Tennessee regulators issued a bulletin warning about a fraudulent memo of sale scheme targeting property sellers across the state.
The advisory, published this week by the Tennessee Department of Commerce and Insurance (TDCI) alongside the state attorney general and other officials, details a growing financial trap. Scammers target individuals who list their residential properties for sale by offering quick cash purchases.
Instead of fulfilling the cash deal, the bad actors file a memorandum of sale with the local court clerk. This official filing alerts other potential buyers about an existing transaction, effectively locking the property down and preventing the owner from pursuing alternative buyers.
The fraudulent operation typically breaks down when the purchasing company refuses to complete the closing process. Instead, the scammers demand tens of thousands of dollars as a ransom payment to clear the property title.
“The homeowner is left with little recourse,” the department said in the bulletin.
Perpetrators of this scheme frequently mask their operations by claiming to be legitimate real-estate wholesalers. However, state regulations enforce strict compliance standards for this sector.
Tennessee law mandates that wholesalers provide clear and conspicuous disclosure regarding their intention to locate third-party buyers for a property before entering into contracts.
State regulators outlined several defensive measures for property owners to protect themselves against title hijacking.
- Examine sales contracts carefully for any clauses mentioning the recording of a memorandum.
- Negotiate precise contract language establishing exact timelines for removing any filed memorandum.
- Inquire directly whether the prospective buyer intends to wholesale the property.
- Insist on obtaining all agreements and communications in writing.
- Verify the professional license status of prospective buyers using the official state public search tool.
Property sellers facing illegal demands for money to release a recorded memorandum should consult a licensed Tennessee attorney. Victims can also submit formal complaints directly to the state Attorney General’s Office, Consumer Affairs Division.
The state regulatory agency did not disclose how many property sellers have fallen victim to the scam.
