consumers who never want to pass by an opportunity to make their lives better.

One way to tell if a residential real estate investor is running the FOMO scam is the use of high-pressure sales tactics. For example, once you contact the company, you receive phone call after phone call until you capitulate.

Making matters worse, the FOMO scam can be a way for scammers to glean additional information from you that they can use against you.

A con artist never minds their business in real estate and will keep asking questions that feel too personal, too off-topic, or blatantly contrived to learn more about who you are and what you value.

Be especially careful when a cash buyer wants to know why you’re selling – and won’t stop asking the question until you give them the information they need to keep scamming you.

The direct money wire and fake escrow scam

Most people in the US only purchase a home a few times in their lives; some only buy one house and raise a family, only selling after retirement.

So, it is perfectly understandable if you forget about the nuances and details of how a legitimate real estate transaction should proceed.

An actual cash buyer or a legit ” we buy houses ” company will never, ever ask for a direct money wire transfer of any sort before everything is in order. Besides, they should be paying you and hardly ever the other way around.

This dynamic is why you always go through a genuine escrow that safely holds onto deposits and earnest money until you and the buyer finalize the deal.

But what happens if the escrow company is just as crooked as the cash buyer?

It may seem shocking, but it’s happened before and will continue to happen as long as sellers don’t read up on the correct way to accept a cash offer before you sell your house.

Without a doubt, a scam artist never relents on the con and will actually combine tactics to get you to take the action they want, all while ratcheting up the pressure at the same time.

For instance, a scammer may claim that they’re leaving the country on an urgent business trip and want to start the process beforehand. They’ll even have a so-called escrow at the ready where you can both wire earnest money.

How to spot a good “ We Buy Houses ” company

On the other hand, you can spot an excellent real estate company or a “we buy houses” company by paying careful attention to:

  • Online reviews
  • Contract language
  • Earnest money procedures
  • Proof of funding letter

If a cash buyer checks all of those boxes, it’s most likely OK to move along to the next steps when you sell your house.

Online reviews

With somebody different websites out there about the real estate business, it’s relatively easy to search online reviews and see whether or not the cash buyer is authentic. You can find reviews on sites like Yelp, Zillow, Realtor, and even Facebook if you look long enough. The catch is that you may or may not be able to follow up with the reviewer depending on the website.

Contract language

Another way to spot a legitimate cash buyer is that contract language will be clear and easy to understand. There may be a certain amount of legal jargon and terminology in the document, but you should be able to understand what’s going on at a glance.

Also, make sure that you read the contract in its entirety before you agree to sell your house because the last thing you want is for a simple misunderstanding to derail the entire sale.

Earnest money procedures

Simply put, buyers pay earnest money, not the other way around, so if a cash buyer wants you to split earnest money costs, it’s always a scam. After all, the whole point of earnest money is for the buyer to show that they are legitimate and will follow through on what they claim.

Proof of funding letter

The last way to tell whether or not a ” we buy houses ” company / cash buyer is authentic is that they will present a proof of funding letter to show that they can actually provide the funds. Honestly, it’s never a good idea to take a stranger’s word that they will pay you tens of thousands, if not hundreds of thousands of dollars, without any assurances from a financial institution or bank.

Sell Your House: Three tips to avoid a ” We Buy Houses ” scam

As you can see, it’s unfortunate that home sellers have to deal with skilled con artists these days, yet you’re not helpless! Follow these three tips to weed out the vast majority of illegitimate cash buyers when you sell your house.

1 – Ask way too many questions before you sell your house

One of the easiest ways to tell if you’re dealing with a scam artist is that they get angry and frustrated quickly when you ask simple questions.

So, even if you already know the answers, ask anyway to see how the person on the other end of the conversation reacts. Many scammers will give up the chase rather than go through the trouble to keep you on the hook throughout the ordeal.

Or, they may not know the answer to a fundamental question about the US real estate market, which is an excellent way to tell that you’re dealing with a con artist in a different country. For example, the term real estate never gets used in the UK. Instead, the correct term is property investment.

2 – Ask for references and testimonials

Along those lines, you should be aware that it’s relatively easy to scam someone online. You don’t always have to click on a malicious link because anyone can make a phony website with fake references and testimonials, provided they have the coding skills.

A “ We Buy Houses ” company with an over-the-top, extravagant website doesn’t prove that the business is real. In fact, you should be a little skeptical to sell your house if their website looks too good to be true.

A “ We Buy Houses ” company that’s essentially a small business simply doesn’t have the time or the funding to build a world-class website – complete with CRM lead capture, click funnels, responsive widgets, and custom CSS coding on their splash page.

The idea is to make you think something like, “Wow! Look at how great their website looks! They have to be legitimate if it looks this pretty.”

3 – Only work with a trustworthy, reputable home buying company

Undoubtedly, the best way not to get scammed by a cash buyer when you sell your house is to only work with a trustworthy, reputable home buying company like us.

A trustworthy company will have a transparent, open process from start to finish with no high-pressure sales tactics or several requests for money that don’t seem logical.

At the end of the day, when deciding whether or not to sell your house to a ” We Buy Houses ” company, the idea is to be absolutely confident that you’re dealing with a real business.

If you’d like to learn more about how to sell your house and your options, Mrs. Property Solutions can answer all of your inquiries and show you how to avoid real estate scam. We are the #1 legit ” we buy houses ” company in LA and AZ!

Are "We Buy Houses" Companies A Scam? | Mrs. Property Solutions

Hannah Ray

Hana is in charge of our social media, marketing, and online presence! She manages our Facebook, YouTube, and Google my Business posting. She is also in charge of creating helpful blog content that provides educational information concerning home sellers in a bind that needs to sell their house fast. When she is not working, she enjoys being a new mom and spending time with her two little ones.

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