Home Seller Scam Alert
On May 17, 2023, the investigative journalism news organization ProPublica published a piece cautioning homeowners about the predatory and disgusting practices used by companies that “buy homes for cash.” You may have seen the ads on highway billboards or on local television, promising to buy your ugly home as is, or paying “top cash” for your home without commissions or closing fees. The fact is that these companies represent a seedy, unregulated type of investors or scammers that prey on the elderly and vulnerable people. They target the elderly, the sick, people in financial straits, people with huge medical bills, people with lots of equity in their homes, or people who are upside down in their mortgages. They scam people that are in need of a quick sale but have little to no real estate or legal knowledge. The ProPublica article shares a number of heartbreaking stories including the case of a senior citizen with dementia who was scammed into selling her home at roughly two-thirds its value.
The ProPublica article asks an important question that all homeowners need to be aware of: What are the risks of going with a cash buyer instead of a real estate agent? The short and simple is that real estate agents and realtors are licensed and have a fiduciary obligation to act on the best interest of their clients. Cash buyers do not need to be licensed and operate under a questionable code of ethics. Most often these unscrupulous buyers do not inform buyers of the correct value of their home or make exaggerated claims of “necessary repairs” that may run in the thousands. In fact, these people are trained to low ball buyers from the start so that they can purchase the home at the lowest price. The home is sold immediately with little to no changes at a great profit. Once the contract is signed, the seller has very little recourse. In most instances the buyer reserves the sole right to cancel the contract while the seller gives up all rights. In many instances the buyer will “cloud the title,” making it more difficult for the seller to seek another buyer in case of second thoughts or the deal falls through. “Investors will often record a ‘memorandum of sale’ on the property as a means of locking [the seller] into a contract.” It is important homeowners to educate themselves, contact a real estate agent, seek legal advice from a real estate attorney, check the value of your home from a reputable website, monitor your elderly parents’ finances and dealings with unsolicited home buyers, place yourself on the do not call lists, ignore the catchy ads, mailings or jingles, and always be vigilant.
Here are two informative pieces for you to read regarding this scam and remember us for your home insurance needs: