“We Buy Houses” Red Flags and Scams

Red Flags That a “We Buy Houses” Company Might Be a Scam

Be cautious if a company shows any of the following warning signs:

• Relies on verbal agreements – Always insist on a written, official offer.
• Requests upfront application fees – Legitimate buyers should not charge you to consider your home.
• Promises to sell your property after you’ve transferred the title – This is highly suspicious and often a setup for fraud.

One of the most dangerous scams to watch out for is equity skimming. In this scheme, a so-called cash buyer promises to either pay you a large sum once the property is sold or take over your mortgage payments while allowing you to stay in the home.

Once you transfer the title, the scammer may begin collecting “rent” from you—but instead of using it to pay the mortgage, they pocket the money. Eventually, the lender forecloses on the home, and the scammer vanishes—leaving you without a house and facing severe financial consequences.

Caution for Buyers: Quick Flips Aren’t Always Quality Homes

If you’re thinking about buying a recently flipped property, proceed with care. Many flippers are focused on maximizing profit and minimizing turnaround time, not necessarily on quality.

To cut costs and save time, some may:

• Skip permits for renovations
• Use low-quality or substandard materials
• Hire unlicensed or inexperienced contractors
• Neglect proper oversight of work and subcontractors

This can result in poorly executed, potentially unsafe repairs. While there are reputable flippers who do solid work, others may prioritize profit over professionalism and cut corners along the way.

If you suspect you’re buying a flipped home, a thorough home inspection is essential. It could save you from major repair costs and safety issues down the line.

There are some disadvantages to ‘cash-offer’ companies

While selling to cash-offer companies has its benefits, there are some significant disadvantages you should be aware of.

You may net less money

There are two major leverage points with cash buyers:

1. Like me, they know you want to get rid of your house
2. Unlike me, they expect you to settle for a much lower price because they have cash-in-hand

Cash buyers will typically offer 50% to 60% of your home’s market value. This gives them a cushy profit margin. My offers tend be higher than cash buyers because I am willing to work with an agent or seller financing.

You give up control

Unlike traditional home sales, where there’s room to negotiate both price and terms, “We Buy Houses/cash-offer” companies typically present a firm, non-negotiable offer. As noted earlier, these offers are often below market value.

Additionally, they usually don’t provide flexibility, such as rent-back options or other concessions. The sale tends to move forward on their terms, using their standard contracts and procedures.

Hidden Fees

Some cash buyers lure in sellers with an appealing offer, only to add fees later that reduce the actual payout. Service fees often range from 5% to 6% of the purchase price.

The takeaway? Always review the fine print carefully before accepting any cash offer.

Your best interest is secondary

These companies are in the business of buying homes—but not at full market value. They avoid traditional listings on the MLS because purchasing at market price wouldn’t leave enough room for profit when they resell.

It’s also important to remember that they have no legal obligation to offer a fair price or act in your best interest.

It could be a scam

Unlike licensed real estate agents, real estate investors aren’t required to hold a license, and their activities face minimal regulatory oversight. They also aren’t bound by a professional code of ethics like Realtors are. While many “We Buy Houses” companies operate legitimately, it’s still crucial to do your homework and confirm that any company you’re considering is reputable.

They’re likely not local companies

Seitz Home Development is a local, St. Louis company. I was born and raised here and I currently live in south city. Of course, I want to make money, but I also have a love of our local architecture and have a passion to keep our city beautiful. Nothing is more satisfying than bringing an old house back to life and providing a beautiful new home to someone.

You might get passed around like a hot potato

Many of these companies are franchises. Their employees come and go. Seitz Home Development is one guy…me. You will get consistent, personalized service throughout the entire process.