Red Flags and Warning Signs

When someone makes you an offer on your property, how do you know if it's legitimate? This page helps you identify warning signs across all types of real estate transactions—from cash offers to creative financing arrangements.

Professional Appearance Doesn't Indicate Legitimacy

Sophisticated operators invest in looking trustworthy. Professional websites, nice offices, printed materials, and friendly demeanor are all things money can buy. A polished presentation costs thousands of dollars; legitimacy requires consistent behavior over time.

This cuts both ways. A buyer working out of their truck isn't necessarily predatory, and a buyer with a corporate office isn't necessarily safe. Cash offers can legitimately vary by 15-25% for the same property depending on the investor's business model. The price itself isn't a reliable signal either direction.

The difference between legitimate and problematic operators shows up in the specifics—verifiable credentials, contract terms, and how they respond when you ask questions or take time to think.

Buyer Verification: Proof of Funds and Entity Checks

Proof of funds documents can be fabricated. Watch for: blurred edges or altered fonts, account holder names that don't match the buyer, dates more than 30 days old, or claims that funds are "being transferred." Legitimate cash buyers have verifiable bank statements or financial institution letters. You can call the issuing bank to verify authenticity.

Any LLC or business entity can be checked through the state Secretary of State website (free). Look for: registration date, registered agent, and good standing status. A newly formed LLC with no track record warrants additional scrutiny. Multiple layers of LLCs or a buyer unwilling to identify the principals may indicate someone trying to obscure accountability.

If the contract buyer name says "and/or assigns," ask who will actually be purchasing. You're entitled to know your counterparty.

Contract Red Flags: Commitment Signals in the Terms

Standard earnest money is 1-3% of purchase price. A $100,000 property typically has $1,000-$3,000 earnest money. Offers with $100-$500 earnest money signal low buyer commitment—they can walk away with almost no cost.

Cash buyers typically close in 14-21 days total, with inspection periods of 7-14 days. Inspection periods exceeding 21 days, especially with extension rights, may indicate a wholesaler who needs time to find an actual buyer. Your property could be tied up for weeks without real commitment.

Watch for vague contingencies: "subject to partner approval," "at buyer's sole discretion," or "satisfactory inspection" without defined criteria. These phrases let buyers exit for any reason without forfeiting earnest money.

An "and/or assigns" clause in the buyer name means the contract may be sold to another party. This isn't inherently bad, but understand you may close with a different entity than who made the offer.

Process Red Flags: Urgency and Pressure Tactics

Manufactured urgency uses phrases like "offer expires today," "other buyers waiting," or "must sign immediately." Legitimate buyers know real estate transactions take time. They don't need to create artificial pressure.

A useful test: any legitimate buyer can wait 24-48 hours for you to review documents, consult an attorney, or talk with family. If someone won't give you this time, they're either not serious or trying to prevent you from getting outside perspective.

Discouraging legal advice is a red flag regardless of other factors. Comments like "you don't need a lawyer" or "that's a waste of money" suggest the buyer benefits from you not understanding what you're signing. Legitimate buyers expect and accommodate independent review.

Real deadlines exist—foreclosure dates, tax sale dates, contract expirations. The difference is that legitimate buyers work with real timelines rather than manufacturing fake ones.

Communication Red Flags: Patterns That Reveal Intent

Evasion and inconsistency are signals worth noting. Watch for: answers that don't match your questions, stories that change between conversations, vague responses to specific questions, or inability to explain contract terms.

Overpromising is its own red flag. No one can guarantee lender decisions, deficiency waivers, or tax outcomes. Claims like "your lender definitely won't call the loan" or "this will definitely be approved" suggest either inexperience or deception. Legitimate professionals explain uncertainty rather than promising specific outcomes.

References provided by buyers are self-selected—anyone can provide three satisfied customers while having many unsatisfied ones. Online reviews can be fabricated. Look for specific details (property addresses, timelines) rather than vague praise. A mix of positive and constructive reviews is often more trustworthy than all five-star ratings.

Structure-Specific Concerns

Some red flags are specific to particular transaction types. Subject-to transactions involve ongoing loan liability. Seller financing involves payment defaults and remedies. Lease-options involve tenant-buyer protections.

For red flags and protections specific to each structure, see: Subject-To Transactions, Seller Financing, Lease-Options.

The Verification Mindset

The transformation is from passive trust to active verification. Instead of asking "does this feel legitimate?" ask "what can I verify?"

Legitimate operators welcome verification. They provide verifiable proof of funds from institutions you can contact. They operate through registered entities with track records you can look up. They give you time to review documents with advisors. They explain contract terms when asked. They acknowledge uncertainty where it exists.

Verification is a process of specific checks, not impression-based judgment. A checklist approach works better than intuition: proof of funds verified, entity registration confirmed, earnest money adequate, inspection period reasonable, contingencies clear, no manufactured urgency, legal review welcomed.

Taking time protects you; pressure exploits you. The seller who verifies is harder to deceive than the seller who trusts.

For specific questions to ask buyers before signing, see Questions to Ask.

Related Pages

Learn more about specific transaction types:

• Cash and Wholesale Offers — how investor pricing works

• Subject-To Transactions — ongoing loan liability

• Seller Financing — payment and default concerns

• Lease-Options — tenant-buyer arrangements

Action guides:

• Questions to Ask Before Signing — specific questions by structure

• What To Do Next — process guidance

Understanding risk:

• Understanding Seller Risk — risk framework across structures

For help evaluating a specific situation, start with the page that matches your circumstances: When You're Behind on Payments, When Your Property Has Problems, or When You Just Want Out.