We Buy Houses – a Scam?
You Need To Know You’re Dealing With A Reputable Business when selling your home fast.
We Buy Houses – is this a scam? “We Buy Houses” is an often used marketing terms that investors and home buying companies use to get you to call them. You will often see We Buy Houses signs on telephone poles and medians throughout Washington DC, Maryland and Virginia.
Unfortunately, there are a lot of unscrupulous investors out there that will take advantage of people. For example, listen to Al’s shocking story:
If you need to sell your house fast and you see a We Buy Houses sign, ask yourself is this “We Buy Houses” concept a scam? If you select a reputable company you can insure that they will buy your house in 7 days. If you need to sell your house fast in Washington DC and choose a We Buy Houses company, you need to make sure they meet the following criteria. Can you trust that Express Homebuyers is trustworthy? Yes! Watch and read our numerous customer testimonials, like this one:
How Can You Differentiate Between Buyers
and We Buy Houses Scams?
When it comes to selecting a buyer for your house, most people want to choose the buyer who presents the highest offer. You may think that because they are the highest bidder that they are reliable and have the resources available to get the transaction done. But this isn’t always true. There are many sellers out there that thought they had found the ideal buyer for their home, but when the settlement date approached the buyer called to back out. This caused them to spend money on marketing their house for a longer period of time and in some cases, they had to continue maintaining a vacant property that they could no longer afford. We don’t want you to experience potential problems caused by we buy houses scams. We want you to know what to look for when selecting one.
Has the buyer told you where their offices are located? Set up an appointment to meet them at their office. Make sure that they have a permanent office where you can reach them at anytime.
Do they have a staff? If they are a well-established company, they will have experienced staff that will be able to guide you through the selling process and will be available to answer all your questions.
How will they finance the purchase? A reliable company will have an available line of credit to buy your house. Ask them for proof. Even more, ask them for a deposit of $5,000. If they are serious about buying your house, they will provide it.
What professional organizations is the company a member of? Is the company a Better Business Bureau Accredited Business? Call the Better Business Bureau at 202-393-8000 or look for the company information at the BBB website http://www.bbb.org/.. Calling the BBB will help you determine if the company is reliable.
Have you read the contract carefully? Take your time. Selling your property is one of the most important decisions in your life. Don’t let the buyer pressure you. If you need more time to go over the contract, demand it. Look for the weasel clauses that are the big “outs” that nobody sees. These “outs” allow shady buyers to back out of the contract up until the last moment.
Download a complete checklist of questions to ask potential buyers here:
A Sure Sign of a Reputable Business is Widespread Recognition
Express Homebuyers has an A+ rating from the Better Business Bureau, and you can read about us in the Washington Times! In fact, Express Homebuyers has also been featured in the following news outlets:
Ready to Sell Your Home Fast to the
Real House Buyers?
Don’t be fooled by We Buy Houses Scam! Express Homebuyers is the best home buying business in the tri-state area of Washington DC, Virginia, and Maryland. If you want to sell your house in as little as 7 days, then look no further. Express Homebuyers will make a fast and fair offer over the phone in just minutes and on your schedule to buy your house fast. Call Express Homebuyers now at (877) 804-5252 for an offer in 7 minutes.
Express Homebuyers Advantage Video
We Buy Houses Scams
5-Part Video Series
We Buy Houses Scams 1
I figured it was time for an industry insider to pull back the covers on some of the shady practices that unfortunately occur in the house buying industry. These dishonest practices and we buy houses scams are one of the reasons I started Express Homebuyers back in 2003. I saw a real need in the industry for investors to operate in an ethical, honorable and truthful manner. Taking advantage of people is NOT RIGHT and is something I DO NOT TOLERATE.
First let’s talk about some of the most widespread tricks.
Well, wait. Let’s make sure we all understand something first. All investors, including Express Homebuyers are in the business to make a profit. That’s the reality of running a business – if you don’t make any money, you close up shop. So we all buy homes for a price we feel allows us to put in the necessary repair dollars and then resell the property for a profit.
Here’s where the differences start. Many house buying companies and property investors hide behind those “We Buy Houses” and “I Buy Houses” signs and websites that don’t tell you who they are, if they have an office address and if they have a legally operating and licensed company. Many of the We Buy Houses signs you see on utility poles have only a phone number. No one’s personal name, business name or business address is on there. And many of the 800 numbers go through Google voice or other services that make it untraceable.
Why do property investors do this? They do it for 2 reasons. The first is because is in most areas of the country those signs – which are also known as bandit signs – are illegal. The offender can be penalized with big fines. The second reason is that if the investor does something illegal during the course of your transaction with him, it will be virtually impossible to track him down.
At Express Homebuyers, we’ve run TV ads for years with my face and name on the commercial. Why? Because we operate honestly and ethically and have nothing to hide. Want to come visit our office and meet our team? You are welcome here any time! That’s an offer that would be difficult for most other home buyers to make, as most of them don’t have offices. They operate as a one-man show working out of a home or apartment.
We Buy Houses Scams 2
So back to the questionable activities and traps. One very common practice in real estate investing is a technique called wholesaling. Wholesaling is a process in which a “we buy houses” investor gets your home under contract and then assigns the contract to another buyer who actually closes on your home.
Why do some investors choose to wholesale instead of buying your home and fixing it up? There are several reasons. One is they don’t have money to buy the home. Or they don’t like the headaches and liability associated with renovating a home. Or they may just want or need to get paid immediately instead of waiting months for the property to be renovated and sold.
So – let me give you an example to better explain the wholesaling process. Lets say Bill investor says he will buy your home for $100,000 cash and can close in 2 weeks. You say great and sign a contract with him. Bill then goes to Jim investor and says “hey Jim, I have a house in Washington DC under contract. Would you like to buy it for $120,000?” Jim runs his numbers and thinks he can still make a profit by buying your home for $120,000, so he says yes. At this point Bill prepares a document called an assignment of interest and assigns the contract to Jim. In 2 weeks, Jim shows up to settlement and pays the settlement company $120,000. $20,000 goes to Bill and you get $100,000 – the contract amount that Bill promised you. Of course, if you have a mortgage that needs to be paid off you won’t get the full $100,000, but you get my point.
The scenario I just outlined in and of itself isn’t a problem. The problem occurs when Bill gets your house under contract and promises to close in 2 weeks with cash that he really doesn’t have. And the sad truth is, most investors don’t have the cash to buy your home. Because Bill doesn’t have the cash, he must quickly find a buyer who has cash and to whom he can assign the contract. What often ends up happening is Bill can’t find a buyer or he finds a buyer but the buyer backs out. Either way YOU are left without a buyer for your home.
You thought you had a signed and sealed contract. You started packing and have movers lined up. Then you get a call from Bill – if he is even professional enough to call you. Bill can’t buy your home and the deal is off. Needless to say, this can be a crushing disappointment, especially if you have an impending foreclosure auction or a deadline to move. We get calls every month from people with similar stories to this one!
So how do you avoid this situation? Very simply – you require the buyer to show you proof of funds before you ever sign a contract with a “we buy houses” company. Any reputable property investor should be able to share a current bank statement showing sufficient funds to purchase your home. You also must require the real estate investor to make a large, non-refundable deposit to the settlement company handling the closing. That way, if like in the example I just mentioned, Bill can’t find a buyer, he forfeits $5,000 to you.
We Buy Houses Scams 3
Another common practice in the home buying industry is the age-old bait and switch. Now the bait and switch can be used in two distinct ways.
The first is on the offer price. There is a ”we buy houses” company operating in the DC metro area that is famous for the bait and switch on offer price. They tell you over the phone they can purchase your home for, let’s say, $150,000 in cash and can close in 2 weeks. You’re happy with that offer and sign a contract without first going through the checklist I’m going to share with you in a minute. You’re selling in 2 weeks because you’re in a real financial mess and need the money urgently. The investor then tells you he has to inspect the property before he signs his part of the contract.
He shows up a few days later and reports that because of certain repairs he must now lower the price to $140,000. You’re upset but because you’re in jam, you agree. Then the day before settlement, the investor calls and gives you one of a thousand different reasons about why he can’t pay you $140,000. Now he can only pay you $120,000. You are furious, but also 2 days away from a foreclosure auction and the possibility of losing everything, so you agree.
This exact scenario played out six months ago with a seller to whom we had made an offer. She told us that another investor was going to pay her $50,000 more than we had offered. When we checked back months later, we found out she sold to that same bait and switch investor for $3,000 LESS than what we had offered. So essentially she got $53,000 less than the investor originally promised her.
That’s the first bait and switch tactic.
We Buy Houses Scams 4
The second one involves your mortgage. As I mentioned earlier, most investors don’t have cash on hand to pay for your home, but they lie and tell you they do. They give you a price over the phone and say they’ll pay cash – that’s the bait. Then they make an appointment to come see your home. Once they get to your house, they convince you to keep your mortgage in place and simply deed the house over to them – that’s the switch. They don’t have the cash and instead persuade you to finance the purchase of your home.
This scheme is known as buying a house “subject-to,” which means they are buying it subject to the existing mortgage in place. That means your name remains on the mortgage and you remain financially responsible for making the payments but they own your home and can profit from it.
In theory, there is nothing wrong with selling a property “subject to” as long as you are dealing with a reputable company that guarantees to make your mortgage payments on time. The problem is when someone isn’t reputable and doesn’t make your mortgage payments. Then you are left to suffer the consequences. Making matters worse, these scam artists will often stick a renter in your home and collect rent, but still won’t pay your mortgage.
The “subject to” ploy is very similar to another often-used dirty technique of tricking a homeowner into signing over their home. Let’s say you’re in foreclosure and have a pending foreclosure auction date 30 days out. This means if nothing happens in 30 days, your home will be auctioned off to the highest bidder and the sheriff will force you out of your home after the sale. Not a good scenario by any stretch of the imagination. To avoid this happening, you call a property investor. Let’s say you owe $100,000 on your mortgage and your house is worth $200,000. The crooked investor meets with you and says you have nothing to worry about. He will stop the foreclosure and allow you to stay in your home until you can get another loan and buy it back from him. All you have to do is pay him some rent – which is usually more than the mortgage payments were. If you couldn’t make the mortgage payments, you likely can’t pay a higher amount in rent! Oh, and additionally during this process, the investor tricks you into signing over your deed. That means he now has full control over your home. You miss a rent payment or two and a short time later you get an eviction notice on your door. You are forced out of your home and lose all of your hard earned equity. If something sounds too good to be true it usually is.
You’re probably thinking you’re smart enough to avoid getting caught in these so-called traps. Unfortunately, smart people get played all the time by these scam artists.
We Buy Houses Scams 5
How do you avoid these nightmare situations? Just like in any industry, there are good guys and there are not-so-good guys. Armed with the right information, you’ll be able to tell them apart and make the best decision. Here are the 7 insider secrets to know and factors you must consider when you’re selling your property to a house buying company. If you take the time to follow these steps, it’s highly unlikely you’ll become a victim of any “we buy houses” scams.
Number one – require a large, non-refundable deposit. By large, I mean 5-10% of the purchase price. This check should be deposited immediately in an escrow account with the title company. Then you should check with the title company to make sure the check cleared. Get that confirmation in writing as scammers can provide fake cashiers checks. Here is what the scammers do. Basically, they will email/message you from your online ad and say they are willing to pay full price for your home, sight unseen. Then, they will send you a large down payment via cashiers check or money order, and come up with a lie about why they need you to refund a portion of their funds immediately after you deposit the check. These checks or money orders look very real, and usually take the bank some time to realize they are fake. By then, you have already returned funds to the scammers that you never really received. They deposit your real check and your money is gone forever.
Key facts pertaining to this particular We Buy Houses Scam according to fsbo.com blog:
The second secret is to verify the buyer has the necessary funds to purchase your home. If he is getting a loan, speak with his lender and have that lender show you proof of funds. If the buyer says he is paying cash, make sure you see a current bank statement that shows the funds available to purchase your home.
Number three – thoroughly check out the buyer’s credentials. I don’t need to tell you that your home is most likely your single biggest asset. You want to make sure you’re selling to a reputable home buying company. Do an exhaustive online search. Check the Better Business bureau to see if they have a good rating. Read Google reviews and yelp.com to see what past clients have to say about working with them. If you can’t find anything about them on those 3 sites you may want to think twice about working with them.
The fourth thing is to get their office address. You may want to verify it on Google or with the county or state to make sure it is a legitimate business.
The fifth secret is to carefully read and review the buyer’s contract. The non-refundable deposit will do you no good if the contract has an out for the buyer. Common outs, also known as contingencies, include
Basically any clause that says the buyer can walk away without consequence if a certain specified thing happens or doesn’t happen.
Number 6 – investigate the buyer’s experience. How many houses has this company or person bought? Is he willing provide you with proof by showing you settlement documents from past purchases?
The seventh secret is – make sure your mortgage is paid off or have a licensed attorney involved in the settlement process. Don’t sign the deed to your house over without being in the presence of a real estate settlement attorney. You should always close on the sale of your house with a licensed attorney or settlement company. Unfortunately, not all attorneys and settlement companies can be trusted either. Check out their reputations online as well.
And before I sign off today, here’s the bonus secret. DON’T SIGN any papers you don’t fully understand. Any trustworthy person or company will not be offended if you need help in understanding and you take those documents to a third party for explanation.
So there you have it, the “we buy houses” scams to lookout for and the 7 secrets you can use to protect yourself from them.