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If you own a house, you’ve probably received postcards declaring, “We want to buy your home.” Or maybe the solicitations arrived by email, robocall or text. You might have seen roadside signs proclaiming, “We Buy Houses” or “Cash for Homes.” Whatever the method, these frequent pitches can seem puzzling and intrusive — and they’re probably not in your best financial interest.
How the sell-us-your-home scheme works
Companies will buy your house, typically as is. You don’t need to clean it, paint it, fix it or show it. In a process called “wholesaling,” they buy the house at below-market prices, then flip it to another investor at a higher price. The problem: Companies frequently offer only about 60 percent of a home’s fair market value, says Keith Clayton, special deputy attorney general with the North Carolina attorney general’s office.
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“I refer to these scams as equity stripping,” he says. “The biggest risk is that you will lose the equity that you have built up in your home.”
The industry is largely unregulated. In many states, home flippers, unlike real estate agents, don’t need a license, and buyers often use aggressive, manipulative and misleading practices. The most common complaints about homebuying companies on the Better Business Bureau’s website involve frequent emails, calls and texts, even after homeowners ask them to stop.
“They engage in all kinds of high-pressure sales tactics, misrepresentations about the value of the home, misrepresentations about market conditions — such as an urgency to sell now — misrepresentations even about possible tax debt,” Clayton says.
Even that pledge to buy properties “as is” can be a sham. Buyers will sometimes retract that promise and demand repairs before accepting a deed, “leaving the seller footing the bill of the repairs after all,” the Pennsylvania attorney general’s office warns. For homeowners trying to avoid foreclosure, it says, the buyer may promise relief, then “take the deed without paying off the mortgage balance, leaving the home seller ultimately responsible for the monthly payments and subject to foreclosure.”
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