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Are 'we buy houses' offers a rip-off? How to know if you're getting scammed.

Yahoo Personal Finance· Getty Images
Updated 5 min read

For a time, it seemed the signs were everywhere. From billboards to those little "bootleg" signs stuck in the ground near busy intersections. "We buy houses!" "Get cash for your house!" "We buy UGLY houses!"

Those "we buy houses" signs still show up in cities across America. Sometimes the message is spread through social media, online ads, and postcards. Perhaps you've received a text offering to buy your house.

The cash offer scheme has a long history — and recently triggered a national press investigation. Here's how to determine if an offer to buy your house is the real deal or a scam.

Read more: Is it a good time to sell your house?

Nonprofit newsroom ProPublica launched an investigation in 2023 of the "We Buy Ugly Houses" company HomeVestors. The report claimed some franchise offices "... used deception and aggressive sales tactics to persuade homeowners in vulnerable situations to sell their homes for far below market prices."

Some sales contracts were just about impossible to void after being signed, the report added. HomeVestors’ CEO later resigned, claiming the press coverage had taken a "personal toll" and he was retiring.

The news article got lawmakers' attention, and some state attorneys general stepped up oversight of the "we buy houses" industry.

HomeVestors now allows three days for a seller to cancel a contract.

Not all marketing enticing you to sell your home to an eager buyer for fast cash is shady, especially in these days of a shortage of homes in the real estate market. Legitimate cash buyers may use the same "we buy houses" signs, cold calls, emails, and texts to contact sellers. These qualified purchasers may include:

  • Individual real estate investors who manage a portfolio of income-producing properties. Often, they will flip a house for a fast-turn profit or use it for rental income.

  • Real estate investment trusts (REITs) that amass large institutional holdings of properties offered to investors in a form similar to stocks.

  • iBuyers like Opendoor and Offerpad, which use algorithms to speed the sale process.

  • Real estate wholesalers, which are essentially a middleman acting as a bridge between a seller and a buyer.

  • Real estate hedge funds that operate pools of investments for many investors.

  • Real estate agents seeking to develop business by finding sellers looking to list their properties.

However, even if a buyer is legit, that doesn't necessarily mean that you'll get a top-notch sale price. Cash buyers are guided by the "buy low, sell high" strategy.

Professional house buyers are likely to discount your home's current market value so they can turn a quick profit. They may also factor in the cost of renovations or upgrades, home staging, closing costs, and perhaps some additional marketing.

Learn more: How much does it cost to sell my house?

Red flags that you may be dealing with a scammer include:

  • Asking you for up-front money. If the home-buying company asks you to pay a fee in advance, it's very likely a scam. You're the seller: It's you who should be receiving a sizable deposit.

  • Attempting to get you to sign over the title to your house. Even a "temporary" transfer of the title is asking for trouble.

  • Offering no earnest money. Claiming that a real estate closing will occur so rapidly that an earnest money deposit isn't needed is another warning sign. Also, if the earnest money is such a small amount that it doesn't deter a buyer from backing out of the deal, that’s a bad sign.

  • Putting “walk away” conditions in the purchase contract. Be careful if the home buyer's contract includes broad contingencies allowing them to cancel or delay the purchase for practically any reason. A legit cash buyer can close the deal in just two to three weeks.

In some circumstances, you may be willing to take less profit to sell a house fast and avoid the hassle of the home sale process.

Perhaps you've already moved into a new house and need to get out from under making two mortgage payments. You may have inherited the house and want to wrap up the probate details. Or, if you're in a major financial bind — perhaps even facing imminent foreclosure — you may decide to take less in an effort to pay off creditors.

However, if you've got time, the home is in good condition, and you're looking to get the most you can from a house sale, a traditional sale in the open market through a real estate agent is likely the best way to go.

Dig deeper: How to sell your house without a Realtor

"We buy houses" investors often purchase contact lists of homeowners from direct marketing lead generation sellers in an area they wish to target. If you've received multiple inquiries lately from people interested in buying your home, your name and address may be on such a list.

If there are house buyers in your city or region, they may be your best choice. A quick Google search can serve up the details. Nationally known cash home buyers include HomeLight Simple Sale?, Offerpad, and Opendoor.

No. Zillow famously offered a home purchase program for a brief time but discontinued it in 2021. Another national real estate brand, Redfin, also launched an iBuyer service in 2017 until it shut down in 2022.

Zillow's Zestimate is the best-known automated valuation model in real estate. However, to get an accurate estimate of your home's worth, it's a good idea to use two or three AVMs to obtain an average. Some tools to compare include:

This article was edited by Laura Grace Tarpley.