Selling for cash sounds simple: no mortgage approval, fewer contingencies, a quicker close. But “cash buyer” is a broad label. Some buyers are well-capitalized investors who truly wire cash. Others are wholesalers who sign your property up and try to assign your contract to the real end buyer. Both can be legitimate—if they’re transparent and funded. Your job is to separate real cash from empty promises and scams.
Investor vs. End Buyer vs. Wholesaler
- End buyer/investor: Has funds on hand (or private/hard money committed) and intends to close and take title.
- Wholesaler: Markets your signed contract to another buyer. Wholesaling can be ethical only with clear disclosure and your consent to assignment.
- Red flag: A “cash buyer” who cannot show timely proof of funds, dodges questions about who’s actually closing, or refuses to deposit earnest money with a neutral escrow.
Real Proof of Funds vs. Vague Promises
A genuine POF is a recent bank/asset statement or a letter from a recognized financial institution showing the buyer’s name and available balance. A screenshot of a “crypto wallet,” personal spreadsheet, or outdated letter is not enough. Verify with the institution if you’re unsure.
Common Cash-Home Scams (And How They Work)
Bait-and-Switch “Price-Chipping”
The buyer agrees to a number, then—right before closing—claims “unexpected issues” and demands a massive price drop. This exploits your tight timeline.
Prevention: Tight inspection window, no open-ended contingencies, and clauses that prohibit renegotiation based on items already visible or disclosed.
Assign-and-Dash (Undisclosed Wholesaling)
A buyer contracts your home at an attractive price, then disappears while shopping your deal to others. If they can’t find an assignee, they bail—wasting your time.
Prevention: Use no-assignment or consent-to-assign clauses. Require written disclosure if they intend to assign and reserve the right to reject assignees.
Fake Escrow or Wire-Fraud Phishing
Scammers spoof title company emails and send fake wiring instructions. One wrong wire can cost you your proceeds.
Prevention: Always call your title/escrow office at a known phone number (not the email thread) to confirm instructions. Use secure portals. Never trust last-minute changes by email.
Option Contract Traps
Instead of a real purchase agreement, you sign an option that lets them control your price while risking little. They’ll market the property, but they’re not obligated to buy.
Prevention: Avoid options unless you specifically want them (and price them accordingly). Insist on a standard purchase agreement with earnest money at risk.
Upfront “Processing/Marketing” Fees
No serious buyer needs you to pay “application,” “valuation,” or “marketing” fees.
Prevention: You should not pay the buyer to buy your home. Legit buyers pay earnest money to you (held by escrow), not fees you pay them.
Affidavit of Memorandum to Cloud Title
A bad-faith buyer records a “memorandum” against your title, claiming a contract interest to block you from selling to anyone else unless you cave on price.
Prevention: Use strong contract language (default remedies), short deadlines, and work with an attorney/title company prepared to address frivolous clouds on title.
Foreclosure “Rescue” & Equity Skimming
Promises to “save your home” in exchange for title or a deed with a leaseback—and you lose your equity.
Prevention: Be extremely cautious with sale-leaseback and subject-to pitches when you’re distressed. Have an attorney review everything.
A Step-by-Step Anti-Scam Process
Pre-Screen Every Buyer
- Full legal name, company name, physical office, website, and government ID.
- Ask how they fund purchases (cash, private money, hard money).
- Request three recent deals with addresses and closing statements (you can redact sensitive data).
Verify the Money
- Request recent POF on institution letterhead.
- If they claim hard/ private money, ask for the approval letter or contact info to verify.
- Require earnest money (1–3%+ depending on market) delivered to neutral escrow within 24–48 hours.
Use the Right Contract (State-Approved)
- Prefer state-approved or attorney-drafted contracts—fewer loopholes, more consumer protections.
- Avoid “homemade” agreements or ones that heavily favor the buyer.
Title/Escrow Safeguards
- Choose a reputable title company or closing attorney yourself.
- Require all deposits into escrow (never to the buyer personally).
- Ask for a title commitment early to surface issues.
Inspection & Access Rules
- Short inspection period (5–10 days or less).
- Supervised access or lockbox tracking; set hours.
- No contractors wandering without permission.
- Prohibit marketing photos/signs unless you consent.
Closing-Day Checklist
- Confirm wired funds received by escrow/attorney.
- Review the final closing statement (CD/HUD-1).
- Walkthrough timing specified (e.g., within 24 hours of close).
- Confirm utility/keys possession protocol in writing.
Documents You Should Demand
Proof of Funds (POF) & Identity
Recent, verifiable statements or bank letter; buyer’s legal ID; entity docs if buying under an LLC.
Earnest-Money Deposit (EMD) Receipt
A written receipt from the title/escrow company that funds were received and are cleared (not just “promised”).
Title Commitment & Closing Statement
The commitment shows liens, encumbrances, and requirements to close. Before signing final documents, review the closing statement line by line.
Contract Clauses That Protect You
No-Assignment (or Consent-to-Assign)
Either prohibit assignment entirely or allow it only with your written consent. Add language: any undisclosed assignment constitutes default.
Hard Earnest Money After Due Diligence
Make the earnest money non-refundable once the inspection period ends—unless the buyer fails to perform.
Limited Inspection Window & Price-Chipping Guardrails
State that cosmetic or pre-existing items disclosed or visible at the walkthrough cannot be grounds for price reduction.
Per-Diem Fees & Liquidated Damages
If the buyer misses closing without a contractual excuse, they pay a per-diem fee or forfeit earnest money as liquidated damages.
How to Vet a Cash Buyer’s Reputation
Public Records & Prior Closings
Look up the entity in state business registries. Check county recorder for recent purchases by the buyer’s name or LLC.
Reviews, Complaints, and References
Search for BBB profiles, attorney-general complaints, and online reviews. Ask for seller references and call them.
Ask for HUD-1/CD Samples
Serious buyers can share (redacted) closing statements proving they actually close—and not just “contract and pray.”
Title Company & Attorney Best Practices
Work with a title company or closing attorney you select. Ask how they verify wires, handle payoff statements, and manage identity checks. If a buyer insists on a specific title company you’ve never heard of, research it—then decide.
When Wholesaling Is Legit (With Full Disclosure)
Wholesaling can serve a purpose when:
- The wholesaler discloses they intend to assign the contract.
- You permit assignment in writing.
- They deposit meaningful earnest money.
- Your contract sets deadlines and non-refundable milestones.
- Everyone understands who is the final buyer and who brings funds.
No disclosure? That’s a red flag.
Special Situations: Probate, Tenants, Code Issues, Foundation
- Probate: Ensure the personal representative has authority; get court approvals if required.
- Tenants: Disclose leases and deposits; clarify possession date and “cash for keys” if needed.
- Code/structural issues: Disclose known defects. “As-is” doesn’t protect you from fraud or concealment claims.
- Liens/judgments: Work with title to plan payoffs or negotiate releases before closing.
If You’re in Foreclosure or Facing Tax Sale
You’re a prime target for predators. Don’t sign deeds, POAs, or long options without independent legal counsel. Avoid “we’ll take title and let you rent” pitches that strip your equity. Ask your attorney about state-specific Homeowner Protection laws and rescission periods.
Digital Safety & Wire-Fraud Protocol
- Use secure title portals; confirm instructions by phone using a known number.
- Never share SSNs or full bank info by email; use encrypted methods.
- Freeze your credit if identity theft risk exists.
- Beware look-alike domains (one letter off).
Red-Flags Quick Checklist
- Won’t provide recent POF or ID.
- Demands option instead of purchase contract.
- Asks you to pay “processing” or “marketing” fees.
- Earnest money is tiny, late, or sent to the buyer, not escrow.
- Unlimited inspection or vague “partner approval” contingencies.
- Pressures you to use an unknown title company they control.
- Talks about recording a memorandum before EMD clears.
- Last-minute price cuts for issues already known/visible.
10 Questions to Ask Any Cash Buyer
- What’s your legal name and entity, and who will take title?
- Can you send recent POF on letterhead?
- Who is your title/escrow contact? (I may choose my own.)
- How much earnest money and when will it be deposited?
- What’s your inspection window?
- Are you the end buyer, or do you plan to assign?
- What is your closing timeline, and what can delay it?
- Can you share two recent closing statements (redacted)?
- Who will be present at walkthrough and when?
- How do you prevent wire fraud during closing?
Timeline Examples: Safe 7-Day Close vs. Risky 30-Day Stall
Safe 7-Day Close (Typical):
- Day 1: Verified POF + contract signed; EMD to escrow in 24 hours.
- Day 2–3: Title opened; inspection completed.
- Day 4–5: Contingencies removed; EMD goes hard.
- Day 6–7: Funds wired; closing.
Risky 30-Day Stall:
- Day 1: No POF; buyer insists on long “partner approval.”
- Day 10: No EMD; buyer requests price cut.
- Day 20: Buyer records a memorandum; blocks your sale.
- Day 30: Buyer walks; you’ve lost a month and leverage.
What to Do If You Suspect a Scam
- Hit pause and don’t sign anything new.
- Call your title/escrow and a real-estate attorney.
- Document everything (emails, texts, contracts, IDs).
- If a memorandum clouds title, ask your attorney about demand letters and statutory remedies.
- Report fraud attempts to your state attorney general or consumer protection office.
Conclusion
Selling your house for cash can be fast and smooth—if you treat it like a professional transaction. That means verifying funds, using state-approved contracts, choosing reputable title/escrow, and installing guardrails that stop price-chipping, undisclosed assignments, and wire scams. When a buyer is real, they won’t resist reasonable verification or fair deadlines. Protect your equity with strong paperwork, short contingencies, and a closing team you trust—and you’ll keep the “cash” in cash sale from turning into costly chaos.
FAQs
1) Is a wholesaler always a scam?
No. Wholesaling can be ethical with full disclosure, your written consent to assign, meaningful earnest money, and firm deadlines. The problem is undisclosed wholesaling.
2) How much earnest money should I require?
Market norms vary, but 1–3% is common. On tight timelines or as confidence grows, negotiate non-refundable EMD after inspections.
3) Can I force a buyer to close if they stall?
If your contract includes liquidated damages, per-diem penalties, or specific performance, you have leverage. Ask an attorney which remedies fit your state.
4) Do I need my own title company or attorney?
It’s wise. Choosing your own neutral title/escrow (or a closing attorney in attorney states) reduces conflicts of interest and improves wire-fraud security.
5) What’s the fastest safe closing timeline?
With clean title and verified funds, 5–10 days is realistic. The keys are immediate POF, short inspections, quick title work, and funds wired to trusted escrow.
