Buying a home is a major milestone for many individuals and families. However, the process of purchasing a home can also be stressful and complicated. Unfortunately, scammers take advantage of this confusion to prey on unsuspecting buyers. This article will discuss 15 common real estate scams and how to avoid them.
What is a real estate scam?
Real estate scams are deceptive schemes designed to trick individuals or businesses into investing money or property in a fraudulent real estate venture. Scammers may present investment opportunities that appear too good to be true, or they may use high-pressure sales tactics to persuade victims to invest quickly without conducting adequate research or due diligence.
1. Foreclosure scams
Foreclosure scams are a common real estate scam that targets individuals at risk of losing their homes. Scammers may offer to “rescue” your home by promising to negotiate with your lender on your behalf. However, they will charge high fees and may fail to deliver on their promises.
To avoid foreclosure scams, be wary of any company that guarantees to save your home from foreclosure. Always work with a licensed attorney or a trusted housing counselor approved by the Department of Housing and Urban Development (HUD).
2. Rental scams
Rental scams are a common type of real estate scam that targets renters. Scammers may create fake rental listings, ask for upfront payment or deposit, and disappear with your money.
To avoid rental scams, always view the property in person before paying any money or signing any lease agreements. Do not wire money or pay with cash or gift cards, as these are untraceable forms of payment.
See Also: Buying a Home vs Renting a Home
3. Title Scams
Title scams involve scammers impersonating a legitimate title company and tricking you into wiring money to a fraudulent account. They may tell you that there has been a change in the wiring instructions and ask you to send the money to a different account.
Always verify the wiring instructions with your title company or closing agent over the phone or in-person to avoid title scams. Do not rely on email or other electronic communication to verify wiring instructions.
4. Home improvement scams
Home improvement scams target homeowners who need repairs or renovations. Scammers may offer to perform the work at a low price but use substandard materials or do not complete the work as promised.
To avoid home improvement scams, always work with a licensed contractor who is bonded and insured. Get multiple estimates for the work and check references before hiring anyone.
See Also: 7 Home Improvement Projects That Add The Most Value
5. Investment scams
Investment scams target individuals looking to invest in real estate for profit. Scammers may promise high returns on investment, but in reality, the investment is either non-existent or worthless.
To avoid investment scams, always do your research before investing in any real estate opportunity. Work with a licensed real estate professional or investment advisor. Be wary of any investment opportunity that sounds too good to be true.
See Also: How To Invest in Real Estate
6. Mortgage scams
Mortgage scams involve scammers who offer to help homebuyers obtain a mortgage but charge high fees and provide little or no benefit. They may also falsify the buyer’s financial information to obtain a larger loan.
To avoid mortgage scams, always work with a licensed mortgage lender and get multiple quotes for your mortgage. Additionally, do your research and compare different lenders’ fees and interest rates.
7. Bait-and-switch scams
Bait-and-switch scams involve scammers who advertise a property at a low price to attract buyers. However, when you show interest, they will tell you that the property is no longer available and offer you a different, more expensive property.
To avoid bait-and-switch scams, always verify the property’s availability with the seller or the listing agent before showing interest. Refrain from making a quick decision, and always work with a licensed real estate professional.
8. Short sale scams
Short sale scams target homeowners who are struggling to pay their mortgage and need to sell their homes. Scammers may offer to buy the house for a low price, promising to negotiate with the lender on the homeowner’s behalf. However, they will pocket most of the profits from the sale and leave the homeowner with nothing.
Always work with a licensed real estate professional and a qualified attorney to avoid short-sale scams. Only sign agreements or transfer the deed to your home after consulting with your attorney.
9. Reverse mortgage scams
Reverse mortgage scams target seniors who own their homes and need additional income. Scammers may offer to help them obtain a reverse mortgage, but they will charge high fees and provide little or no benefit.
Always work with a licensed reverse mortgage counselor approved by HUD to avoid reverse mortgage scams. Be wary of any company that guarantees to help you obtain a reverse mortgage or charges high fees.
See Also: The Best Reverse Mortgage Guide
10. Appraisal scams
Appraisal scams involve scammers who offer to inflate the value of a property to help the buyer obtain a larger loan. This can lead to the buyer paying more for the property than it is actually worth.
To avoid appraisal scams, always work with a licensed appraiser familiar with the local market. Do your research and compare the appraised value to similar properties in the area.
11. Equity skimming scams
Equity skimming scams target homeowners who are behind on their mortgage payments. Scammers may offer to take over the payments and let the homeowner stay in the home. Still, they will not make the payments and eventually foreclose on the property.
Always work with a licensed real estate professional and a qualified attorney to avoid equity-skimming scams. Only transfer the deed to your home or sign agreements after consulting with your attorney.
12. Loan modification scams
Loan modification scams target homeowners who are struggling to pay their mortgages. Scammers may offer to help the homeowner obtain a loan modification. Still, they will charge high fees and provide little or no benefit.
Always work with a licensed attorney or a trusted housing counselor approved by HUD to avoid loan modification scams. Be wary of any company that guarantees to help you obtain a loan modification or charges high fees.
13. Short-term rental scams
Short-term rental scams involve scammers who create fake rental listings for short-term rentals, such as vacation homes. They may ask for payment upfront or deposit and disappear with the money.
Always verify the rental listing with a reputable website or rental agency to avoid short-term rental scams. Do not wire money or pay with cash or gift cards, as these are untraceable forms of payment.
14. Email scams
Email scams involve scammers who send phishing emails to real estate professionals and homebuyers. They may impersonate a legitimate real estate company or lender and ask for personal or financial information.
To avoid email scams, always verify the sender’s identity and do not click on any links or download any attachments unless you are sure they are safe. Only provide personal or financial information if you are certain that the request is legitimate.
15. Cybersecurity scams
Cybersecurity scams target real estate transactions and involve scammers who hack into email accounts or intercept wire transfers. They may pose as a legitimate party and ask you to wire money to a different account.
Always use strong passwords and enable two-factor authentication for your email and banking accounts to avoid cybersecurity scams. Do not rely on email or other electronic communication to verify wiring instructions.
15 Common Real Estate Scams Conclusion
In conclusion, real estate scams can cause significant financial and emotional damage to homebuyers and homeowners. By being aware of these common scams and taking the necessary precautions, you can protect yourself from falling victim to these scams. Always work with licensed professionals and trusted advisors, and do your research before making any financial decisions. If you feel like you are victim of a real estate scam, Contact Us below or check the FAQs at the bottom of this page for more information.
Some Common Real Estate Scams FAQs
What should I do if I suspect I have fallen victim to a real estate scam?
If you believe you have been the victim of a real estate scam, you should contact law enforcement immediately and report the incident. Contact your bank, credit card company, or any other financial institution to which you provided information during the scam.
How can I protect myself from real estate scams?
You can protect yourself from real estate scams by exercising caution and conducting thorough research. Always check the legitimacy of the people or companies with whom you are dealing, and be wary of unsolicited offers or requests for information. If something appears to be too good to be true, it most likely is.
What should I do if I receive an unsolicited email or phone call from a real estate professional?
Do not provide any personal or financial information if you receive an unsolicited email or phone call from a real estate professional. Instead, request their name and company, and then confirm their legitimacy by conducting an online search or contacting the Better Business Bureau.
How can I report real estate scams?
You can report real estate scams to the following organizations:
-Local law enforcement organization
–Better Business Bureau (BBB)
–Federal Trade Commission (FTC)
-State Attorney General’s Office
–National Association of Realtors (NAR)