Most people’s first contact with home investors come through some form of “We Buy Houses” marketing material like signs, letters, notes at your door, online, etc. This demonstrates the low barrier to entry that exists when it comes to real estate investors. Literally anyone can do marketing and call themselves an investor, whether they know a what they are doing or not.

Of course, new investors aren’t the biggest worry you’ve got to face. You’ve really got to be worried about scammers. You need to know how to separate a scammer from a legitimate investment firm that’s actually going to help you. As legitimate investors, we’ll do everything we can to help you spot these scams before you get into trouble. Here are some tips on how to spot a “We Buy Houses” scam

Tip 1: Understand the flow of money in a legitimate real estate transaction

Money does not flow from you to the buyer. Money flows from the buyer to you. Often, scammers will ask for hefty “processing” or “administrative” fees. You pay them, and then they ride off into the sunset. Sure, the fees won’t be anywhere near the value of the home, but can you really afford to lose anywhere from $200 to $1000 to someone unscrupulous? Besides, these guys can often get thousands of desperate sellers to pay up in a short period of time. Then they change their number, disappear, and are on to the next set of marks.

A legitimate real estate investor will consult with you and write you an offer. This will be free service they provide. You will then have the option of accepting the offer or not. Then you’re going to get cash. You may have to pay some or all of that cash to the bank if you owe  money on the home, but you’re not paying to sell the house.

Tip 2: Earnest money is part of the real estate buying process

“Investors” who don’t want to put up any earnest money are often acting as “bird dogs.” They’ve taken one of those get rich quick “real estate investing” seminars and are actually trying to sell deals to other investors, who may or may want to buy. All they’re doing is locking up your home under contract on the very small chance that their contacts will buy the house from them.

We have no problem putting down earnest money. By the time we’ve done that, we’ve decided we’re happy to buy your home. It’s not extra money we’re paying. It’s just an advance on money we were going to pay anyway. In addition we’re often happy to close very quickly unless there’s some reason you need more time. There is no reason not to handle the process professionally, and there is no reason to give ourselves a bunch of different “out” clauses. We’re also happy to provide proof of funds. If we don’t want the house we’ll say so and move on.

Tip 3: The buyer is eager to buy the house sight unseen

Usually this is the start of a foreign wire fraud scam. Nobody in their right mind is willing to buy a home sight unseen. We buy decrepit and run-down houses all the time. However, we at least go and look at the homes before we make you an offer. If the house is going to need $50,000 of rehab we’d like to know that before deciding what kind of offer we’re going to make to you, for example. This allows us to give you fair offer to homeowner every time, because there is no guessing involved.

“Sight unseen” means “I really have no intention of buying this house. I’m just here to take you for a ride.”

Tip 4: You’ve just got a bad feeling about all of this

New scams come out all the time. We couldn’t possibly warn you about all of them, simply because criminals are constantly looking for new ways to con people. However, there’s one tool you can always use to determine whether something is wrong: your gut. If something seems off, it probably is. There are plenty of people out there who are willing to invest in your home, so there’s no reason to go with one that gives you a bad feeling. If you see unprofessional behavior, don’t like what’s being said about the company online, can’t find any information at all about the company or just feel like something’s strange about the proposed deal, don’t move forward.

You also should know that you have every right to receive and entertain multiple offers. There’s nothing wrong with contacting several investors to see what they’ll offer. Look at how they treat you in addition to the bottom line number they are offering to you. Remember, a true home investor should help you make the best of a bad situation. Ultimately, you ought to feel good about the transaction and walk away better off than you were before. A true home investor is also happy to answer all of your questions before talking about money at all.

At ShapeUp Homes we are a professional investment team that’s been consistently helping homeowners out of complicated situations. We’re happy to answer any and all of your questions, and we do so free of charge. Call us today at 210-441-4233.

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