The real estate market is highly lucrative, and con artists have realized this. While free commercial real estate listings are certainly no scam, others of a different nature do exist.
Fortunately, real estate investors have familiarized themselves with old scam practices. However, some criminals have changed tactics.
This article will look at the most common real estate scams and provide tips to avoid them.
Escrow Wire Fraud
The scam works when the scammer calls you and poses as an escrow company. They then give you an account to wire the escrow funds. Unfortunately, it’s hard to detect this scam because the criminals will create a website mimicking the honest escrow company.
They will then use other tactics such as spoofing to sell the lie by making addresses and phone numbers appear natural.
They will interchange one letter or number in most cases, which is hard to spot if you’re not keen. These scammers operate fast and wire the money to what is most likely an offshore account to avoid detection.
You can avoid the escrow scam by verifying your lender’s information, including their phone number and bank information. Avoid clicking on links without verifying their origin.
It’s also important to be wary of emails that request you to wire funds to a different account than what you’re used to. Finally, it can also help to call your settlement agent once you’ve transferred any funds.
Loan Flipping and Predatory Lenders
A loan-flipping real estate scam happens when a lender dupes a homebuyer into refinancing their mortgage severally. They then charge them high fees and points each time, leaving the homeowners with even higher loans.
Loan flipping scams are prevalent among the elders in society because they most likely have higher equity. They are also likely to be unsuspecting of the scammers.
On the other hand, predatory lenders use tactics to convince home buyers they will provide a better loan offer than what they are being offered.
You can avoid these two common real estate scams by involving a trusted friend or relative if you’re an elder with cognitive issues.
As much as possible, work with reputable banks to learn about any fees upfront. You should also request a quote that includes hidden costs if any.
Foreclosure Relief
This scam is common among those facing financial turmoil and behind on their mortgage payments.
Scammers who use the foreclosure relief use records of homes in foreclosure to dupe unsuspecting homeowners.
They promise to help the homeowners offset their mortgage if they make a lumpsum payment.
However, they then disappear after they receive payment. As a result, the homeowner is left in a deeper financial hole.
The most effective way to avoid foreclosure relief scams is to work with your lender to renegotiate the payment terms.
You can also seek out help from a HUD-accredited housing counselor for a list of financing options.
Fake Listings and Rental Scams
Some scammers look for pictures from the internet and use them to list properties on Craiglist and other sites. They then ask for an upfront payment to secure the property or a viewing fee.
They often succeed because most people are unaware of this kind of scam. They will then move to the next target.
Rental scams are more common than you might think, which has prompted the FTC to dedicate a whole section to its website.
Moreover, the fraud is highly lucrative because some renters are conned for as high as $1,000.
To avoid fake listings and rental scams, it can help to research the property. It would help if you also were wary of people who ask for upfront payment because you see the property.
Moreover, ensure you speak with the property owner before paying cash or viewing the property. It also helps to pay using a check instead of money which gives you an automatic receipt.
Finally, ask for a license when dealing with a real estate agent. You can use this information to verify their credentials.
Bait-and-Switch Movers
You’re not out of the woods yet because you’ve found a place to move into. You still have to deal with all the hustle and bustle of moving in.
A bait-and-switch scam happens when your belongings are on transport to your new home. The moving company gives you a quote upfront but charges more after picking your things up.
They will then hold your belongings up for ransom until you’ve cleared the whole amount.
You can protect yourself from this scam by asking for the moving company’s license number.
You can then investigate whether there are any complaints lodged with the Federal Motor Carrier Administration.
Moreover, it can also help to compare quotes from different companies instead of settling for the cheapest company you come across.
Finally, you should also avoid paying a lump sum in advance. Instead, it would help if you considered only paying a deposit upfront as a sign of good faith. You will then make the full payment when the delivery is complete.
Too Cheap or Overly Expensive Listings
If the listed property is in a nice neighborhood and it’s being listed for way less than other properties, you should tread carefully. Unfortunately, the opposite is also true.
If the property is overpriced and enjoys the same amenities as other properties in the neighborhood, it’s most likely a scam.
To avoid these common types of fraud, you should do a background check on the person you’re dealing with and attempt to identify if a copywriting service was hired to write the listings. It also helps to read the lease document completely before you append your signature.
There are many real estate scams, and some may not be evident at face value. It’s therefore essential to tread carefully when making any transaction.
To avoid being scammed, it’s necessary to verify the details of the person you’re dealing with by doing due diligence.
You should also verify all bank details and keep a clear record of all financial transactions by paying by check. Finally, avoid making lumpsum payments until the agreed service has been delivered.
