Maryland Bans ‘Check in the Mail’ Homebuying Tactic

Maryland homeowners who open their mailboxes to find what looks like a check offering hundreds of thousands of dollars for their house will have one less reason to wonder whether they should cash it.

A new state law took effect on Thursday making it illegal to send a check or other negotiable instrument as part of an unsolicited offer to buy someone’s property.

The measure targets a particularly aggressive version of the familiar “we buy houses” pitch. Instead of sending a homeowner a letter or postcard with a cash offer, some would-be investors have sent what looks—and in some cases functions—like an actual financial instrument.

The idea is similar to a “live check,” a long-standing lending practice in which a company mails a consumer a real check they never requested. If the recipient deposits it, they can be agreeing to a loan, along with its interest, fees, and repayment terms.

As real estate scams rise across the country, the new regulation could provide one more layer of protection for vulnerable homeowners.

‘They are very dangerous tools’

Unsolicited offers from investors seeking to buy homes off-market are hardly new.

Homeowners routinely receive postcards, letters, calls, and text messages promising quick cash purchases, often without repairs, commissions, or a conventional listing.

But consumer advocates told Maryland lawmakers that putting that offer in check form fundamentally changes how a recipient perceives it.

Maryland Gov. Wes Moore signed the bill into law in April, with the new restrictions taking effect on Oct. 1. (JP Yim/Getty Images for Clinton Global Initiative)

“These are very dangerous tools,” Jennifer Bevan-Dangel, president and CEO of Economic Action Maryland, told lawmakers.

“Even as experienced consumer advocates, we have been taken off guard, confused, and unsure about the nature of these unsolicited offers,” the group testified, describing the marketing as “deceptive at worst and misleading at best.”

During a House hearing, lawmakers heard about a homeowner in Parkville, a Baltimore suburb, who received an unsolicited check for $234,368.25 tied to an offer for her property.

For a homeowner under financial pressure, that kind of offer can be especially powerful.

“An unsolicited check can appear to be immediate relief,” the CASH Campaign of Maryland, a nonprofit focused on financial security for low- and moderate-income residents, testified—even though negotiating one may create an obligation the recipient did not fully understand.

Live checks have long worried regulators

The problem Maryland is confronting has a much longer history in consumer lending.

Live checks took off as a direct-mail lending tool in the 1990s, allowing companies to put a ready-to-cash loan directly into consumers’ mailboxes without requiring them to apply first.

By 1998, the practice had grown large enough to draw scrutiny from the U.S. Government Accountability Office.

Fleet Bank, just one of the lenders examined by federal investigators, mailed 50,000 live checks during a 1995 test. By March 1998, it had mailed 5.85 million, generating about 155,000 loans worth roughly $680 million.

The rapid expansion also exposed a major risk of putting live checks in the mail: They could fall into the wrong hands.

Fleet reported 68 confirmed cases in which its checks were fraudulently negotiated. Another lender, First Chicago, abandoned its live-check pilot after suffering losses it considered unacceptable.

States began responding by passing regulations around the same time.

Minnesota imposed restrictions in 1998 that generally barred lenders from mailing live checks unless consumers had requested them or already had certain relationships with the lender. North Carolina followed in 2001 by requiring prominent warnings explaining that the check was a loan and that cashing it meant agreeing to repay the money with interest and fees.

But the practice never went away entirely. In 2020, the Consumer Financial Protection Bureau said it had created new consumer guidance in response to an “increase in live check loan offers being made to consumers in the mail.”

What happens if a Maryland homeowner receives one now?

Under Senate Bill 582, signed by Gov. Wes Moore in April, a person may no longer send a check or other negotiable instrument as part of an unsolicited offer to purchase real property. Violators can be charged with a misdemeanor and fined up to $500.

Homeowners also have some protections. Under the law, responsibility for paying back the check can arise only if the recipient actually receives and negotiates the instrument.

Even so, Maryland regulators are advising anyone who receives a suspicious unsolicited check not to sign or deposit it and instead report it to the state Office of Financial Regulation.

The law contains some exceptions, too. It doesn't prohibit convenience checks used to access an existing line of credit, for example, and certain prescreened offers of unsecured credit governed by federal law are excluded.