How to Spot & Avoid House Buying Scams

Home Buying Scams

If you need help selling your house ASAP, you’ve probably looked at a “We Buy Houses” type Company. Some of these companies are very helpful.

These companies buy homes that are difficult to sell, or homes that are facing foreclosure. A lot of them are great, but a few of them are scam artists.

Home investment companies are obviously companies, and companies need to make a profit. Some home investment companies come by their profits honestly, and others are only worried about the bottom line.

While there are many great investment companies out there, you need to make sure you’re working with one you can legitimately rely on.

1. Observe How They Advertise

Sign that says "I Buy Houses"

You can’t fit everything you need to say on a small sign. It’s normal for a company to stick to short blurbs. Their website, on the other hand, should have tons of information about how things work. Home investment companies can offer you a lot of assistance, but it’s not a good sign when they can’t tell you how.

One of the most important things to look for is transparency. The “what” isn’t always as important as the “how” in most scenarios.

Some home investment companies utilize legal loopholes that can completely undermine unsuspecting home owners. In the end, these could come back to bite you. You’ll wind up with much more than you bargained for, and not in a good way.

If you don’t understand the information, you should be able to call them and speak with a live person who can answer your questions in detail. They should have a phone number, email address, or contact form in an area that’s easy to find.

If you don’t receive a reply or if the reply leaves you feeling confused, this is a warning sign. Good investors know that most homeowners don’t have experience working with an investor. You need an investor who understands your concerns and can answer your questions in simple terms.

2. Carefully Review Their Paperwork

Reviewing Real Estate Investment Companies Purchase Contract

There isn’t a lot paperwork when you’re selling directly to a private investor, mostly because of the lack of middlemen involved. There may be some more paperwork if you’re choosing an investor as an alternative to foreclosure or to get out of a negative equity situation, but this paperwork will come from your bank. The home investment company will be able to help you with most of it.

A home investment company will have their own paperwork for you to review. Always check to make sure that the paperwork is an actual reflection of what you’ve discussed with the investor – even if the investor seems reliable. Some sweet talking investors may mislead you, and when you sign that paperwork, there may be nothing you can do to protect yourself.

Fees may be hidden in your paperwork. This is a surefire way to detect a scam. Home investment companies should never be charging you fees to purchase your home. When they prepare an offer on your unwanted property, that offer should already take any fees or repair expenses into account.

The investor should be footing the bills for ALL of these things – that’s why the offer is always less than market value. If an investor is offering you less than market value and still hitting you with charges, they’re profiting a lot more than they’ve made it seem.

3. Recognize Common Types of Scams

Scammed by a Fake Real Estate Company

There is one scam that occurs far more than other scams, and it’s very easy to spot without ever even talking to the home investment company. This is the scam where the investor claims that they’ll buy your home and allow you to stay there. Investors purchase homes with the specific intention of fixing them up and reselling them. They can’t resell a home if it’s occupied.

An investor isn’t going to give you anywhere between tens of thousands and hundreds of thousands of dollars out of goodwill. That’s what they would be doing if they purchased your home and let you stay. This is going to cost you, and the investor already knows that. When an investor owns your home, you become the tenant of the investor. Like all other tenants, you’re expected to pay rent.

Since some sales to investors involve deficiency judgements or other debts to settle with the lender, you’ll also need to make those payments. If you fell on hard times and were unable to pay your mortgage, how could you reasonably be expected to pay both bills at the same time? The investors charge rent higher than the mortgage you couldn’t afford.

You’re going through a rough patch, and the investor is well aware. It is the intention of the investor to evict you almost imediately. Don’t trust investors who make things sound too good to be true – they always are, and that’s how homeowners get scammed.

4. Look for Positive Feedback

Real Estate Investment Company Research

Like any upstanding company, a home investment company that’s worth working with will have good press. Usually, you’ll be able to find internet views and testimonials of past sellers. Investors with great track records are proud to show their reviews everywhere.

Investment companies that have mostly negative reviews aren’t worth your time. What may be even worse than negative reviews is having no reviews at all. If they have satisfied homeowners who can attest to their ability to fulfill their promises, they’ll want you to know about it.

Even if these companies have testimonials on their website, you can’t be sure they’re real. The best way to know for sure is to check their Facebook page or sites like Yelp. You’ll know the reviews are from real people.

Great investors can receive the occasional negative review. Companies that receive mostly negative reviews or no reviews at all are not companies you should entrust with the sale of your home – period. Not everyone will have a perfect experience, but it shouldn’t seem like everyone had the worst time.

Home investment scam companies that run long term scams and don’t want to be caught will often throw together a basic website with no beneficial information. This allows them to purchase a few homes, disappear, and start over again.

New websites or websites with text that has directly been copied and pasted from an existing website are suspicious. To make sure you’re not looking at a clone site, copy and paste a few blocks of text directly into Google. If identical content exists on multiple sites, or the site barely says anything, you’re dealing with a fake company.

Real investment companies can afford to create and update a unique website with informative content. Scam companies have a tendency to cut corners just long enough to rope in unsuspecting homeowners.

5. Identifying and Reporting a Real Estate Scam

If you believe you’ve spotted a real scam, you can report it. Stop contacting the shady company. Every state has a different method for reporting fraud and consumer scams. It’s easy to locate the authority in your state with a quick Google search. If you feel intimidated by the home investment company or you fear retaliation, you can submit your tip anonymously.

6. Finding a Legitimate Real Estate Investor

So Cal Home Buyers would love to work with you. We’re here to answer all of your questions. We have over 10 years of experience purchasing homes in every imaginable situation and have worked with hundreds of sellers. We buy all types of homes including foreclosure, homes that need repairs, and homes with negative equity all the time.

When you’ve decided that working with an investor is the best move for you, all we require is some basic information about your property and the circumstances to get started. Once we receive this information, we will call you back to introduce ourselves and answer any questions you might have about the process. We’re here to respect you and help you through a difficult time. We want to make things as simple and painless as possible.