How to Spot Real Estate Scams and Avoid Falling Victim to Frauds
It has gotten difficult to make out whether or not a real estate offer is legitimate or not. Strangely enough, buyers and sellers are all equally affected by the increasing number of frauds in the real estate sector. Here are a few valuable tips on how to spot real estate scams in time and avoid falling victim to the most frequent types of frauds
Thanks to the Internet, the number of real estate offers posted online is growing constantly, and the National Association of Realtors says that as much as 90% of people who are looking to rent or buy turn to the Internet first.
Despite the important and growing online presence of real estate offers, there is a vast amount of unsolved security and safety questions that are waiting to be solved or at least improved for future users.
With the growing number of real estate offers, the number of real estate frauds is growing as well. Unfortunately. And their vicious attempts of tricking people into trusting them work more often than you’d think.
Who is the real seller?
One of the biggest problems legitimate sellers can face is that scammers extract data and listings from their posts and repost them afterwards as their own. Naturally, they change the conditions and often ask for bizarre prices and even more bizarre fees.
Spotting such a fake seller scam isn’t easy. The pictures of a particular flat or home are, in fact, real – only the seller’s background could bring up a few question marks: fake names, fake email address, but the bank account number they ask you to use to pay them an unreasonable amount of money for absolutely nothing in return – that one is more than real.
During the past years, scammers often focused on flats and ripped people off by asking for deposit money in advance. This kind of unethical real estate practice still exists, but many of them have turned to houses, simply because there is more money in for them.
Know the scammers tricks to spot a real estate scam in time
Real estate scams that focus on houses are much more profitable than rental scams, but they’re also much more elaborate.
Knowing a few common real estate fraud types is the first step of spotting them as real estate frauds and avoiding falling victim to them.
According to the Loan Modification Scam Alert Campaign, these are some of the common fraud types:
- Phony counseling or foreclosure rescue scams
The scammer offers you to negotiate a deal with your lender in order to modify your loan or to save your house, in return for a small processing fee, which is sometimes also called administrative fee. He or she offers to handle everything from here on, in order to avoid you from contacting your lender, lawyer or housing counselor. After paying the fee or several mortgage payments, the false counselor disappears with your money.
- Fake government modification programs
Again, you are asked for up-front payments, but this time, the scammer claims to be connected to a government agency, or to even work for a government program. They offer to include you in one of the federal mortgage modification programs – in return for an exorbitant fee. Doing some research about verified members and programs could help you spot this kind of real estate scam in time.
- Forensic loan audit
In this type of real estate fraud, the scammer offers to analyze your mortgage loan documents in order to verify that your lender did everything right and that the conditions all comply with the law. If not, you could report it and reduce or even cancel your loan. Again, you’ll be asked for paying a processing fee to make use of this “expert advice”.
- Mass joinder lawsuit
In this case, you are contacted by lawyers who want to go forward against your lender, hand in a lawsuit and help you lower your loan if you decide to join the homeowners who also participate in this mass joinder lawsuit. Luckily, it’s easy to spot this kind of scam: this type of lawsuit does, in fact exist – but the lawyers get paid afterwards. Asking for fees in advance isn’t common practice.
- Short sale scam
Scammers will offer you to expedite the sale process. In this kind of real estate scam the scammer will – yes, you guessed it, ask you to pay a large sum in advance for their “services”.
Another frequent type of unethical real estate practices includes asking for money before viewing the house or the flat. Depending on the total price, you could get swindled out of several thousand dollars. Some victims went through five-figure losses, after which they never again heard from the scammers.
You might think: how on earth do people fall for something like that? It’s so obvious that this is a scam!
Well, spotting real estate scams became difficult because the scammers operate in an extremely sophisticated and elaborate way. Often, they seem to have more than plausible reasons.
They might say that they work in a different state or country and that they passed the viewing and selling part on to an agency that charges fees for this kind of service. Also, they’ll have legitimate email accounts and pictures.
As a general rule: Never underestimate the scammer’s level of professionalism and never overestimate your ability to spot a real estate scam!
Become suspicious and be extremely careful if one or more of the following things happen to you:
- You’re asked to transfer money in return for a particular service before the actual service is performed;
- You’re asked to transfer money to be given the keys for a flat viewing;
- The house or flat is way cheaper than other similar properties from this particular area. Many websites now offer calculators or estimates that show whether or not the price is appropriate, which is a great tool for spotting real estate scams;
- There are no detailed descriptions of the house/flat;
- For flat rentals: No other expenses are mentioned, the rent is just represented with one number and there are no details about other costs that come with this flat (bills, for example);
- The person can only be contacted via email.
If this happens, try contacting your lender, your housing counselor or ask for expert advice that can help you spot a real estate scam. The Loan Modification Scam Alert Campaign has assembled a great list of trusted authorities you can contact to help you with real estate scams. Pay for your dream home, not for greedy scammers!