Tennessee Warns Homeowners of 'Memo of Sale' Scam With Ransom Demands

Tennessee regulators are warning homeowners about a scam that files a memorandum of sale against a property and then demands tens of thousands of dollars to clear the title. The Tennessee Department of Commerce and Insurance, the state attorney general and other officials posted a bulletin this week explaining how the scheme works and what sellers can do to protect themselves.

How does the scam work?

The scheme begins when a homeowner lists a house for sale. Scammers approach the seller and offer a cash purchase. But no cash arrives. Instead, the fraudster files a memorandum of sale with the clerk of court.

That filing matters. The memo notifies any other possible buyers that a sale is pending, and it can prevent the homeowner from selling to another potential buyer, TDCI said in the bulletin. The property is now locked up.

Then comes the squeeze. The scam company usually refuses to close on the sale, according to the department, and instead demands a ransom of tens of thousands of dollars to clear the title.

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

The officials did not say how many sellers have been targeted so far. The bulletin also warned that the scheme can complicate title and property insurance purchases, extending the damage beyond the blocked sale itself.

Who do the scammers claim to be?

The fraudsters often present themselves as real-estate wholesalers. That label carries legal obligations in Tennessee. State regulations require that wholesalers must make "clear and conspicuous" disclosure of their intent to find third-party buyers, TDCI said.

A legitimate wholeseller discloses the plan up front. The scam operator hides it, files the memorandum and uses it as leverage. The difference between the two is disclosure — and the officials' advice centers on forcing that disclosure into the open before any document is signed.

What should sellers do?

The bulletin laid out specific steps for homeowners:

• Read the sales contract for any language about recording a memorandum. Consider negotiating language that details when the memorandum will be removed.
• Ask clearly whether 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 a buyer demands 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 contract-review step is the earliest defense. A memorandum clause spotted before signature can be negotiated or struck. Once the memo is filed with the clerk of court, the homeowner is negotiating from weakness.

What happens next?

The department has not disclosed enforcement actions or a count of victims. The bulletin's practical effect is disclosure: sellers in Tennessee now have a named scheme, a state license-check tool and a complaint channel. Homeowners who verify a buyer's license and refuse vague wholesale offers before signing will be harder to trap.