Are 'We Buy Houses' Companies Legit? How to Spot a Cash-Buyer Scam

'We buy houses' companies are a legitimate, established part of the real estate industry — local real estate investors, franchise operators, and iBuyers all operate legally across California and the country, and for many sellers facing a distressed sale, tight timeline, or a property needing significant repairs, they provide a genuinely useful service. At the same time, the low barrier to entry in this space (anyone can put up a website and a yard sign) means it also attracts a real minority of scammers and bad-faith operators who prey on financially or emotionally distressed sellers.

The good news is that legitimate and illegitimate operators are usually easy to tell apart once you know what to look for. This guide gives you the specific green flags and red flags to check, the legal protections California law already gives you as a seller, and a fast way to vet any buyer before you sign anything.

A legitimate buyer will provide proof of funds on request — a bank statement or letter from their financial institution showing they actually have the capital to close without a financing contingency. If a buyer resists providing this or gets vague about it, that's a meaningful warning sign, not a minor one.

A legitimate buyer gives you a written offer with clear, specific terms — purchase price, closing timeline, any contingencies, and what (if anything) is deducted at closing — rather than a verbal number that changes later. The offer should be genuinely no-obligation: you should be able to walk away without penalty if you don't like the terms, and a legitimate buyer won't pressure you to sign on the spot.

Legitimate buyers don't charge upfront fees of any kind. You should never be asked to pay an 'application fee,' 'processing fee,' or any other charge before a sale closes — all real costs in a cash sale come out of proceeds at closing, exactly as they would in a traditional sale. A legitimate buyer typically has a physical or well-documented local presence, a Better Business Bureau (bbb.org) record you can check, verifiable reviews across multiple platforms (not just their own site), and is willing to provide references from past sellers on request. They will also generally want to see the property in person, or at minimum request extensive photos or video, before finalizing an offer — a firm number with zero visibility into the property's actual condition is unusual and worth questioning.

Be cautious of any buyer who makes a firm offer without ever seeing the property (in person or through a real inspection process) — a legitimate offer is condition-dependent, and a firm number with no basis is a sign the 'offer' isn't real. Similarly, a buyer who can't or won't produce proof of funds when asked is a serious red flag, since it's a basic, easy thing for a real buyer to provide.

Any request for money upfront — a deposit, processing fee, 'administrative' fee, or anything paid by you before closing — is one of the clearest scam signals in this industry. In a legitimate transaction, money flows to the seller at closing, not from the seller to the buyer beforehand. Be wary of high-pressure tactics: buyers who insist you sign today, claim the offer 'expires in an hour,' or discourage you from having an attorney or trusted advisor review the contract are using pressure because they don't want you to think it through.

Watch closely for anything involving wire transfers or earnest money games — a common scam pattern involves a buyer asking you to wire funds to an account for a fake reason (taxes, fees, deposits) or providing fraudulent wiring instructions during escrow. Always verify wiring instructions by phone, through a number you look up independently, never through a number or email provided in the instructions themselves. Finally, be alert to contract assignment without disclosure — some wholesalers sign a contract with you intending to resell (assign) that contract to a different, unknown end buyer for a fee, without ever telling you that's the plan. This isn't automatically illegal, but a buyer who isn't upfront that they may assign the contract, or who won't disclose who will actually be closing on your home, is not being transparent with you.

California law provides specific protections for sellers, particularly those in vulnerable financial situations. Under Civil Code Section 1695 (the Home Equity Sales Contract law), homeowners in foreclosure who sell to certain equity purchasers have a legal right to cancel the contract within five business days of signing, with specific required disclosures and contract language the buyer must include. If you're in foreclosure and being approached by an investor, this cancellation right exists specifically to prevent rushed, pressured sales — a legitimate buyer operating in this space should already know about and honor this law without you having to bring it up.

Beyond foreclosure-specific protections, general contract law still applies: any purchase agreement you sign is a binding legal contract, and you're entitled to have an attorney review it before signing, to negotiate its terms, and to walk away if you're not comfortable — up until the point you actually sign. If you believe you've been the target of fraud or deceptive practices, the California Department of Real Estate (dre.ca.gov) accepts complaints, and for real estate licensees specifically, the DRE can investigate and take licensing action. This guide provides general information, not legal advice; if you're facing foreclosure or believe a contract you've signed is problematic, consult a real estate attorney promptly.

Start with a quick search: look up the company name plus 'reviews' and check the Better Business Bureau (bbb.org) for a profile, complaint history, and accreditation status. Search the company name plus 'complaint' or 'scam' to see if anything concerning surfaces from past sellers.

Ask directly for proof of funds and don't move forward until you receive it. Ask how long they've been buying homes in your specific area, and ask for two or three references from recent sellers you can actually call. Confirm in writing (email is fine) that there are no upfront fees of any kind and that the offer is genuinely no-obligation. Ask them to explain how they arrived at their offer number — a legitimate buyer can explain their repair estimate and after-repair-value comps without hesitation (see our companion guide on how cash offers are calculated for the full formula). Finally, confirm who will actually be on title at closing — the company you're speaking with, or an undisclosed third party they plan to assign the contract to.

Ten minutes of this kind of checking will surface almost every red flag covered in this guide. A legitimate local buyer will never be bothered by these questions — if anything, being asked to prove their legitimacy is a normal, expected part of doing business honestly.

The reality is that 'we buy houses' companies span a wide spectrum, from established local investors and licensed businesses to opportunistic wholesalers and outright scammers. The tools to tell them apart aren't complicated — proof of funds, a written no-obligation offer, no upfront fees, a real BBB and review history, and transparency about how the offer was calculated and who's actually closing on the home. Sellers who ask these basic questions before signing anything protect themselves regardless of which buyer, or which path (agent, FSBO, or cash sale) they ultimately choose.

Sierra Property Buyers provides proof of funds on request, puts every offer in writing with no upfront fees of any kind, and is happy to walk you through exactly how our number was calculated. We'd rather earn your trust by being transparent than ask for it on faith — and we encourage you to run this same checklist on any buyer you're considering, including us.