These days, it seems like there is a new scam targeting people in the real estate market. Whether you’re buying or selling your home there is no side untapped by fraudulent happenings.
You should be aware of these tactics-the stakes are high and so too is risk if things go wrong! It is a stomach-turning thought, but don’t worry; we’ve got some tips and advice for how to avoid getting taken advantage of by these criminals.
Catching these schemers can be tricky but fortunately for buyers and sellers, proactive professionals know that educating their clientele on what to look out for in this digital world of transactions can help avoid this occurrence completely insuring a smooth and honest road to closing.
In this article we will lay out warning signs to look out for concerning fraud when selling or purchasing a home in 2022.
Transactional Wire Fraud
With the help of clever hacking, these scammers are able to take advantage of your situation and steal your money that is intended for the sale of your home. They create an email address that appears as if it comes from reputable sources such as title companies, closing firms or mortgage companies in order to dupe buyers into wiring funds directly into their own account without any resistance whatsoever!
If you receive this type of correspondence don’t fall victim by trusting everything blindly; always verify who is asking for payment before sending anything over. There could easily be a scheme going on here where somebody else gets hold off all access points related directly with real estate transactions.
The real estate industry has been impacted by wire fraudsters who steal money from both buyers and sellers alike. There are many ways that these criminals can impact your transaction, including the inability to recover funds wired out of country or into an unauthorized account–making them more than likely impossible for you to get your money back.
The real estate industry is a trusting one, with buyers and sellers putting their faith in each other. When theft occurs at any level it leaves both parties feeling devastated and even violated–the victim of wire fraud has even more reason to be angry as they lose money due directly from this crime and as a buyer it could potentially take you out of the market completely.
Woefully, the warning signs of this particular fraud are incredibly difficult to spot because more often than not you won’t even know that your information has been compromised until after they’ve stolen all possible details that they were looking for.
When wiring funds, make sure that you and your agent have a clear understanding of where the wiring instructions are coming from. Communicate clearly and be aware of who will be sending them and when they’ll arrive so if there’s an unexpected delay in receiving these or if it come early then you will be alerted by the change of plan to double check the authenticity of the request.
A good rule of thumb to follow is to look at the recipients of this email, if your agent or the other agent is cc’d on the message then it is likely to be an honest email. If you were unaware of the fee, make sure to ask your agent what the fee is for or clarify that you should or should not be paying it. No email in the transaction of a home sale should ever be sent to just you unless it is from your agent.
Overall, the simplest way to protect yourself is by picking up the phone. If you don’t feel confident in the emails being sent from or received on an outside account, simply call your agent for verification before exchanging sensitive information.
“We Buy Houses” Scammers
If you leave your house you’ll know that the “We Buy Houses for Cash” bandit signs are becoming more common, but they should be avoided. If you happen to see these strangers walking around in your neighborhood asking others if their house is worth buying or not-be shy! Keep reading below as we dig into what makes this whole scam work so perfectly…
What Is It? The sign promises that any home owner can get money quickly by simply giving them the rights over your property – even without having an agreement written down first (which, in a real and legal agreement, will never happen). They’ll also provide free title insurance and closing costs which puts potential buyers at ease when accepting payment up front.
So you could use the money for the sale of your home, it would ease your financial struggle significantly and you decide to call. The phone rings, and someone picks up and explains a quick fix for your financial problems. An intimidating voice on the other end promises to have all of the cash in hand by tomorrow morning if only you can sign over the deed today! You agree, sign over the deed and now you are officially a victim of fraud and no longer own your home without two pennies to rub together to show for it.
The saying is “nothing in life is free” and that goes double for selling your home. This fraud preys on vulnerable homeowners who may be facing economic difficulties. While this ‘opportunity’ may feel like a godsend to them, these owners are being duped through false promises and misleading information.
If you see these signs around your neighborhood talk with your neighbors and collectively look up the phone number and/or name of this company and see if you can find it online. Lack of an online presence and cheaply made fliers are a huge red flag, a company with enough money to buy out your home will make sure they are properly advertised online. If you or someone you know has been the victim of a “we buy houses” scam, it is important to report the fraud to the authorities.
Rental house swindle
Scammers are, at an increasingly rapid rate, trying to take advantage of potential vacation rental renters. These work by directing the renter to pay for rentals outside of the reputable platform they found the listing on. This can be done by posing as the owner of a rental property on a platform like Airbnb or Vrbo, and then redirecting the renter to an outside platform like Zelle or Venmo for payment. The renter arrives for their stay only to find that they don’t have a reservation, that they’ve been scammed and now are out the money they spent to book the property.
To protect yourself from falling victim to this scam, report the scam to the website that you found the rental on, be warned to never book a rental property outside of the platform they found it on and make sure the next listing has proper reviews. If you are unsure about the authenticity of a listing, do a Google Image search of the photo in the listing to see if it’s being used elsewhere. If you do find it contact the real owner of the property and let them know so that they can report it. As a rental owner, you can also help by regularly checking the listings on rental platforms for any clone of your own property that may be being used to scam people.
“Looking to buy in your area” scam
This scam is a newer one. Wholesaling is a business model that involves finding properties in a certain area that are likely to appreciate and earn a profit and then selling them to investors. The usual process involves finding homeowners who are looking to sell their property fast which can look like leaving voicemails and texts. Getting a voicemail about someone wanting to buy your home from you quick may be quite inciting but it is important to read the fine print.
Typically, these scammers will get you to sign a contact, sell the contact to the investors and then receive a “finder’s fee” from the company. This fee comes directly out of your pocket leaving you with less while the investors ‘flip’ your home for more money or tear it down completely to rebuild and make even more money than they could have before.
This model can be profitable for some, but it can also be very damaging to other homeowners. In many cases the homeowners are left feeling used, duped or plain scammed. For some this really could be a good way to sell, maybe there are too many repairs to be done and you are looking to sell ‘as is’, this could be a good way to get the sale done and move on. But If you are looking to get top dollar for your home you may need to lower your expectations while going this route. It is important that you are aware of this potential scam and the risks involved before entering into any contract or transactions this way.
Foreclosure relief fraud
This type of fraud is particularly cruel. This scam preys on people who are facing difficulties while going through foreclosure. A “relief specialist” will contact these people and offer a way out for a much lower rate than the payments they are making. Homeowners are promised representation from their bank and more time in their home. However, this scammer will take their money and then disappear without anyway to get ahold of them again, leaving the homeowner in a worse position than before.
Scams like this are especially effective on people who don’t understand or know their options when they’re in a foreclosure. The fraudulent ‘specialist’ often prey on the elderly or those whos first language is not English, which make this scam particularly wicked.
If you are facing foreclosure or someone you care for is make sure that they are aware of this kind of scam and that they have a legitimate person that they can talk to about different options available.
Loan Rate Deceit
Most mortgage lenders are honest and reliable, as they should be, but there are some unsavory characters in the business. This scam is quite hurtful and deceptive especially when buying your home.
The tactic is bait and switch, the lender will conditionally offer a homebuyer preapproval for a loan with a loan rate that is seemingly perfect, pending a full review of their credit, and to start the application there is a required deposit. What is intentionally left out of the conversation is that after a specific amount of time the deposit becomes non-refundable.
Later on, the pre-approval goes through, the buyer is notified, but the rate is higher than what was discussed. The fine print is then explained and to avoid losing their deposit the buyer is pressured to accept the new rate.
The best way to protect yourself from this deceit is to have a real estate agent help you get in contact with reliable and reputable lenders that they work with in your area. Remember that the mortgage industry is comprised of humans, some more honest than others, and that it’s important to work with people that are trustworthy and honest and have the reputation to back that up.
The House That Was Never There
The “invisible home” scam is aimed towards potential home buyers. Advertised as a for sale by owner (FSBO) this home is shown online with beautiful pictures in a gorgeous neighborhood with all the bells and whistles you could dream of, all without an address. The explanation of the secret location is that the owner is only concerned with serious buyers and until a “good faith deposit” is made the listing will remain confidential.
A good rule of thumb to follow in this case is that if there isn’t an address, the property is likely to not exist. To avoid becoming a victim of this scam it is best to only look at homes that share location or to hire a real estate agent who can inquire on your behalf about the property and let you know if it is a legitimate option or not.
You Can’t Make a Silk Purse Out of a Sow’s Ear
If you’ve worked as a listing agent for any length of time, you’ve definitely run into times with your sellers where they understated certain defects on their disclosure statements. This is normal; sellers want to show their home in the best possible light, and a little correction frequently straightens things out. Scammers, however, go beyond mere generalization; they outright lie.
They will purposefully try to hide severe flaws like mold, foundation problems, water or fire damage, and will then intentionally lie about these flaws on the seller’s disclosure statement (SDS). Many of these con artists could actually hire their own home inspector to participate in the scheme, paying for a false home inspection report that they can then present to potential buyers as evidence of a property’s sound condition. This could make a customer feel like they don’t have to conduct their own inspection.
There is essentially no reparations for the buyer after a sale has completed. The flaw is detected days or weeks later and unless they can demonstrate that the seller engaged in real estate fraud, which is challenging given how common this is, they are simply out of luck.
Its important for you to know the procedure for purchasing a home, particularly the right to a period of inspection. To be clear, providing purchasers with a home inspection report is neither unlawful nor unethical. But it’s a definite red flag when a seller discourages or outright forbids a buyer from conducting their own examination. Talk with your agent about the property, any substantial flaws that they notice or have firsthand knowledge of attempts to conceal must be disclosed.