Are "We Buy Houses" Companies Legit? A Checklist to Vet Any Cash Buyer

It is smart to be cautious. When you are behind on payments, you get a flood of letters and calls, and it is hard to tell who is real. A few simple checks can protect you.

Quick facts before you talk to any buyer

A legitimate cash buyer can pass basic checks in a day or two. Keep these facts in mind:

• The FTC says it is illegal for a company offering mortgage relief to charge you before you get a written offer of relief from your lender (Mortgage Assistance Relief Services Rule).
• The CFPB lists these warning signs: upfront fees, telling you to stop paying your mortgage, and trying to get you to sign over title, sometimes called a "rent to buy" scheme.
• The FTC warns that if you transfer your deed, you are not likely to get it back, and you may still owe the mortgage.
• In Texas, a person who assigns your purchase contract without a license must disclose that in writing (Occupations Code §1101.0045 and Property Code §5.0205).
• Free foreclosure counseling is available from HUD-approved counselors at 1-800-569-4287.

Are "we buy houses" companies a scam?

Most are not scams, but they are businesses that buy below retail so they can profit. Some buy with their own money and close quickly. Others are wholesalers who sign a contract and then look for another investor. A small number are foreclosure rescue scammers who target people in trouble.

The goal is not to trust or distrust a sign or a website. It is to check the buyer the same way a bank or title company would. For the math behind offers, see how much cash home buyers pay.

How do you verify a cash home buyer?

Ask for proof, not promises. Use this checklist with every buyer:

1. Proof of funds. Ask for a recent bank or lender letter showing money at least equal to the price. A letter from a hard-money lender is common and fine if you can confirm it.
2. A written offer and contract. Get the price, closing date, earnest money, inspection period, and who pays closing costs in writing.
3. An independent title or escrow company. Ask for its name, then look up its phone number yourself and call to confirm it has the file. The title company pays off your loan and liens and sends you the rest.
4. Earnest money deposited with that title company. Ask how much and when. Very small deposits make it easy for a buyer to walk away.
5. A real business. Look up the company name on your state Secretary of State's business search. Check that it is active and who the registered agent is.
6. A track record. Search the company and owner names with "reviews" and "complaints," check the Better Business Bureau, and ask for recent addresses they bought. You can confirm those sales in county property records.
7. No upfront fees. You should never pay a buyer to make an offer, inspect, or "hold" your home.

What is the difference between a wholesaler and a direct buyer?

A direct buyer purchases your home with its own funds; a wholesaler signs a contract and sells that contract to someone else for a fee. Wholesaling is legal in many places, but it adds a middle step. If the wholesaler cannot find an end buyer, your deal can fall apart, which is risky before a foreclosure sale.

Texas disclosure rules

Texas Occupations Code §1101.0045 lets an unlicensed person assign a purchase contract only if they disclose in writing the nature of their interest to the seller and any potential buyer; otherwise it counts as real estate brokerage. Texas Property Code §5.0205, in effect since January 1, 2024, requires written notice to the owner that the person intends to assign the contract, and notice to potential buyers that they do not hold legal title. Other states have their own rules, so ask any buyer directly: "Will you close with your own money, or assign this contract?"

What are the red flags of a foreclosure rescue scam?

The biggest red flag is any request to sign over your deed or pay money before anything is done for you. Federal agencies list these warning signs:

• Asks for upfront fees, or payment by wire, cashier's check, or payment app.
• Tells you to stop paying your mortgage or to stop talking to your lender, lawyer, or housing counselor.
• Promises to "stop" or "guarantee" an end to your foreclosure.
• Pressures you to sign today or to sign papers you do not understand.
• Offers a "forensic audit" of your loan for a fee.
• Offers to let you rent your home back and buy it later if you sign over the deed.

Read more in our guide to foreclosure scams to avoid.

What should you never sign?

Never sign a deed transferring your home unless it happens at a closing where your mortgage is paid off. Watch for these documents:

• A deed signed outside of closing. If a buyer takes title "subject to" your loan without paying it off, the mortgage stays in your name. If they stop paying, the foreclosure and credit damage are still yours.
• Sale-leaseback "rescue" deals. You deed the home to someone, rent it back, and are promised you can buy it back later. The FTC warns the scammer may keep your rent, not pay the mortgage, and evict you.
• Blank or incomplete forms, or a power of attorney over your property.
• A contract with no set price, a long inspection period, or a clause letting the buyer lower the price for any reason.

If anything feels off, have a real estate attorney review the contract before you sign.

If this is your situation

A buyer knocked on your door after a foreclosure notice

Take their card, but do not sign anything that day. Run the checklist above and get at least one other offer.

The buyer's contract says "and/or assigns"

Ask directly whether they plan to assign it. If yes, ask for the end buyer's proof of funds and a firm closing date before the foreclosure sale.

Someone wants the deed now and will "handle the bank"

Stop. This is the pattern federal agencies warn about. Call a HUD-approved counselor or local attorney first.

The sale date is very close

Choose a buyer who can prove funds and close through a title company in time, and also ask your servicer about postponing. See how to stop a foreclosure auction.

What to do this week

1. Write down every company that contacted you, with names and phone numbers.
2. Look up each company on your state's business entity search and check reviews and BBB complaints.
3. Ask each buyer for proof of funds, a written offer, and the title company's name.
4. Call the title company yourself, using a number you found independently.
5. Ask whether the buyer will assign the contract.
6. Call a HUD-approved counselor at 1-800-569-4287 to review your options for free. Compare selling with the other paths in selling to avoid foreclosure.