Tennessee Regulators Warn Homeowners of Memo of Sale Scam

“The homeowner is left with little recourse,” the Tennessee Department of Commerce and Insurance (TDCI) warned in a bulletin released this week regarding a predatory real estate scheme.

Scammers are increasingly targeting homeowners by offering cash purchases for properties, only to use legal filings to hijack the sale process. Instead of completing a transaction, these bad actors file a memorandum of sale with the clerk of court, a move that effectively freezes the property’s ability to be sold to anyone else.

This tactic creates a legal bottleneck. By recording the memo, the scammer notifies any potential legitimate buyers that a sale is supposedly pending. This prevents the actual owner from moving forward with other interested parties or traditional real estate agents.

The scheme typically concludes with a demand for a ransom. Once the homeowner realizes they cannot sell their property due to the clouded title, the scammers demand tens of thousands of dollars to clear the memorandum and release the claim.

Many of these individuals attempt to hide their true intentions by claiming to be real-estate wholesalers. While wholesaling is a legitimate business practice, Tennessee law imposes strict requirements on these operators to protect consumers.

Under state regulations, wholesalers must provide “clear and conspicuous” disclosure regarding their intent to find third-party buyers. Failing to disclose this intent distinguishes a legitimate business from a fraudulent one.

The impact of these scams extends beyond the individual homeowner. A clouded title can complicate the purchase of property insurance and stall local real estate markets, as the legal uncertainty surrounding a property makes it nearly impossible to secure financing or insurance for a new buyer.

State officials have provided specific guidance for sellers to avoid falling victim to these predatory filings. Because these scammers often operate through legitimate-looking contracts, sellers must scrutinize the fine print of any purchase agreement.

Check if the sales contract contains specific language regarding the recording of a memorandum.
Negotiate explicit terms detailing exactly when any memorandum must be removed from the public record.
Ask potential buyers directly if they intend to wholesale the property to a third party.
Ensure all communications and agreements are documented in writing.
Use the TDCI Public Search to verify the license status of any individual approaching you for a sale.

If a buyer demands payment in exchange for releasing a memorandum, officials recommend consulting a licensed Tennessee attorney immediately. Homeowners who believe they have been targeted by this scheme should file a formal complaint with the Attorney General’s Office, Consumer Affairs Division.

The Tennessee Department of Commerce and Insurance has not disclosed the specific number of sellers who have been targeted by this particular scam.