Financial Red Flags and Scams to Watch Out For
Selling a home involves large sums of money, which unfortunately attracts scammers. As a senior, you may be specifically targeted by dishonest individuals. Awareness is your best defense. For more resources on protecting yourself, visit the FTC and the Consumer Financial Protection Bureau (CFPB).
1. “We Buy Houses for Cash” Predators
You have likely seen the signs on telephone poles or received unsolicited postcards. While some cash-buying companies are legitimate, many are predatory. They target homeowners who may be in a hurry or overwhelmed by the selling process. Their tactic is to offer a quick, “as-is” cash sale, but the offer is often far below market value—sometimes 50-70% of what your home is actually worth.
Warning Signs:
- An unsolicited, high-pressure offer to buy your home immediately.
- They discourage you from getting your own appraisal or consulting a real estate agent.
- The offer seems too good to be true or is contingent on confusing terms.
How to Protect Yourself: Never sign anything under pressure. Always get an independent valuation of your home from a licensed real estate agent or appraiser before considering any offer.
2. Home Improvement and Staging Scams
Before putting your home on the market, you might hire a contractor for repairs or a stager to help it look its best. Be cautious. Scammers posing as contractors may show up at your door offering a great deal on a project like paving your driveway or repairing your roof. They often demand a large upfront payment in cash and then either perform shoddy work or disappear with your money.
Warning Signs:
- The contractor is unlicensed or cannot provide references.
- They demand full payment or a very large cash deposit before any work begins.
- They use high-pressure tactics, such as claiming the “special price” is only available today.
How to Protect Yourself: Only work with licensed and insured contractors. Get multiple written estimates for any job. Never pay in full upfront. A reasonable deposit is typically 10-30%.
3. Forgetting About the Tax Implications
This is less of a scam and more of a costly mistake. Many seniors who have lived in their homes for decades have seen enormous appreciation in value. They may be unaware of the capital gains tax and the exclusion rules. Failing to plan for this can result in a surprise tax bill that eats into your retirement nest egg. It is a critical part of the financial planning for your sale.
How to Protect Yourself: Well before you sell, consult with a tax professional or a certified financial planner. They can help you calculate your home’s basis, estimate your potential capital gains, and confirm that you qualify for the full exclusion. This planning can save you tens of thousands of dollars.
