If you live in an area with a hot real estate market, you may have received an unsolicited call to buy your house. In fact, in some cities you might receive them several times a day! A lot of factors play into this, including high demand and low inventory in many markets and the financial upheavals many people have experienced since the start of the COVID pandemic.
Those are the kinds of situations that create opportunities for entrepreneurially minded property owners to flip homes or invest in undervalued properties, and often it’s those (perfectly legitimate) entrepreneurs who are calling. Unfortunately, the same conditions also give rise to plenty of predatory operators and outright scammers. Here’s how those calls work, and how to spot the dangerous ones.
There Are Actually Several Versions of “the Call”
You may hear multiple variations of the unsolicited offer for your home, depending on where you live. Sometimes it’s actually a licensed realtor, cold-calling to fill time between other marketing activities.
Others claim that they’ve driven past your home, and wondered if you might be interested in selling. Some callers speak more generally of wanting to buy homes in your neighborhood, or in your city. Sometimes it’s a live person on the line, and other times it’s a robocall playing a recording and leaving a phone number for you to call back.
The sales pitch, also, can vary. Realtors will emphasize how much your house has increased in value, and offer to get you a good price for your home. Most others take a different tack, offering a lowball price but offering a quick cash sale in exchange. By covering the closing costs and not charging a commission — as a realtor would — the buyer holds out the prospect of getting out of your house quickly and easily. In areas with older homes, they may offer the added enticement of buying your home “as-is,” so you don’t need to cover the costs of getting it ready to sell.
Sometimes the call isn’t a call at all, but a letter or a postcard or a “Cash for Houses” sign nailed to a phone pole in your neighborhood. The bottom line, however the message is delivered, is that you can sell your house quickly without the commissions, showings and open houses associated with the conventional selling process.
So What’s the Catch?
It’s important to emphasize that there’s nothing wrong with trying to drum up business, and there are perfectly legitimate companies (and individuals) in the business of buying houses for cash. Essentially, it’s the same model used by check-cashing companies: You trade money for convenience. If you have reason to consider selling the property, it’s reasonable to at least hear them out.
Suppose, for example, you have a time constraint such as a job-related relocation. Conventional closing takes weeks, but these quick cash sales can settle in a matter of days. Some callers may contact you about a property you’ve inherited, or one you currently treat as an income rental. If you didn’t want the house in the first place, or if you’re starting to feel that the landlord business is more trouble than it’s worth (many do), it’s an opportunity to make your escape.
The issue is that even legitimate buyers want to make a profit. The difference between the price they offer, and what your home is actually worth, is their potential margin. The size of that margin determines whether it’s a good deal for both sides, a bit shady, or downright predatory. In some cases the putative “buyer” may have no intention of ever paying you at all, which crosses the line into criminal fraud.
The Scale of Sketchiness
A few specific examples can help illustrate how these offers work. Suppose, for example, you live on a block consisting mostly of renovated, updated houses. A house flipper may approach you with an offer that’s only a modest discount from your home’s current market value. If you watch any of the popular house-flipping shows on TV, you know that they’ll gain much of their profit from improving the house’s appearance, curb appeal and maybe its actual square footage. That’s perfectly legitimate.
Now consider a scenario where you live in a low-income neighborhood that’s rapidly gentrifying. You may not have been keeping track of home values in your neighborhood, but the buyers absolutely have. They’ll offer a price that’s pretty close to what you remember your house being worth, but it’s actually substantially below the current value. That’s what Dickens might have described as “sharp practice”; not outright deceptive, but not entirely ethical, either.
Other potential buyers might make a deliberate practice of identifying neighborhoods primarily occupied by seniors, in the hope of finding a “mark” who’s easily bamboozled or perhaps even in the early stages of dementia. If the homeowner responds positively to the phone call, the buyer will show up in short order, with contract in hand, offering a price that’s substantially below market value. This is decidedly unscrupulous, though — arguably — not an outright scam.
Home Buyer Call Scams and Shady Tactics
Of course, some of these calls also result in outright scams, especially if you show signs of wanting to sell because of financial distress (something a lot of people have experienced since the start of the pandemic).
One scam reported by North Carolina’s attorney general offers to help you beat foreclosure by purchasing your home. The timing “just happens” to work out so that you sign over your home before receiving the cash, or perhaps the putative buyer offers to pay out the balance of your mortgage and then let you rent-to-own it back from them. Once you’ve signed over the title to the home, the payment never materializes, or the scammer then leases or sells your home to someone else. It’s a double whammy: You’ve lost your home, but you’re still liable for the entire outstanding debt.
Another scam typically uses an official-looking letter, advising you of an outstanding code violation affecting your home or an outstanding tax bill. The violation may or may not be real, but that’s not the point. The point is to frighten you, make you fearful of the costs you’ll face in correcting it, and stampede you into selling.
Other shady operators offer to act as middlemen in a quick cash sale, connecting you with non-conventional buyers (investors, flippers or online buyers) in exchange for a fee or exclusive rights to market your home for a set period. Outright scammers take your money and disappear. Those who lock up your home for a month or longer aren’t scammers as such; they’re quick-buck artists who want to sell at a profit, then use that money to buy you out at the offered price. If they fail, they’ll just walk away, and you’ve lost a month that you could have used to sell your house.
How to Protect Yourself against Scams and Unscrupulous Businesses
As always, educating yourself is the first line of defense. Before you seriously consider accepting a cash offer on your house, take time to find out for yourself what homes in your area are really selling for. Researching common real estate scams is another good idea. Licensed realtors and established cash-for-homes companies resent scammers for making their lives more difficult, so they’re often good sources of information on scams in a given area.
Next, consider the visibility and identity of the person or company who’s offering to buy your home. Do they have a professional-looking website, or billboards around town? Are they registered with the Better Business Bureau? Those are positive signs. Companies that seem to exist only as an email address, a business card or a handmade sign are a lot more suspect. Don’t just take them at their word, either: Use Spokeo’s people search tools to check any name, address or phone number you’re given. If the names are fictitious, or the number or address traces back to an entirely different name and location, those are big red flags.
Finally, look at the offer itself with a skeptical eye. Is the buyer suggesting a firm, sight-unseen offer in next to no time? That’s either not legitimate — a serious buyer will need to know the condition of the house — or so lowball the buyer can’t possibly lose, and you can’t possibly win. Also, the buyer’s money should be flowing into your hands, not the other way around. A suggestion that you should pay any sort of “fee” is a sign to drop the deal like a hot potato. Never, under any circumstances, sign over the deed to your home until payment is finalized and you’ve had the paperwork checked by a lawyer.
The Bottom Line on Home Buyer Calls
So how should you handle home buyer calls? Well, if they’re automated robocalls, the caller might be in violation of the Pallone-Thune TRACED Act, aka “that new robocall law.” You can report those calls to the FTC and the FCC. Registering your number with the National Do Not Call registry will weed out most calls from legitimate businesses (you can report calls there as well), and you can use call-blocking features on your phone or from your carrier to stop specific numbers from ringing you endlessly.
As for the offers themselves, well…that’s a judgment call. If you hadn’t planned to sell, but are open to the possibility, it doesn’t hurt to listen. That being said, unless you have specific reasons for wanting a fast cash sale, you’ll almost certainly get a better price by going through a realtor.
- The Philadelphia Inquirer: Robocaller ‘Will’ Really Wants to Buy Your Philly Home. Here’s What Happened When We Called Him Back.
- Zillow: Should I Sell To a Home Investor?
- Millionacres: What Is an Unsolicited Offer to Purchase Property?
- North Carolina Attorney General Josh Stein: “We Buy Homes” Scams
- Kris Lindahl Real Estate: The Big List of Scams and Misleading Tactics in Real Estate: Tips for Protecting Home Buyers, Sellers, Owners and Renters
- FairCashDeal: How to Avoid “We Buy Houses” Scams in Memphis
- US Federal Trade Commission: Report Fraud
- US Federal Communications Commission: Consumer Complaint Center: Phone Complaint
- DoNotCall.gov: National Do Not Call Registry