Tennessee Officials Warn About Rise of ‘Memo of Sale’ Scam Targeting Homeowners

Tennessee regulators are warning about a growing “memo of sale” scam that can cost homeowners dearly and can complicate title and property insurance purchases.

The Tennessee Department of Commerce and Insurance, the state attorney general and others posted a bulletin this week that explained that, when sellers list their homes for sale, scammers may offer cash purchases. But instead of cash, the scammers will file a memorandum of sale with the clerk of court.

The memo notifies any other possible buyers about the pending sale and can prevent the homeowner from selling to another potential buyer, TDCI said in the bulletin. The scam company usually refuses to close on the sale, then demands a ransom of tens of thousands of dollars to clear the title.

“The homeowner is left with little recourse,” the department noted.

The scammers may claim to be real-estate wholesalers. But Tennessee regulations require that wholesalers must make “clear and conspicuous” disclosure of their intent to find third-party buyers, TDCI said.

The officials offered some words of advice for sellers:

• Pay attention to whether the sales contract contains language about recording a memorandum. Consider negotiating language that details when the memorandum will be removed.
• Ask clearly if the buyer intends to wholesale the property.
• Get everything in writing.
• Use TDCI’s Public Search to check the license status of the individual approaching the seller.
• If the buyer is demanding payment to release a memo, consult a licensed Tennessee attorney for guidance.
• File a complaint with the state Attorney General’s Office, Consumer Affairs Division

The department did not say how many sellers have been targeted by the scam.

Topics Trends Homeowners