People invest a big chunk or savings of money to live in a place they can call home. When it comes to buying, selling, or renting a place to live, it can be a pretty exciting adventure. But amid all the excitement, there's something important to keep in mind – real estate scams. Unfortunately, there are people out there trying to trick others when it comes to houses and apartments.
Like other con artists, real estate scammers are ready to turn your search for the perfect home into an anxiety-inducing ordeal. In 2022, victims of real estate scams lost over $396,900,800, according to the FBI's Internet Crime Report. Therefore, pause, take a deep breath, and consider whether there are any signs that things aren't as they seem before becoming overly excited about choosing the perfect spot.
What Is a Real Estate Scam?
Real estate fraud occurs when con artists utilize real estate as a ruse to steal your money. Last year alone, the FBI reported that over 13,600 people were victims of real estate or rental fraud.
Mortgage scams are one of the most popular types of real estate fraud. Shady lenders or loan brokers will sometimes spread falsehoods to get money from naïve borrowers.
However, misrepresenting information on a house loan application is considered mortgage fraud. Borrowers, for example, will occasionally commit mortgage fraud by manipulating the appraised value of a home.
1. Wire Fraud Scam
Wire fraud can take numerous forms in real estate scams, ranging from
escrow wire fraud to mortgage wire fraud. This often occurs when a scammer
appears as your real estate agent and dupes you into transferring funds to a
phony account for your closing costs.
Scammers frequently use sophisticated software that duplicates your agent's email address or phone number, making them difficult to detect. Unfortunately, once you send money to someone, it's very impossible to retrieve it back.
As a home buyer, you can protect yourself by understanding the closing process from the beginning. Also, before sending money, always call to confirm wire transfer requests.
2. Foreclosure Relief
Scam
Scammers will target people who are about to have their houses foreclosed on in a foreclosure assistance scam. In exchange for an upfront payment, a corporation may contact you and offer to either stop the foreclosure or alter the loan.
This type of scam is especially heartbreaking because the victim will not only be unable to recover their money, but they may also lose their home. To avoid this type of scam, never agree to pay a company in advance for a service that hasn't been finished. Also, make sure you do your research on the person or firm promising to assist you.
3. Loan-Flipping Scam
Scammers will entice victims to refinance their homes repeatedly, charging exorbitant fees and points on each transaction, in a loan-flipping scam. As a result, the borrower will end up with unaffordable loan payments and little equity in their home.
Seniors are frequently victims of these types of fraud because they have large equity in their houses. They can easily fall prey to scam artists if they are unaware that they are being taken advantage of.
Senior homeowners should only engage with lenders they know and trust to protect themselves. And, if possible, individuals should confer with a friend or family member before making these types of financial decisions.
4. Commercial Real Estate Scam
Commercial real estate fraud is frequently sophisticated and can take many forms, ranging from forgery to misrepresentation. Misappropriation of funds, on the other hand, is one of the most common types of commercial real estate fraud.
This happens when a borrower diverts funds from a loan or
payment to an unapproved expense. A financial misappropriation would occur, for
example, if a property management business collects rent payments and then uses
those monies to pay for another property. Misrepresentation is common in
commercial real estate fraud, such as the submission of fake paperwork or the
furnishing of false financial statements.
5. Home Inspection Scam
Home inspections are essential in the home purchasing and selling process since they ensure that you are paying the correct market value for the home. A home inspection scam involves an unqualified supplier performing the examination and concealing potential house concerns.
To avoid this form of fraud, make sure to ask plenty of
questions and watch for red flags. Check that the inspector has access to all
sections of the property and request a copy of the report.
6. Title or Deed Scam
The involuntary transfer of ownership without the owner's knowledge is referred to as title or deed fraud. Another person may attempt to transfer property ownership to someone else or borrow money using that property as security.
This is a significant fraud since the victim may lose their home as a result. Even if the homeowner does not lose their home, a title scam can be a costly issue to resolve. Anyone who owns rental or vacation properties that they do not personally manage is in danger. To protect yourself, keep an eye out for signals that something is wrong with your property.
It is critical to be attentive, undertake due research, and seek guidance from reliable professionals in real estate transactions to protect yourself. Always double-check facts, be wary of upfront payments, and report any suspicious activity to the appropriate authorities.
Fortunately, there are precautions you should take to avoid being duped by a real estate scam. You can better protect yourself if you are aware of the telltale signs of some of the most common real estate scams.
How To Spot Real Estate Scams?
The best way to avoid real estate scams is to become familiar with some common warning signs. This is especially true for first-time home purchasers who need to familiarize themselves with the home-buying process. The following indicators may suggest a real estate scam:
1. Too Good to Be True:
To attract victims, scammers frequently tout ridiculously low pricing or amazing discounts. It's a red flag if a home is priced drastically below market value if the deal appears too good to be true.
2. Pressure to Act
Quickly:
Scammers instill a sense of urgency in potential victims to dissuade them from completing detailed research. They may pretend that the property has many offers or that the pricing is only available for a limited time. Take your time investigating and avoid succumbing to pressure.
3. Incomplete or Vague
Information:
Genuine sellers and agents offer detailed information on the property, such as its features, location, and legal status. Proceed with caution if details are ambiguous, incomplete, or difficult to verify.
4. Request for Upfront
Payments:
If you are asked to make upfront payments before visiting the property, signing a contract, or performing due diligence, proceed with caution. Scammers frequently request money using untraceable methods, such as wire transfers, making it impossible to reclaim funds.
5. Unprofessional
Communication:
Scammers may communicate in an unprofessional manner, using incorrect grammar and spelling. Legitimate professionals maintain a high level of professionalism in their communication.
6. Inability to Visit
the Property:
If the seller or landlord refuses to let you view the property or makes reasons for why you can't, it could be a hint of fraud. Genuine sellers should be willing to help with property viewings.
7. Verify Ownership and
Title:
To verify property ownership and title, examine public records or a title business. Scammers may falsely claim ownership of properties and attempt to sell or rent them.
8. Check Online Reviews
and Ratings:
Look for online reviews and ratings for the real estate agent or business. Dissatisfied consumers frequently share their experiences, and a lack of favorable evaluations or a large number of complaints might be a red flag.
9. Research the Area:
Compare the price of the advertised property to similar properties in the neighborhood. Significant differences could suggest a hoax. To comprehend appropriate pricing ranges, familiarize yourself with the local real estate market.
10. Question Unusual
Terms or Conditions:
Examine any unexpected terms or conditions in the transaction, particularly if they appear complex or peculiar. Such words may be used by scammers to mislead and deceive potential victims.
11. Verify Real Estate
Professionals:
Confirm the qualifications of the real estate experts participating in the transaction. Examine their licenses, qualifications, and reputations to determine that they are genuine.
12. Use Reputable
Platforms:
Stick to well-known and reputable real estate websites and platforms when searching for properties. These platforms often have measures in place to verify listings and reduce the risk of scams.
13. Consult with
Professionals:
Before making any major purchases, consult with a real estate agent, a lawyer, or a financial advisor. They can provide insights, evaluate papers, and assist in the identification of potential scams.
By being vigilant, conducting thorough research, and seeking professional advice when needed, you can significantly reduce the risk of falling victim to real estate scams. When you're on the lookout for a house, it's super important to be careful to avoid falling into traps set by tricky people.
These tricksters use all sorts of tactics to fool folks who
are excited about getting their own home. They might make offers that sound
unbelievably good, try to rush you into making decisions, or even ask for money
before you've had a good look at the property.