Making Sure You Avoid Common Real Estate Scams
Whether you’re renting or buying, real estate can be a tricky business. And in today’s technology-saturated world, scams seem to thrive in the real estate market. For example, a con agent could scrape an existing listing from Craigslist and falsely market the property as their own, or a masquerading Realtor might request a wire transfer that renders funds untraceable.
With a myriad of sketchy scams awaiting eager buyers and renters, it’s important to always be vigilant. Exercising skepticism and avoiding suspiciously attractive offers is a great place to start, but we’ve put together a list of five common scams, and more importantly, how to avoid them, to help you protect yourself from predatory real estate practices.
Online Rental Scams
With a proliferation of online marketplaces for real estate, buyers and renters often start their searches for new homes online. Well aware of this trend, scammers will lift an actual listing and re-post it as their own on another site – often with an alluringly low price tag. The scam goes awry for renters when the “seller” asks them to wire money, or requests a fee for an application that is inevitably “denied.”
To avoid falling victim to these scams, we suggest you follow the Federal Trade Commission’s advice: Be cautious if you are asked to wire money, if they request a deposit or fees before you’ve signed legal paperwork, if they say they’re out of the country or are unavailable to show you the property for an indefinite amount of time, or if they ask you to give money to a third party on their behalf.
Be Wary of Title Fraud
Although less common, title fraud remains a dangerous real estate scam. This is because title fraud robs you of more than a deposit or fee – this scam involves identity theft.
For this ploy, the false party will fabricate documents to make it look like he or she is the property owner; using this information, the scammer will take out a new mortgage on the property. With a secured loan, the false owner can take the cash and then leave the real owner high and dry with remaining payments.
We recommend two methods of protection against title fraud: title insurance, and safeguarding personal information.
Purchasing title insurance offers financial protection from false impersonation and improperly recorded legal documents that a scammer may attempt to forge. While this purchase is a worthwhile investment, guarding personal data is key. Don’t carry documents with private information (passports, Social Security cards, etc.) if it isn’t necessary, and always take precautions with credit card purchases and large transfers of sums.
Beware of Loan Modification
Upfront fees, refinancing options, unsolicited calls from an agency – these are all red flags of loan modification scams. Targeting homeowners who are soon-to-be (or who may already be) facing foreclosure, these companies will claim to offer salvation from a dire situation. The fake lender will often present a solution to dreaded foreclosure options, such as reduced mortgage payments, all for the low price of a fee or access to your bank account info.
While some of these companies may have seemingly credible websites and agency names, avoid them at all cost. Watch out for the following:
- A request for an advance fee
- Suggestion to redirect payments away from your mortgage company and into the lender’s agency
- Guaranteed protection from foreclosure
- Requests for personal or bank account information.
All of these tactics should raise a red flag for loan modification scams.
Renting Foreclosed Homes
Unfortunately, homeowners in a desperate situation facing foreclosure may list their homes on the market for rent or for purchase. As a homeowner collects “rent,” the impending eviction date draws closer, and when it arrives, the renters will be forced to relocate – losing both financial and personal security.
To avoid this situation, do your homework. Check out the backgrounds of both the property manager and the owner. Are they genuinely interested in investigating your financial and personal records? Resources such as online databases will show you if a property has recently foreclosed.
If you are eager to exercise every precaution, you can also reach out to your County Recorder to find out whether or not a Notice of Default or Notice of Trustee Sale has been filed. If either of these notices apply to your prospective property, look elsewhere.
Arguably one of the smartest precautions you can take is to avoid fooling yourself into believing that it couldn’t happen to you. While the ideas of predatory lending seem ominous, often they’re less easy to identify than you might think.
A few takeaways to remember:
- Always avoid paying in cash or wiring money.
- Work with a credible real estate agent with whom a family member or a friend has had a successful experience.
- Research the property, and find out about its rental history. Are there any red flags or notice of recent foreclosure?
When you’re ready to enter into the real estate market as a renter, buyer, or existing homeowner, be sure to keep these tips in mind and don’t let yourself be swindled or caught off-guard!
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