Common Types of Cash Home Buying Scams
March 10, 2021
Over 11 thousand people were victims of real estate and rental scams in 2021 according to the Federal Bureau of Investigation. With how important real estate is to our lives, a real estate scam can be a huge disaster that takes decades to pay off.
That’s why it’s crucial to understand how to spot real estate and rental scams before they happen. In the cash for home buying world, scams are a lot more prevalent and it’s harder to protect yourself from them.
When you are presented with a cash home buying offer, you should already be familiar with the most common types of cash home buying scamming. This blog post will go over the most common cash home buying scams, the differences between a cash offer and a mortgage for sellers, and red flags to watch out for so you don’t become a victim of “We Buy Houses” ripoffs.
What Does It Mean To Buy Houses For Cash?
A cash offer for a house is when the buyer has enough money available to buy a property without using any type of loan or financing. Without the mortgage lender’s underwriting guidelines to safeguard the process, cash offers are a lot riskier for the seller.
However, cash buyers tend to be more attractive to sellers due to the quicker buying process, since cash offers don’t require an appraisal, inspection, or any mortgage approval process.
The Benefits to a Cash Offer vs Mortgage Loan For Sellers
The pros and cons of cash offers versus mortgage loans can help you decide which option is better for you as a seller. All-cash offers usually have attractive benefits to sellers because they have minimal closing costs, speedier completion of the sale process, potential removal of home inspection or appraisal contingencies, and no worries about buyers being rejected for financing.
Obtaining a mortgage is the more traditional route that potential buyers take when buying a home. Mortgage loans can provide plenty of benefits for sellers. There are more safeguards for the seller through financing since lenders require different processes that are meant to protect the seller as well as the lenders like credit score checks, debt-to-income ratio, appraisal, etc.
Read More: Signs a Cash Buyer is a Scammer
6 Types of Cash Home Buying Scams
Cash home-buying scams can come in many different forms. Now that you know the difference between all cash offers vs mortgage loans, here are some of the most common scams you should be aware of to find legitimate cash buyers.
1. Money Upfront
There is rarely an instance where a seller will need to pay the home buyer upfront in order to move forward with the sale. If you are asked to pay any fees, this could be a sign that the buyer is a scammer.
Some fake buyers may create a contract that heavily favors them, asking for the sellers to pay upfront fees like processing paperwork or mailing documents. Fees hidden in a contract can be a red flag for cash home-buying scams.
Phishing is when a fraudulent buyer uses emails to get personal information from their victims. This can be done through malicious emails that look like they are coming from a legitimate source, usually asking for bank account numbers or Social Security numbers. Cash buyers who ask for personal information through email to purchase a house are likely to be scammers.
3.Fake Foreclosure Relief
These fraudulent buyers will target distressed homeowners who are struggling to pay their mortgage and are on the edge of foreclosing. The scammers offer to help desperate homeowners by negotiating with the lender to stop the foreclosure or to reduce your mortgage payments.
In exchange, they want to be paid money upfront. Once the seller sends them money, the scammer disappears and the homeowners are at even more risk of foreclosure.
Homeowners who have defaulted or are soon to be foreclosed on often become targets of cash scams. You may receive an offer from someone claiming to save your home by paying off the existing loan for you, but in return they will ask that you sign over the deed of the house.
Once this title transfers into their fake name, they can take all equity and leave you liable for repaying whatever funds remain on your mortgage. They can also make the homeowner a tenant that has to pay rent.
5. An Overseas Buyer
Cash buyers who are unavailable to meet in-person or see the property can easily be scammers. Unscrupulous buyers may claim to live overseas and will make an all-cash offer on a house without being interested in even seeing it, which is a huge red flag.
The scammers will typically wire the funds to you, only for them to request a refund once you have received payment. It’s imperative that you don’t cooperate with this; if their original check bounces, it’ll be too late and your money won’t be retrievable.
6. The Buyer Who Overpays
A common cash-for-house scam is when foreign buyers “overpay” and ask that you wire back the overpayment. However, once the buyer’s check clears it will bounce and your sent money will disappear.
To protect yourself as a seller, it’s best to require 5% – 20% of the purchase price up front in order to agree on selling terms; then take extra caution by waiting until all payments have cleared before moving forward with any transaction.
Work With a Trusted Professional When Selling Your House For Cash
One of the best ways you can protect yourself when selling your home for cash is by working with a great real estate agent. Negotiators are some of the top real estate agents in the USA who were handpicked to join an exclusive real estate agent organization. They have an unrivaled devotion to their clients and will go the extra mile to ensure they get the best possible deal.
Working with real estate experts like Negotiators are a great resource for home sellers to safely and effectively sell their home for cash. They can answer any questions you may have and guide you through the home-selling process.