A golden rule when it comes to real estate is that if a deal sounds too good to be true, then it probably is. Getting involved in real estate is rewarding and financially life-changing, but it can also be downright scary. Unfortunately, like any other industry, real estate has its fair share of scammers hoping to con any individual with their hard-earned money.
However, these criminals are getting more creative with how they can track their targets. According to the Federal Bureau of Investigation’s Internet Crime Complaint Center data, more than 13,600 victims have reported instances of rental or real estate fraud in 2020 alone.
Fortunately, we present you with these three (3) types of real estate scams and how to avoid them.
The Wire Fraud
This type of scam commonly happens when you are about to close a deal on your new home. Then, an email will arrive with all the correct information about the title of the house and instructions on how you can wire the cash to an account from a distant bank. But, unfortunately, the bank account probably belongs to the scammers who also hacked your title information.
The scammers set up fake websites very similar to the original title or lending company you are working with to make it look real. They also use spoofing techniques to make the websites, email addresses, and phone numbers look familiar. However, there is an off letter or number. Some red flags you should be aware of about the wire fraud scam are:
- Spelling errors in the email they sent or other messaging systems
- Hasty changes to the terms and conditions of the housing contract
- Their presentation of decisions have strict deadlines
- Refusal to seek a translator or speak on a call
When you fall for the wire fraud, you will not only be out of your money but also your home. To avoid this, always check the original documents you received from your lender before sending any money. Call their listed phone numbers and verify from a live person the wiring instructions you just received. Always be wary of the changes in your wiring instructions.
This type of scam typically starts when homeowners are having difficulty and are behind on their mortgage payments. When this happens, homeowners are usually desperate to save their homes. Then, this is the perfect time where the scammers who have access to public records of homes in pre-foreclosure swoops in and offer foreclosure relief.
Foreclosure relief capitalizes on the vulnerability of the homeowners. According to the Federal Trade Commission (FTC), some fraudsters claim that they are with the government or government housing assistance programs. They swindle hundreds if not thousands of dollars from homeowners through fees.
Due to the COVID-19 pandemic, foreclosure scams are rising in numbers. Even though various government bodies and numerous banks are working to address this issue and help distressed borrowers, many criminals are still capitalizing on the homeowners’ fears. One huge red flag you should be aware of this scam is when the scammer will tell you not to talk with your lender.
To avoid this, you can work with your loan servicer to request forbearance, modify your existing loan, and make other necessary arrangements. You can also enlist help from the HUD-accredited housing counselor to know the available options you can take. In addition, include the counselor with the three-way call with your lender to develop viable solutions.
“We Buy Homes” Scams
The “We Buy Home” scams also target families who are struggling with their mortgage payments. The usual scenario is that scammers will post signs, ads and send postcards stating, “We Buy Homes!” The target doesn’t know that when they respond to the ad or mailer, the scammer will not buy the house but instead convince you to sign over the control of your house.
When that happens, the scammer company will lease the property to a new tenant. This way, the original homeowner will lose the right to their house, but they are still responsible for making the mortgage payments.
Moreover, this scam can also target tenants and homebuyers, not just homeowners. They can lure you with the ads stating rent-to-own agreements, but in the end, it’s highly deceptive and involves hefty upfront fees.
To avoid Scams from ‘We Buy Houses’ companies, remember the following before replying to their ads:
- Beware and be wary of anyone who asks you to turn over the title of your house with the pretense that they need it to sell your property.
- If you are struggling with your mortgage payments, speak directly with your lender.
- Suppose you are searching for a house to buy or rent, never pay before signing a leasing contract. It would be better if you work with leasing or a real estate agent you trust.
The Bottom Line
When you search for a house to buy or rent, the last thing you want is to worry about scammers. Large cities like Los Angeles, California, the second-largest city in the US with various opportunities and beautiful sceneries, make people drawn to it. However, this also makes it a hot spot for scammers and other criminals alike.
Hopefully, the following types of scams mentioned above will help you know what to avoid and how to avoid them. In addition, real estate scams can be financially devastating, which is why you should always proceed with caution when you sell, buy, or rent a house.