How to Avoid Getting Scammed when Selling to a Real Estate Investor

Anyone can say they’re a “Real Estate Investor”, but not everyone that does should be trusted. So how can you tell the trustworthy we buy houses companies and real estate investors apart from the scammers? That’s what we’re here to help with.

The first thing you’ll want to do is ask yourself some questions about why the real estate investor is interested in your house.

Ask Yourself These Questions:

•  Would you buy a house without seeing it in person?
• Would you buy a car without driving it?
• Would you even buy a new phone without turning it on to make sure it works?

Well, how can a so called “real estate investor” pretend to buy your house if they’ve never seen it?

The Nightmare Scenario 

Imagine this: you need to sell your house fast for one reason or another. While driving around, you see a We Buy Houses sign on a telephone pole and decide to give it a call. Or maybe you Google “We Buy Houses” and fill out some forms.   

All of a sudden you get an email from a so-called investor who has never seen your home and it reads something like this:   

Dear Sir or Madame:  

We’d like to offer you way more than we plan to pay for your house because this large amount of $$ will get you to sign a contract with us and then we can change our offer right before closing so that you have already boxed up your belongings, moved to another place, and you have no options left but to accept our lower offer.”  

Sincerely,  

Person that went to a seminar at the local hotel conference room over the weekend and now pretends to be a real estate investor. 

Unfortunately, not all scam artists are that straightforward, and many disguise their true intentions with better writing.   

So, if you get an email, even if it looks official, ask yourself: ”how can someone make you a serious offer without ever having seen your home?”

Two Ways to Protect Yourself From Real Estate Investor Scams:  

1. Tell the “real estate investor” to send you a copy of their bank statement showing they have the money to buy your house. Make sure the name on the bank statement is the same as name of the person or business entity that is on the offer or contract to purchase your house. Then call the bank to verify (it’s too easy to photoshop things these days).  
2. Find their business on the Better Business Bureau website at https://www.bbb.org/. Look at their rating from the BBB and for how long they’ve been rated. If you can’t find their business, that should be reason enough to be suspicious. 

Additional Steps to Protect Yourself From Real Estate Investors Fraud

Even if the real estate investor can satisfy you that they have the money and that they are a legitimate business recognized by the Better Business Bureau, they can still create chaos in your life based on the terms of their contract. 

Fortunately, there are other ways you can make sure they are making you a fair and serious offer.

Here’s how you protect yourself:  

1. Demand a deposit of at least a 10% of their offer price. Make sure that this deposit is non-refundable if they can’t close for any reason. For instance, if they offer you $300,000 for your house, make put down a $30,000 deposit that you keep if they don’t close on the property. Make sure this is written into the contract.  
2. Check whether they have a “study period” or “inspection period” clause. If you see anything similar to this, require that they strike out this provision(s). This is the single most common method unscrupulous people use to hurt you. If they need to inspect your house, why won’t they come see it? Even if your home uses well water and a septic system, they should come see it before making an offer.   
3. Check if the buyer’s name or company’s name includes “and/or assigns” next to it, or if the contract mention that they have the right to assign the contract. If you see something like this, it means that the investor can assign the rights to buy your house to anyone they want—a process called assignment of contract or wholesaling real estate. Inherently, there is nothing wrong with wholesaling if you are dealing with an accredited business that has the funds to close. But if they don’t have the money in the bank, this will become a huge issue when it is time for closing. If they don’t have the money to buy your house, and they can’t find someone else to assign the contract, then you’re stuck and there’s nothing you can do. Sadly, this happens way more often than it should. Imagine this: you’ve already put a deposit on another place to live. Your moving company has packed up your entire house and is loading the truck. You’re looking forward to dinner at your favorite spot and you get a call from the title company: “we’re sorry, but the buyer for your house was unable to fund the account and they were unable to assign the contract, so we cannot proceed to closing.” What are you going to do then? To avoid this nightmare scenario, tell the buyer to strike out all assign and assignability terms from the contract. If they are making you a serious offer, they’ll do it without pushback.   

If you follow our advice above, you will be well protected from any We Buy Houses Scams. If you have any questions, we’re always here to help. And heaven forbid you find yourself with the title company calling you to say the buyer flew the coop—call us immediately. We were here before the scammers showed up, and we’ll be here long after they’re gone.