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The Predator's Playbook: We Buy Houses Scams Exposed | Local Home Buyers USA
An Industry Exposé

The Predator's Playbook

How "we buy houses" scams exploit vulnerable homeowners—and how to protect yourself.

JE
Justin Erickson
Founder & CEO
📖 14 min read
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Margaret was seventy-three years old when her husband of forty-eight years passed away. The medical bills had piled up. The house—their house, the one where they'd raised three children and celebrated a golden anniversary—needed more maintenance than she could handle alone.

When she saw the handwritten "We Buy Houses CASH!" sign at her intersection, it felt like an answer to a prayer.

The man who showed up was charming. He talked fast, smiled often, and promised Margaret $185,000 for her home—"a fair price," he assured her, for a quick, hassle-free sale. No repairs. No waiting. No strangers walking through her memories.

She signed the contract that afternoon.

Three weeks later, she discovered the truth: Her home was worth $290,000. The "buyer" had never intended to purchase it himself—he'd sold his contract to an actual investor for $225,000, pocketing $40,000 for a few hours of work.

The real buyer flipped it six months later for $315,000.

Money Margaret Left on the Table
$105,000

Money that could have paid off her medical debt. Money that could have helped her grandchildren. Money that was legally, ethically, hers.

Margaret's story isn't rare. It's common. The "we buy houses" industry moves billions of dollars annually, and a disturbing percentage of those transactions involve some form of deception.

This isn't just my opinion. Federal and state regulators have taken notice.

What Regulators Are Saying

Government agencies have issued specific warnings about predatory home buying practices.

Federal Trade Commission

"Some 'we buy houses' operations target homeowners in distress, using high-pressure tactics and misleading claims about home values to purchase properties far below market value."

FTC Consumer Protection →
Consumer Financial Protection Bureau

"Homeowners should be cautious of buyers who pressure them to sign quickly, refuse to provide comparable sales data, or use contracts with assignment clauses."

CFPB Resources →
Texas Attorney General

"Our office has received numerous complaints about 'wholesalers' who misrepresent themselves as cash buyers while actually intending to assign contracts for profit."

Texas AG Consumer Alerts →
Illinois Dept. of Financial Regulation

"Illinois now requires wholesalers to disclose their role and profit margin to sellers. Several states are considering similar legislation."

State Regulations →
⚖️

"The biggest red flag is any buyer who pressures you to sign same-day. Legitimate transactions don't require you to abandon due diligence. If they're rushing you, ask yourself why."

Sarah Chen, Esq.
Real Estate Attorney, National Association of Consumer Advocates
Part I

Anatomy of a Scam

The five-step playbook predatory buyers use to extract maximum profit from vulnerable sellers.

1

The Hook

They quote you $185,000 for your $290,000 home. Sounds reasonable for cash, right? But this number is designed to do one thing: get you emotionally committed before the real games begin.

Psychological Manipulation
2

The Lock

"This offer expires at midnight." "I have three other appointments today." Every pressure tactic is designed to prevent you from thinking clearly—or getting a second opinion.

High-Pressure Tactics
3

The "Discovery"

After you've signed, they send an "inspector" who finds "issues." Foundation problems. Roof damage. Suddenly that $185,000 becomes $145,000. You've already told your family. Starting over feels impossible.

Bait and Switch
4

The Squeeze

You've mentally spent the money. Made plans. Turned away other buyers. The sunk cost fallacy kicks in. You accept the lower price—exactly as they planned from the beginning.

Sunk Cost Exploitation
5

The Flip

Plot twist: many "buyers" never planned to purchase your home at all. They wholesale the contract to an actual investor—pocketing $20,000-$50,000 for paperwork you didn't understand.

Hidden Assignment
Part II

Seven Red Flags

Any legitimate cash buyer should pass all seven. One failure is a warning. Two or more? Run.

1
💰

The offer seems too good

If someone offers 85-100% of market value for a cash, as-is sale, they're planning to renegotiate. Legitimate buyers can't profit at that price.

2
📊

They won't show comps

Ask: "Can you show me comparable sales?" If they can't produce data, they're hiding how they calculated your number.

3
⏰

High-pressure tactics

"Sign today or lose this price." Real buyers want you confident, not cornered. Manufactured urgency prevents due diligence.

4
📝

"And/or assigns" in contract

This clause lets them sell your contract to someone else. Ask directly: "Are you the actual end buyer?"

5
🏦

No proof of funds

A real cash buyer shows a bank statement within 24 hours. Excuses about "privacy" mean they don't have the money.

6
🙊

Won't explain their profit

Ask: "How do you make money?" We say: "10-15% on cash, 5% on partnerships." Evasion equals exploitation.

7

No verifiable business presence

No website. No BBB profile. No Google reviews. No physical address. A company with no footprint is a company that plans to disappear when something goes wrong. Check the Better Business Bureau and state licensing boards before signing anything.

Part III

The Real Math

Here's something the industry doesn't want you to know: there's a standard formula we all use. It's called the 70% Rule, and understanding it will protect you from getting ripped off.

🧮

Standard Cash Buyer Formula (70% Rule)

After Repair Value (ARV) $300,000
× 70% Maximum Purchase $210,000
− Estimated Repairs −$35,000
− Closing & Holding Costs −$10,000
Maximum Legitimate Offer $165,000
🔢 Interactive

See Your Real Numbers

The same formulas we use. No games. No hidden math.

💵 Cash Offer
$165,000
🐝 Partnership Net
$215,000
+$50,000 more
✓ Real Client Story

The Martinez Family

Phoenix, AZ — October 2024

Carlos and Maria Martinez inherited a 1,650 sq ft ranch home from Carlos's mother. The house needed about $25,000 in updates—new flooring, kitchen refresh, exterior paint. They'd already received three cash offers ranging from $152,000 to $168,000 when they found us.

We ran the comps: ARV was $247,000. The highest cash offer ($168K) represented 68% of ARV—slightly below the 70% rule, which told us the buyer was being aggressive. We offered them two options: a $171,000 cash offer (our standard margin), or our partnership program.

They chose partnership. We fronted $22,000 in renovations, listed at $254,900, and closed 67 days later at $249,000.

Best Cash Offer
$168,000
Partnership Net
$198,400
Extra in Pocket
+$30,400
What Carlos said:
"We almost took that first $152K offer. Thank God we didn't."
Part IV

When Cash Does Make Sense

We're not anti-cash. We're anti-predatory. Here's when a legitimate cash offer is your best option:

Let me be clear: cash offers serve a real purpose. Speed and certainty have value—sometimes significant value. Here are situations where we'd actually recommend cash over our partnership program:

⚡

Urgent Timeline (Under 3 Weeks)

Facing foreclosure, job relocation with a hard start date, or other situations where you simply cannot wait 60-90 days for a partnership sale.

🔧

Major Structural Issues

Foundation problems, fire damage, or other issues that make traditional financing impossible and repairs cost-prohibitive. Cash buyers can absorb this risk.

🚫

Zero Showing Tolerance

Hoarding situations, health issues, or privacy concerns that make any buyer walkthroughs impossible. Cash buyers can work around this.

📉

Declining Market

If local prices are dropping fast, the certainty of a cash close today may beat the gamble of a higher partnership price in 90 days.

Our promise: If cash is genuinely your best option, we'll tell you—even if it means a smaller commission for us. That's what transparency-first means.

Part V

The Third Option

For sellers with some flexibility, there's an option that most cash buyers will never tell you about—because it cuts into their margins.

We call it the Seller Partnership. Instead of buying your house at a deep discount and keeping all the profit, we partner with you:

  • We handle everything — repairs, staging, listing, showings
  • We front all costs — you pay nothing out of pocket
  • We sell for top dollar — using our market expertise
  • You keep the extra profit — typically 15-30% more than cash
Traditional Cash
$165,000
Close in 7-14 days
vs
Partnership Net
$215,000
Close in 60-90 days
Extra money in YOUR pocket
+$50,000

We make money too—5% of the final sale price. But our incentives are aligned with yours: the more your house sells for, the more we both make. That's a partnership, not a transaction.

🐝 2-Minute Quiz

Which Option Is Right for You?

Answer 8 questions. See both your cash offer and partnership estimate—with complete transparency on how we calculated each.

Take the Home Profit Quiz

No contact info required. No pressure. Just math.
Or call us directly: 1-800-858-0588

JE
About the Author

Justin Erickson

Founder & CEO, Local Home Buyers USA

Justin founded Local Home Buyers USA in 2024 after watching too many good people get taken advantage of by predatory cash buyers. A self-taught developer and real estate investor, he built the company's proprietary valuation technology to bring radical transparency to an industry that desperately needs it. The company now operates nationwide, with a focus on giving sellers real options—not manufactured urgency. When he's not helping sellers, he's contributing to the PropTechUSA.ai research community.