Getting involved in real estate can be both rewarding and lucrative. Whether you’re a novice home flipper, a licensed professional or fall somewhere in the middle, real estate done right can be financially life-changing. If you’re looking to rent a property or potentially buy a home, there are countless resources and websites to use to narrow down your search. Just like any industry, there are certain deals you’ll probably want to avoid when deciding how to spend your time and money. Real estate scams can be financially devastating, but there are ways to identify red flags that can alert you of fraud before it’s too late.
Beware of these 6 real estate scams
If it’s too good to be true… it probably is! Here are six real estate scams not to fall for.
1. Rental ripoffs
When looking for a rental, you’ll first want to use a reputable website. Facebook postings or ads on Craigslist are often legitimate but aren’t platforms meant for advertising specific real estate listings, which means it can be easier to post fraudulently. Online swindlers have been known to post about a property, ask for money upfront as a security deposit or downpayment and then disappear once they receive money. Young adults are especially susceptible to rental fraud, as scammers often target first-time renters. Beware of this scam, as it’s standard to see a property in person and have the opportunity to ask basic questions before being required to make a deposit.
- Seller demands payment upfront
- Post from a social media account with no pictures
- Avoids sending further pictures upon request
- Lack of documentation
- Request for payment before a property visit
2. International wire transfers
Globalization has caused different parts of the world to be increasingly connected in the past few decades. In terms of real estate, the internet has made it easier for affluent buyers to invest in real estate overseas. This growing international market is positive in many ways, but comes with new opportunities for scammers. According to an article published in The Miami Herald, the FBI reported almost $1 billion was “diverted or attempted to be diverted” and wired to unlawful accounts in 2017. In other words, this is becoming a bigger issue than ever before. Nobody is exempt, as the chairman of MIT’s Board of Trustees and a Supreme Court Judge were both reportedly the victims of online real estate scams.
- Spelling errors in emails or other messaging systems
- The presentation of decisions as having strict deadlines
- Hasty changes to terms and conditions of the housing contract
- Refusal to speak on a call or seek a translator
3. Property plastic surgery
Sellers are often on a time crunch to get properties locked into contract, which leaves little time to properly deal with the unexpected. Whether it’s mold, termites or even a lead-based paint used decades prior, unethical contractors and sellers will sweep problems under the rug if possible.
While many sellers are respected professionals and would fully fix the issue before listing, it doesn’t hurt to do your research as a buyer. Making sure a cosmetic change isn’t covering up a disaster underneath could save you thousands. Looks can be deceiving, so be sure to ask for the paperwork showing that routine inspections have been performed.
- Recent or unexpected cosmetic changes to the house
- An unwillingness to provide routine paperwork
- Closed doors or taped-off sections of a property
- Overselling a recently renovated area of the house
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4. Loan fraud
Although it can be intriguing when offered a loan with unbelievable interest rates, beware of offers that seem too good to be true, as they are often scams. Often introduced as a “mortgage agency,” fraudulent loan companies guarantee discounted loan rates for an upfront fee. If any service asks for personal details or bank information, it’s probably a good idea to do further research before signing on.
Additionally, it’s more than appropriate to ask for testimonials or references from past clients who have used their services. Any company outside of a traditional bank or well-known broker should probably be researched heavily and cross-referenced just to be safe.
- Big promises without asking background information
- Requesting private bank information
- Lack of personal contact, either over the phone or in person
5. Fake real estate lawyers
Intelligent scam artists are capable of impersonating real estate lawyers in order to claim a percentage of a given sale for themselves. There are a few simple and easy ways to verify that a real estate lawyer is actually representing who they say that they are. For example, if a seller directly offers contact information for their lawyer, then the lawyer is likely legitimate. As a buyer, you can easily check with the seller via email, phone call or an in-person meeting to confirm that their lawyer matches the one that you have on file. If you’re still suspicious of the lawyer after checking with the seller, you can double check their graduation from the law school from which they claim to have graduated.
Though this scam is relatively new and rare, doing your research can prevent an imposter from taking advantage of a real estate closing. The financial impact can be devastating, so it’s likely worth the time to check their credentials.
- A lawyer reaches out independent of the seller
- The seller isn’t aware of the lawyer
- The lawyer lacks a professional presence online
- There is no record of the lawyer at their supposed alma mater
6. Real estate agent without a license
A real estate agent with an expired license is just as problematic as one without a license, so make sure your real estate transaction is legitimate by asking your real estate agent for their license. Social media pages and testimonials don’t necessarily mean that a real estate professional has their license, and a true professional probably won’t mind giving their client some peace of mind by verifying their qualifications. Real estate transactions are often both time consuming and expensive, so it’ll be well worth the time investment.