Vetting a cash buyer — red flags and green flags

Three buckets, three risks

When you start vetting a cash buyer, you're really screening for three failure modes:

1. The wholesaler in disguise. They tell you they're a cash buyer; they're actually shopping your contract to an end buyer they haven't found yet. The deal might close at a lower number than promised, or might not close at all.
2. The unfunded buyer. Real intent, but the money isn't actually there yet. Their hard money lender, partner, or end buyer hasn't confirmed funding. They sign the contract hoping it works out.
3. The scammer. Rare but real. Forged proof of funds, fake closings, deed-fraud schemes where they're trying to get a quitclaim from you for nothing. The classic motivated-seller scams.

The good news: all three fail the same diligence pass. The diligence pass takes about 30 minutes and costs nothing. Below is the checklist I run on any buyer before I'd recommend you sign with them.

Step 1 — Secretary of State business search

Every state in the US has a free Secretary of State business search. Search the buyer's LLC or corporate name and verify:

• The entity actually exists and is in good standing. "Active," "Good Standing," or "In Compliance" depending on the state.
• Formation date. An LLC formed last month is a different risk profile than one formed in 2018. Brand-new LLCs aren't disqualifying, but they're a signal — pair with stronger checks on the other steps.
• Registered agent and principal office. The address should be a real address, not a UPS Store. If the registered agent is a generic service company (Northwest, LegalZoom, CSC), that's normal — most investors use a registered agent service.
• Member or manager names. Some states disclose, some don't. If they do, the names should match the person you're talking to.

Direct links to all 50 state SOS searches are easy to find — search "[state name] secretary of state business search" and you'll land on the right page. Most are free and instant.

Step 2 — Proof of funds, in the right form

Real cash buyers can show you they have the money. The acceptable forms, in order of strongest to weakest:

• Bank statement, dated within 14 days, in the name of the LLC or person on the contract, showing liquid funds equal to or greater than the purchase price. Strongest evidence.
• Bank letter on bank letterhead, signed by a bank officer, naming the account holder, dated within 30 days, stating funds available are sufficient for the named purchase. Standard for institutional buyers.
• Hard money lender pre-approval letter, with the lender's contact info you can verify by phone. Acceptable but means it's not pure cash — the deal depends on the lender funding. Verify the lender's license and reputation.
• Screenshot of an account. Weak evidence; trivially Photoshopped. Accept only as supplemental, not primary.

Three name-matching checks on the proof of funds

1. Name on POF = name on contract. If the contract is signed by ABC Investments LLC and the POF is in John Smith's personal account, that's a mismatch. Cash flows from the LLC, not from John personally — and the LLC can't actually fund.
2. Name on POF = name on the deed at close. The same entity that signs the contract should be the grantee on the recorded deed. If the buyer wants to change the grantee at the last minute, that's an assignment — see how flippers really negotiate.
3. POF amount = purchase price minimum. If your contract is $200,000 and the POF shows $50,000, the buyer is funding the rest from somewhere that hasn't been disclosed. Ask where.

Step 3 — Verify prior closings

The single best signal that a buyer can actually close is the documented record of houses they've already bought. Ask them point-blank: "Can you give me the addresses of 5 houses you've closed on in the last 12 months?"

A real buyer will give you the list without resistance — they're public records anyway. With those addresses you can:

• Pull the deeds at the county recorder. Most counties have free online recorder search. Look for the buyer's LLC name as the grantee on the deed. Confirm it's a recent transaction with a real consideration amount (not $0 or $1, which signals an intra-family transfer or a probate distribution, not a purchase).
• Check the property tax records in the county to confirm current ownership matches.
• Drive past one or two if local. Is there evidence of recent renovation? Was the house actually purchased and not just contracted-and-walked?

Step 4 — Attorney review willingness

Whether or not you're in an attorney-review state, ask the buyer: "I'd like to have my attorney review the contract before signing. Is that okay?"

The right answer is "of course." Any answer that pushes back on attorney review is a flag:

• "We need to sign today, the offer expires in 24 hours" — manufactured urgency.
• "Our in-house attorney can review it for you, save you the fee" — they aren't your attorney.
• "We don't usually involve attorneys, slows the deal down" — a clean buyer welcomes review.
• "It's a standard contract, no need to look at it" — every contract is negotiable.

A real cash buyer's contract is defensible under attorney review because it's been through dozens of attorneys before yours. The buyers who flinch are the ones whose contracts have something in them they don't want a third party to see.

Step 5 — Where the earnest money sits

The contract should specify that earnest money is held in escrow by a named title company or attorney's escrow account. NOT held by the buyer, NOT held by the buyer's "in-house holding company," NOT wired to the buyer's bank account.

The reason matters: earnest money is your protection if the buyer walks for a reason outside the contract. If the buyer holds the EMD, they can walk and refuse to release it, forcing you to sue. If a neutral third party holds it, the contract terms determine release — and a buyer who walks outside the contract loses the EMD automatically.

How to verify

1. Read the EMD clause in the contract. It should name a specific title company or escrow attorney by name.
2. Call the title company directly — not a number the buyer gave you, a number you find on the title company's website. Confirm they hold escrow for this transaction and the EMD has been received.
3. Ask the title company for a receipt. A real escrow holder issues a receipt for the EMD deposit naming the contract, the parties, and the amount.

Step 6 — Contract assignability

Read the buyer signature line. If it reads "John Smith and/or assigns" or "ABC LLC and/or assigns" — see step 7 of the wholesaler diligence below. If it reads just "John Smith" or "ABC LLC," ask: "Will you allow an assignment-free clause to be added?"

An assignment-free clause is the simple fix: "This contract is non-assignable. Buyer must close in the name on this Agreement." A real cash buyer has no reason to refuse this. A wholesaler can't accept it.

Step 7 — The licensing question (state-dependent)

Some states require either a real-estate license or a specific wholesaler disclosure for someone marketing the equitable interest in a property. As of recent years:

• Illinois: Public Act 101-0357 and follow-up rules require wholesalers to either be licensed or limit their assignments per year.
• Oklahoma: 2021 amendments to the Oklahoma Real Estate License Code regulate wholesale assignments.
• South Carolina, Pennsylvania, Maryland and several others: similar disclosure or licensing requirements have been added in recent years.
• Most other states: wholesaling sits in a regulatory gray zone — generally permitted as principal-side contract assignment, but limits exist if the activity crosses into brokerage.

You don't need to be the licensing police. But asking "are you licensed in this state, or are you operating as a principal buyer / assignor?" is a reasonable question. The answer should be specific. Vague answers like "we're a real-estate company" without a license number when you're in a state that requires one is a flag.

Step 8 — The phone-and-Google check

Five minutes of Google work catches a surprising amount. Search:

• The LLC name + "scam," "complaint," "lawsuit," "BBB." Real complaints surface fast. Pattern of complaints rather than a one-off is the meaningful signal.
• The principal's name + "real estate" + city. Should produce some online presence — LinkedIn, Facebook, prior closings mentioned in local news, BiggerPockets forum posts. Total absence is a small flag.
• The phone number. Reverse search it. Is it tied to multiple unrelated business names? Is it a cell number registered last week? Both are flags.
• The address on the proof of funds and the LLC. A residential address can be fine (many investors are solo or 2-person operations). A virtual office or UPS Store address means the entity has minimal real-world footprint.

Step 9 — Watch for the "free" things

Scammers and aggressive wholesalers offer a lot of free services. Each one is a quiet way to control the transaction:

• "Free" attorney — represents them, not you.
• "Free" title company they pick — title company has a relationship with the buyer and may bend small things in their favor.
• "Free" notary they bring to your house — fine in concept, but used in deed-fraud cases to get you to sign a quitclaim deed instead of (or alongside) the purchase contract.
• "Free" moving help — sometimes legitimate, sometimes used to get into your house early and remove things or pressure you to sign add-on documents.

Use your own attorney. Use a neutral title company you picked. Read every document at the kitchen table, not in a moving truck.

The 30-minute diligence checklist

Print this, run it before you sign:

1. Secretary of State search confirms the entity is real, in good standing, formed before this week.
2. Proof of funds, in the entity's name, dated within 14 days, amount ≥ purchase price.
3. Names match: POF name = contract name = future grantee on deed.
4. 5 prior closings provided; 1–2 verified at the county recorder.
5. Buyer welcomes attorney review without pushback.
6. Earnest money to a named title company or escrow attorney; receipt obtained from that party directly.
7. Contract is non-assignable, or assignment is permitted only with written consent and disclosure of end buyer.
8. Licensing or assignor-disclosure status appropriate for your state.
9. Google + reverse-phone search produces no major red flags.
10. Buyer didn't push for "free" services that would shift control to them.

All 10 green: proceed with confidence. 1–2 yellow: ask questions and document the answers. 3+ flags or any red: walk away. There are other cash buyers.

Green flags — what a clean cash buyer looks like

• Volunteers proof of funds and prior closings before you ask.
• Provides the actual buyer entity name, attorney name, and title company up front.
• Welcomes your attorney review; provides their attorney's name in case yours wants to confer.
• Sets a specific closing date in the contract, not "ASAP" or "within 30 days."
• EMD wired to a name-brand title company within 24 hours of signing.
• Doesn't push back on no-retrade or non-assignability clauses.
• Returns calls promptly throughout the process.
• Discloses the licensed status of any agents involved on their side.

That's the shape of a normal, competent cash buyer. Easy Cash Offer's process is built around providing all of these by default — you see the buyer entity name, the proof of funds, and the contract terms before you commit. For our deeper writeup of how we structure the buyer relationship, see our cash home buyers page.

The companion read for after you've vetted the buyer: how a cash sale actually works for the full timeline, and how flippers really negotiate for the moves the diligence pass is filtering out in advance.