How Do I Know If a Cash Buyer Is Legitimate?

A legitimate cash buyer provides proof of funds within 24 hours, offers 3% earnest money, and closes in 7-14 days. If a buyer needs 30-60 days, puts down only $1,000, wants "and/or assigns" contract language, or brings multiple "partners" to view your property, you're likely dealing with a wholesaler—a middleman planning to sell your contract.

When someone offers to buy your Los Angeles home for cash, it sounds simple. No lender, no appraisal contingency, no financing falling through at the last minute.

But here's what the "We Buy Houses" signs on telephone poles throughout Pasadena, Highland Park, and the San Fernando Valley don't tell you: many cash buyers aren't actually buyers at all.

They're wholesalers—middlemen who will tie up your property, shop it around to real investors, and either flip your contract for a fee or bail at the last second when they can't find a buyer.

After over a decade working with legitimate investors and watching countless deals fall apart because of illegitimate ones, I've learned exactly how to tell the difference. If you've already received an offer and want us to vet it—free of charge—call (213) 444-2225.

The Legitimacy Test: 5 Questions Every Seller Should Ask

1. Can You Show Me Proof of Funds Right Now?

Legitimate buyer: Provides a bank statement or proof of funds letter within 24 hours—often within minutes.

Wholesaler: Makes excuses. "Our funds are in multiple accounts." "We'll have the letter by closing."

2. What's Your Earnest Money Deposit?

Legitimate buyer: Offers 3% of purchase price, deposited within 48 hours with a neutral title company, non-contingent.

Wholesaler: Offers 1% or less—sometimes as little as $1,000.

3. How Quickly Can You Close?

Legitimate buyer: 7-14 days. Cash transactions don't require lender approval.

Wholesaler: Asks for 30-60 days. They need time to find a real buyer for your contract.

4. Does Your Contract Include "And/Or Assigns"?

Legitimate buyer: Their name or company name is on the contract. Simple.

Wholesaler: "John Smith and/or assigns" gives them the right to transfer your contract to any third party.

5. Will You Be on the Final Deed?

Legitimate buyer: "Yes, I'm buying your house." Clear and direct.

Wholesaler: Vague answers about "investment groups" or "purchasing entities."

The Verification Scorecard

Question	Legitimate Buyer	Red Flag
Proof of funds	Within 24 hours	Excuses, delays
Earnest money	3% non-contingent	$1,000 or 1%
Closing timeline	7-14 days	30-60+ days
Contract language	Buyer name only	"And/or assigns"
Who's buying?	"I am"	Vague, evasive

If you see 2+ red flags, you're almost certainly dealing with a wholesaler.

The Warning Signs in Action

The "Partner Parade"

A cash buyer says they want to bring their "business partner" to view the property. What's actually happening: they've shopped your property around, and all interested investors are coming to see it. That "partner" is really a potential end-buyer they're trying to sell your contract to.

The Last-Minute Squeeze

The wholesaler ties you up and continues to make excuses, elongating escrow while they search for an investor. Then, when they can't find a buyer willing to pay enough, they come back with a last-minute demand: "If you can give us a $25,000 reduction, we can close."

They know you've already made plans with that money. They're counting on that pressure.

The Never-Ending Escrow

We have clients who come to us after a 2-4 month disaster of an escrow with a wholesaler. Sometimes 6 months. Meanwhile, legitimate investors close in 7-14 days.

What If You've Already Signed with a Wholesaler?

If you're already under contract and realizing something is wrong, act now:

Check your contingencies. Most wholesaler contracts include inspection periods that may give YOU an out.

Document everything. Keep records of delays, broken promises, and missed deadlines.

Demand performance. If they're past contractual deadlines, send written notice that they're in breach.

Currently stuck with a buyer who keeps making excuses? We help sellers navigate these situations every week. Call (213) 444-2225 to discuss your options.

The Bottom Line

A legitimate cash buyer is straightforward. They have money, they show it, they put it at risk with substantial earnest money, and they close quickly.

The verification process takes 30 minutes. Skipping it can cost you 6 months and tens of thousands of dollars.

If you're unsure about someone who's contacted you, we can help verify them—free of charge.

Not Sure If Your Cash Buyer Is Legitimate?

Send us the offer. We'll tell you exactly what we see—the red flags, the legitimate elements, and whether it's something you should move forward with.

• Free contract review—no strings attached
• Honest assessment of buyer legitimacy
• Clear explanation of your options

📞 (213) 444-2225 · ✉️ [email protected]

Frequently Asked Questions

How can I verify a cash buyer has funds?

Request a bank statement or proof of funds letter dated within 30 days, showing liquid assets equal to or greater than the purchase price. Legitimate buyers provide this within 24 hours.

Are "We Buy Houses" companies legitimate?

Some are legitimate investors who actually purchase and renovate properties. Many are wholesalers who tie up your property and sell the contract to someone else. The verification test reveals which is which.

What does "and/or assigns" mean in a real estate contract?

This language gives the buyer the right to transfer the contract to another party. Wholesalers require it because they intend to sell your contract to an actual investor rather than purchasing your home themselves.

What's a normal earnest money deposit for a cash buyer?

Legitimate cash buyers put down 3% of the purchase price, deposited with a neutral title company within 48 hours. If someone offers $1,000 or 1%, they're minimizing risk because they don't intend to close.

Can I back out if I realize the buyer is a wholesaler?

Possibly. Review your contract for contingency periods and buyer performance requirements. If the buyer has missed deadlines or breached terms, you may have grounds to cancel. Consult an attorney if needed.

About the Author

Justin Borges leads The Borges Real Estate Team at eXp Realty, with over a decade of experience working alongside legitimate investors and protecting sellers from illegitimate ones throughout Los Angeles County. Based in Pasadena, the team serves all of LA County.

Contact: (213) 444-2225 · [email protected]

This article provides general information about real estate transactions in Los Angeles County. Every situation is unique. Consult with qualified professionals for advice specific to your circumstances.

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