There’s no question about it — the real estate market right now is absolutely wild. Even modest homes are getting multiple bids from would-be buyers and selling for more than their asking prices.
Cash sales, which historically have accounted for very few purchases, were already up to 15% of the market last April. This year, they account for one out of every four sales.
Here’s why you need to be cautious about cash
Cash sounds like an ideal option for a seller and buyer alike. When a buyer has money in hand, they don’t have to worry about appraisals that come in too low, tons of contingencies to manage before closing, slow loan processing or sudden problems with a buyer’s credit.
So, what’s the problem? Well, either the buyer or the seller could be running a scam. They may also be engaged in money laundering. With so many legitimate cash real estate deals happening out there right now, it pays to know the warning signs of trouble. They include:
- A seller who is vastly undervaluing their property for a super quick sale
- A buyer who is willing to pay far more than market price — well beyond the offers other buyers are making
- The buyer is operating out of a foreign location (where money laundering activities may be more common)
- You meet a buyer locally but all of their correspondence and their banking activity comes from overseas
- There are discrepancies in the information you’re being given about the buyer or seller, the title or other important documentation
- The buyer wants the title to go in a third-party’s name
It is important to remember that large cash transactions have to be recorded with the Internal Revenue Service (IRS) as part of their anti-terrorism programs, so don’t let your excitement over a real estate deal blind you to any potential problems. To best protect your interests, make sure that you work with an experienced attorney.