As the demand for convenient all-cash home buying services continues to rise, so does the number of home buying scams. Wire transfer scams could send your money to the wrong account, never to be seen again. With the amount of money involved in a home sale, is it any wonder?
“Real estate fraud is one of the fastest-growing cyber scams across the country,” FBI Special Agent Siobhan Johnson told ABC News in Chicago. In recent years, the FBI reports a 42% increase in the number of real estate crimes as scammers specifically target home sellers and buyers.
In this article, we’ll walk you through the most common home buying scams, their warning signs, and how to make sure the money from your home sale stays in your pocket.
8 common home buyer scams to avoid
The following scams involve fake or devious buyers trying to convince you that they want to purchase your home. We’ve also included one counterfeit seller scam. They may take different approaches, but their end goal is always the same. To cheat you out of money.
1. The overseas or foreign buyer
This buyer contacts you — through a website, an email, or even through the mail — begging to buy your home. They explain that they’re overseas, and won’t be back in the States until a certain date, but they really need a place to live. And then they offer to send you a cashier’s check to secure the house.
Scammers have been pulling this one for a long time, not just with home sellers but with high-value items on resale websites and landlords. A few days after the cashier’s check shows up and you’ve deposited it into your account they contact you with a sob story about how their plans fell through and ask for a refund. They may even generously offer to let you keep some of the money as an apology, which really is meant to lull any doubts.
There won’t have been enough time for the cashier’s check to bounce, but bounce it will! Often a few days after you send them back “their” money.
2. The eager-beaver and unavailable buyer
Sure, you think your house is great. But beware the eager-beaver buyer. Being excited about your home is one thing, but a buyer who comes across as obsessively eager to send earnest money or a large down payment sight-unseen can be a red scam flag.
Similar to the foreign buyer scam, they’ll be unavailable to tour in person or take phone calls, but they still really want to buy your house. They could make an offer over your asking price, offer cash, promise to deposit earnest money into an account, and run a cashier’s check or wire fraud scam.
Note that some legitimate buyers do buy homes remotely, particularly during the pandemic. But they’ll typically have an agent who walks them through the house on a video call, or negotiates on their behalf. This is where your real estate agent can help you screen the real from the fake.
3. The detail-overload buyer
From the start, this buyer gives you detailed financial records and personal information — far more than someone would expect on an initial home sale inquiry. They send bank and financial statements without even being asked, to “prove” they can afford to pay cash. In this situation, use your common sense.
Would you send a stranger financial records? Probably not. While proof of funds is part of a legitimate cash deal, the information would always pass between your agents and the escrow company.
While they may be willing to provide lots of bogus financial details, they might not have references, a social media presence, or any real proof they exist.
Mike Galbally is an experienced agent in O’Fallon, Missouri, who works with nearly 70% more single-family homes than the average agent in his market. He says that experienced agents, “vet the buyer adequately to make sure you’re writing a good deal for your seller and it’s actually going to close.” This includes verifying funds and, sometimes, that the buyer even is who they say they are.
4. The check-bungling buyer
This buyer says they accidentally sent you too much money and will ask you to refund a portion of it using a wire transfer right after you have deposited the check. They’ll claim that they didn’t intend to put that much down on the house. Because you get to keep a portion of the check, you’re less wary.
But after a few days, the check will bounce and you won’t be able to recover the refund you sent them.
5. The bogus investor buyer
This buyer is an “investor” who pressures you to put your home under contract. They typically will not put down any earnest money or present references. That’s because they don’t actually have the money to buy your house — they’re just putting it under contract in the hopes they can turn around and sell the deal for a profit or a finder’s fee to another investor.
If they’re unable to resell the deal, you’ll have wasted valuable time while your house was off the market. You won’t lose any money, but you’ll lose time when you could have sold to a legitimate buyer.
6. The wire fraud seller
Buyers in a hot market can start to feel desperate to find a house. After you’ve lost out on a few homes, you might be an easy mark for a “seller” who’s really a scammer. These scammers steal photos and information from actual listings and then pose as the seller or a seller’s agent.
While they likely can’t get their fake property listed on a reputable website, they could list it for sale on websites that perform fewer, or no, diligence checks. Think of any website that lets you just sign up and post an ad. While some legitimate for-sale-by-owner sellers do use these sites, beware any seller who wants money upfront.
They could insist that you deposit money into an account, or send a wire transfer, to secure the property. High-pressure sales tactics will definitely come into play, and they’ll claim to have multiple interested buyers. Once you wire the money, it’s gone. And so is the fake home listing.
Buyers are also vulnerable to other forms of wire fraud. Someone may call you, posing as a representative of your agent’s real estate office, with instructions to wire your earnest money or closing costs. The call, and the account, are fake, and you could lose all your funds to these scammers.
“They know buying a home can be confusing and comes with a lot of paperwork” the Coalition to Stop Real Estate Wire Fraud explains on stopwirefraud.org. “So, they’ll pose as a real estate agent, title agent, or lawyer and send you fake account details to scam you.”
In cases like these, always ask to hang up and call your real estate agent’s office back directly. And don’t call back the same number — fraudsters spoof legitimate numbers — look up the number to your agent’s office. Also, call your agent and ask them to verify that the call — and the wire transfer instructions — are legitimate.
“Verify everything. Call your trusted professional before sending money. And then check again,” the coalition advises.
7. The title or deed buyer
A homeowner who’s a victim of a title or deed scam could find their home stolen out from underneath them — literally. These scammers will often steal your mail to obtain confidential information and forge signatures or other documents to assume the title or deed for your property. They could try to take out a loan against your property.
While you can usually get the problem fixed, it’s an expensive process. Watch out for missing mail, strangers on your property, or a drop in your credit score. All of these are signs that someone might have stolen your identity (missing mail and a credit score drop) or be attempting to mortgage your home (strangers on your property). Landlords and people who own vacation homes are particularly at risk because it may take you a while to notice that anything is wrong.
8. The foreclosure relief offer
Distressed homeowners who are behind on their mortgage could find themselves in financial trouble of a different kind if they fall prey to a foreclosure scam. Foreclosure relief scammers target homeowners on the brink of losing their home, promising to either modify their existing loan or stop the foreclosure. The catch? They want money upfront.
While there are legitimate services and charities that help homeowners facing foreclosure, they don’t ask for upfront payment. Anytime a business demands that you pay them before services are rendered, be wary. Look up the company on the Better Business Bureau, investigate their website and online reviews, and if you can’t find much information, or they’re throwing up other red flags — run.
12 at-a-glance signs that your cash buyer is a scammer
What are some warning signs that your buyer could be a scammer? If these signs appear during a home buying interaction, particularly if more than one pops up, consider walking — or running — away.
Some signs might be:
1. Asks for an overpayment refund on a check you just deposited. This is one of the biggest red flags. A request for a refund — either in part or in whole — after less than two weeks indicates a scammer. And don’t think you’re safe just because it’s been a week — some banks present a check for payment several times before they’ll give up and tell you that it’s bounced.
2. Wants you to wire them money for any reason. In legitimate real estate transactions, money never flows directly between buyers and sellers. It’s deposited into escrow accounts with a broker or title agent.
3. Unable or unwilling to provide references. Legitimate investors have an established network of agents, contractors, and sellers that can provide references. If an investor making an offer on your house without putting any cash down can’t provide these, it’s a sign they may be trying to offload the deal at a mark-up or for a fee and it could fall through.
4. The individual never asks to see the property in person. While this alone isn’t enough to indicate a scam, a buyer who doesn’t even want their agent to walk them through on a video call is suspect. Particularly if they have other potential warning signs.
5. You can’t find info about them via internet searches. Whether it’s a social media profile or an online resume, very few of us have no digital footprint. A complete lack of online information is a huge red flag. Galbally says that when he gets a cash offer, he does his homework. “I socially research them through various avenues — social media, LinkedIn, Facebook, to verify that they actually have a career,” he says.
6. No earnest money or deposit is offered. Legitimate buyers know that they have to put earnest money down on a home.
7. The offer price is too good to be true. While homes have been going for over the asking price in some markets, this doesn’t mean buyers are being ridiculously extravagant. An offer significantly over your asking price, combined with another warning sign on this list, could indicate a scammer.
8. They apply extreme high-pressure sales tactics. This offer will expire, final price, make a decision now — watch out for language used in high-pressure sales tactics. Cash buying scams will call, email, and text constantly. They’re trying to overwhelm you with information and not give you time to think logically about the situation.
9. You’re unable to verify proof of funds. A buyer without a preapproval letter, or a cash buyer who can’t provide proof of funds, could be trying to scam you.
10. Wants to charge you for a home evaluation. Here’s where it’s helpful to know who usually pays for what in a home sale. The buyer typically always pays for a home inspection — if someone is asking you to pay for it, they may be trying to upcharge you or use a fake home inspector to pocket the money.
11. The investor without references or money. An offer from an investor isn’t automatically a red flag — investors buy and sell homes in the market daily. But investors that are above board have references for past transactions and can put down earnest money. Working with a speculative investor, one trying to sell the deal to someone else, is too risky for most sellers.
12. The buyer exhibits unprofessional behavior. A home sale is a high-dollar transaction, one with a defined process and built-in checks to identify fraud. A buyer exhibiting unprofessional behavior — anything from screaming at you on the phone to nasty emails — could be trying to scam you. Their harassment could push you into a mental state where you might make unwise decisions just to make them go away.
If things just don’t add up, and your agent is warning you to be careful, it’s better to be safe than sorry. Galbally says that one of the best ways to avoid being scammed is to have an experienced agent looking out for your best interests.
How can I report a home buying scam?
Law enforcement agencies encourage consumers to report scams. When it comes to home buying and other real estate scams, if you were able to avoid any financial loss it may not be worth your time to make a report. By the time you’ve jumped through the hoops of government bureaucracy, the scammers could have changed websites, emails, and phone numbers and moved on.
As a single homeowner, it may not be worth your time. Landlords and property management companies who deal with scammers on a daily or weekly basis often collect all the fake cashier’s checks and letters and send them to the authorities in a batch. If the scammer uses the mail, it’s also mail fraud.
However, sometimes if there are repeated reports from homeowners about a scam circulating in a community or targeting a certain group of people, law enforcement may be able to warn others or even occasionally halt a fraud attempt. For this reason, it may be worth reporting.
If you want to report a real estate scam, talk to local law enforcement and consider contacting one of these federal agencies:
- FBI Internet Crime Complaint Center
- Federal Trade Commission
- Your state’s consumer protection agency
- Your state attorney general’s office
Avoid home buying scams by using reputable, trusted companies
There are many established, legitimate home buying companies that will provide sellers with a cash offer. Information on these businesses is readily available — on their websites, on online review websites such as the Better Business Bureau and Consumer Reports, and whose business registration you can look up and verify.
For example, HomeLight’s Simple Sale platform is a fast, convenient way to get a no-obligation cash offer. With Simple Sale, you simply fill out a short questionnaire telling about your home so you can:
- Receive a competitive all-cash offer in as few as 48 hours
- Sell your home with no staging, showings, or repairs
- Close in as little as 10 days
Below we’ve compiled a list of other established companies that purchase homes for cash across the nation. You can check out their websites, see their service areas, read reviews, compare offers and learn about their buying options.
- We Buy Ugly Houses (HomeVestors)
- We Buy Houses
- Express Homebuyers
- MarketPro Homebuyers
- Sundae Real Estate
Conclusion: Home buyers beware, and be empowered
There are many other scams home sellers may face. Regardless of the common scams we have described in this post, if at any time during your interactions with a potential buyer you get a bad feeling, trust your gut. Legitimate buyers work with agents, have an online presence and reviews, and don’t use high-pressure tactics to get you to sign on the bottom line.
Scammers rely on a home seller’s unfamiliarity with the market. They know that most people only buy and sell one or two homes in their lifetime, and might not know how to recognize a scam. Armed with information about their tactics, and with the guidance of an experienced agent, you can avoid getting ripped off.
Need help finding an agent? Use HomeLight’s free Agent Match tool! After answering a few short questions, we match you with a top agent in your area. Guided by their expertise, you can navigate the waters of a home sale safely.
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