Austin is fast-growing, with an increasingly expensive housing market. Austin is also experiencing incredibly low home inventory right now. This makes Austin a prime target for predatory real estate investors. Homeowners should be careful any time they sell their homes.
What is a predatory real estate investor?
Institutional investors have started buying large quantities of homes in Austin. Institutional investors are defined by Freddie Mac as entities that own more than 2,000 properties. They are managed by hedge funds, endowment funds, and commercial banks. They buy residential properties as an investment strategy.
A predatory investor takes advantage of homeowners to accept much less than their home is worth. Some say they are local buyers, but may actually live elsewhere or be part of a larger corporation. They may charge large fees for sellers in distress that were not part of the original deal. They also use high-pressure tactics and misleading information.
Signs that you are dealing with a predatory investor
- Misleading mailers and phone calls that fake urgency & may make you think that you owe money.
Mailers, like the one shown above and in the video, are designed to look like a past-due bill collection. In reality, these mailers are only a very aggressive tactic to get homeowners to call.
- Random offers to buy your home.
You may have received a call, or a letter in the mail designed to look like a personal note, with an offer to buy your house. It may say something like, “I am a local home buyer and real estate agent. I'd like to give you an offer to buy your house." Oftentimes, it's actually a tactic from an institutional investor that mass buys properties in Austin for hedge funds and commercial banks.
- “Processing” or “Administrative” fees.
As a homeowner looking to sell, you should not pay any upfront fees in order to sell your house. A legitimate buyer will submit a written offer and give you the option of accepting the offer. You will then receive payment. Scammers will take your money and disappear.
- High-pressure tactics.
If the person offering to buy your home requires you to pay a “processing” or “administrative fees” without a written offer, it’s a bad deal. If they want you to sign a contract promising to sell your house to them, but don’t give you “earnest money,” it’s a bad deal. If they don’t want you to have a third-party review of the paperwork, it's a bad deal.
- They don't have a real estate license.
Investors are not legally required to tell you who or what is actually purchasing your home. So the investor could buy your home and then turn around and repurpose the property.
Solid, professional advice is available from a HUD-certified housing counselor or a licensed realtor. A real estate professional works on behalf of the homeowner’s interests. They have a financial incentive in getting you the best price for your house. A realtor is licensed by the Texas Real Estate Commission.