Whether you’re in the market to buy a home or you’re already a homeowner, you need to read this so you don’t fall for real estate scams that can drain your savings or worse, leave you homeless. Unfortunately, real estate scams are becoming increasingly common. Based on Realtor data, one in four consumers report being targeted by fraudulent activity during the real estate closing process. Shockingly, over 5% have fallen victim to these scams, losing an average of $70,000 or more. The best way to protect yourself against real estate scams is to educate yourself on the latest scams and how to protect against them.
Real Estate Scams
Title Fraud
Title fraud is a type of scam in which the scammer poses as the homeowner and transfers the home’s title to their name. To pull off the scheme, they first steal your identity and then use fake IDs and your forged signature to transfer the property’s title to them.
Once they become the new homeowner, the scammer can either sell the home or take out a home equity line of credit against the property. Typically, homeowners don’t realize what has happened until it’s too late.
Unfortunately, seniors are often targets of these scams since they often don’t have an outstanding mortgage on their property. Owners of second homes, rentals, and unoccupied homes are also common targets of title fraud scams.
Fortunately, there are ways to protect yourself from title fraud. One easy way is to take out title insurance. Another way to protect yourself is always to safeguard your personal data to avoid becoming a victim of identity theft. You can do this by being cautious with your personal information so you don’t fall for email phishing scams.
You should also regularly review your bank statements, credit card statements, and credit reports. And occasionally, check with your local recorder of deeds to see if there has been any suspicious activity.
Loan Flipping
It’s common for elderly homeowners to fall prey to real estate scams, one of which is loan flipping. In loan flipping, predatory lenders convince homeowners to refinance their homes repeatedly at high rates and high points. This leaves the homeowner with high loan payments that they cannot afford, as they have borrowed most of their home’s equity.
Predatory lenders often persuade elderly homeowners to do a cash-out refinance to pay for home renovations that will make their homes more accessible so they can age in place, but this can be a trap.
To protect yourself from loan flipping, if you’re an elderly homeowner, make sure you have a trusted family member or friend to discuss important financial decisions like refinancing your home. If you are approached by predatory lenders pressuring you to refinance, it’s likely they are trying to scam you.
It’s important to work with reputable lenders or banks when you’re looking to refinance your home. Also, if you recently refinanced your home, it’s best not to do another refinance.
Foreclosure Fraud
Foreclosure fraud is another scam that homeowners should be aware of. Scammers often target homeowners who are struggling to pay their mortgages and are on the brink of foreclosure. They lure these homeowners into transferring their property title to them by promising them a loan and offering to help them make mortgage payments.
One example of such a scammer is Jeff McGrue of Gateway International, who committed foreclosure fraud and scammed around 250 southern California homeowners who were facing foreclosure and eviction.
McGrue owned a foreclosure relief business in the Los Angeles area and promised homeowners he would pay off their mortgage loans and stop the foreclosure proceedings. All they had to do was pay a processing fee of $1500 to $2000 and transfer the title to his company, Gateway International. Homeowners could stay in their homes if they paid Gateway half of the previous mortgage amount as rent and could even buy back their homes from Gateway in the future.
McGrue claimed that Gateway would pay off the mortgage and stop the foreclosure by sending “bonded promissory notes” drawn on the US Treasury Department account. He told the homeowners that the lenders were required by law to accept the notes.
However, none of this was true. The mortgage company was not required to accept the worthless bonds. The foreclosure proceedings continued, homeowners were tricked into transferring their property title, and Gateway International resold the home to unsuspecting buyers.
To protect yourself from title fraud, it’s important to never take out a loan from anyone who approaches you. Get loans from reputable lenders and not just any random foreclosure relief company. If you’re having trouble paying your mortgage, always speak with your mortgage lender, as they can direct you to the right resources to help you save your home.
Fake Real Estate Agent Scam
One of the most common scams in the real estate industry is the fake real estate agent scam. These scammers post fake property listings on non-real estate websites like Craigslist or Facebook Marketplace and pretend to be real estate agents.
Unsuspecting buyers or renters call the fake agent to arrange a viewing, but at the last minute, the agent cancels. The fake agent then tells the potential buyer that the landlord will show the property instead. Here is where it starts to get suspicious- the fake agent then says he/she can sell or rent the property at a lower price than the advertised rate.
He instructs the buyer not to sign anything when viewing the property and tells the buyer/renter to call the fake agent after the viewing to secure the lower price deal. The fake agent will then ask for a deposit to lock in the lower price, after which the buyer/renter never hears from them again.
To protect yourself against this scam, avoid using non-real estate websites when searching for properties. Instead, use reputable real estate websites like Zillow and Realtor.com, which are linked to the MLS and provide listings directly from licensed real estate agents. If the price seems too good to be true, it probably is. Always be careful before making any deposits or payments to unknown real estate agents.
Vacant Land Scam
A fairly new real estate scam that has surfaced in the past few years is the vacant land scam. Scammers look for land that doesn’t have any mortgage and pretend to be the landowner. They forge deeds and other documents to make it seem like they are the rightful owners. Then, they hire a real estate agent to list the land for sale.
One sign that something is off is when the seller prices the land way below market value. This often leads to a bidding war, and the scammer chooses the buyer who is paying cash. Once the buyer wires the money to buy the land, the scammer vanishes, leaving the defrauded buyer and real estate agent to handle the aftermath.
So, how can you protect yourself from these kinds of scams? As a buyer, you need to be vigilant. If you see a vacant property that is being sold for an unusually low price, it’s a red flag that something is off.
Real estate agents should also be careful and not trust the seller. Get proof of ownership to make sure that you’re really representing the landowner and not a scammer. Be wary if the seller doesn’t want to meet face-to-face and is only willing to meet remotely. Many of these scammers live out of state or outside the country.
Closing Escrow Scam
One of the most challenging real estate scams to detect is the escrow scam. The scammer hacks into your real estate agent’s email and monitors your email conversations.
They wait until you’re near the closing date before striking. At this point, they will send you an email from your real estate agent’s account requesting that you make a deposit into the escrow account. Of course, this escrow account is fake- it’s the scammer’s account.
Unfortunately, many unsuspecting buyers fall for this scam because the email looks real and comes from a trusted source: their real estate agent.
To protect yourself against the Closing Escrow scam, you should discuss potential real estate scams with your real estate agent. Ask that details of escrow accounts and deposits be discussed in person instead of via email.
If you receive an email from your real estate agent asking you to make an escrow payment, do not immediately wire the deposit money. Instead, pick up your phone and call your real estate agent first. Confirm that the email is genuine and that you do indeed have to wire the deposit to the escrow account.
Fake Rental Scam
One of the most common rental scams involves fake rental listings posted on non-real estate websites such as Craigslist or Facebook marketplace. These listings often appear too good to be true with rental prices well below the market norm.
Unsuspecting renters then respond to the ad, contacting the scammer to arrange a viewing. But at the last minute, the scammer will say that the landlord is not available to meet at the apartment. If they want the apartment, they will have to meet at a different location where they will get the key and pay the first month’s rent ASAP since they are getting a lot of interest. The renter agrees, meets the scammer, and hands over the rent money. The scammer then gives a fake key to the renter and disappears. Unfortunately, first-time renters often fall for this type of rental scam.
So, how can you protect yourself from this type of rental scam? Always get your rental listings from legitimate real estate platforms like Zillow and Realtor.com, and avoid Craigslist and Facebook marketplace. Never agree to a rental without seeing the place first. If the price seems too good to be true, it’s probably a scam.
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