How to Spot and Avoid Real Estate Scams

May 1, 2020 | Team Sundae

Whether you’re buying or selling a house, watch out for these common scams and predatory real estate practices.

Scams involving real estate are more prevalent than you think. Especially when the economy is on the skids and uncertain times have people on edge, there are shady operators looking to take advantage. Even in good times, scammers still succeed in taking money away from innocent people. According to the Internet Crime Report from the FBI, there were 11,300 victims of fraud involving real estate, rentals, or timeshare properties in 2018. This totaled more than $149 million in losses for the victims. 

The best way to avoid scammers is to know their tactics and targets. Here are some of the top schemes and shady behaviors scammers use to take advantage of home sellers and buyers, especially those experiencing financial difficulties.

Bait and switch home buying

As a homeowner looking to sell, one of the most common scams is a variant of the bait and switch tactic. Traditionally, a bait and switch involves luring in a customer with a bright and shiny product, and then pushing something else on them at the last minute. 

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In the home sales process, this fraudulent behavior plays out a little differently. The home buyer makes a “vanity offer” on your house that is higher than anything else you see. This gets your attention. The buyer will agree to this deal with you and get you under contract, pending an inspection.

During the inspection, often conducted by a friend of the buyer, a laundry list of problems ‘magically’ appears. The buyer will then nickel and dime the price down substantially from the original offer. Sadly, many buyers have already made financial plans by this point and have no choice but to accept the new, much lower price.

How to avoid the scam

First, remember the adage that if something sounds too good to be true, it’s probably because it is. If you get an offer on your home that makes you raise your eyebrows, get ready to dig in a bit deeper. Check for online reviews about the buyer. Ask the buyer if they can share testimonials from other customers. Check with the Better Business Bureau. Contact Sundae if you’d like to learn how we offer an honest, transparent alternative to bait-and-switch home buyers.

Learn moreWatch Out for This Tactic Used by Predatory Home Buyers

Escrow wire fraud

Stealing funds through fake wire transfers, at the exact right moment, is another juicy target for scammers. They wait until you’re ready to purchase a home, and trick you into wiring the downpayment to the wrong place before you go in to sign all the paperwork.

Unfortunately, this problem worsens the more we move toward digital transactions. Conducting real estate transactions by email means that consumers have to be more vigilantScammers will hack into email accounts to watch exchanges between lenders and homebuyers. This enables them to more closely copy messaging and even make it look like they’re sending emails from a professional account. 

Another way these scammers target you is by creating false companies. They look so much like the lender you’re already working with that you wire funds to them instead of where they’re supposed to go. Fake websites that mimic your title or lending company are a common problem that are easy to fall victim to

How to avoid the scam

The best way to protect yourself from falling victim to this scam is to verify wiring instructions through a live person. Rather than clicking on an email link or responding directly to an email address, call the original number you received from the lender for verification. Get instructions directly from them, and also ask that they call you back to confirm the transfer immediately upon receiving the funds.

Phishy realtors

Licensed realtors must meet high industry ethics standards. They must always be able to show you their license whenever you ask, so don’t feel awkward about doing so. It’s important to know what you’re getting yourself into before you sign with an agent and list your home.

Unfortunately, there are unscrupulous agents that engage in sketchy tactics. Phishy behavior that should raise red flags about your realtor include:

  • Asking for an upfront fee to list your home. Realtors only get paid commission after the house sells.
  • Promising a kickback after closing. This is against federal law.
  • Neglecting to submit a written offer form. They also must give you a copy. Not following this protocol could mean they never sent your offer in at all.
  • Violating realtor code of ethics. This includes how they speak about their competition. Negative talk about other agents is a violation.

 

How to avoid the scam

If you ever feel like your realtor is under-performing or exhibiting questionable behavior, feel free to cut ties and look for someone else. This is a perfect situation where a personal referral comes in handy. You can also check online reviews as well as confirm an agent is licensed and/or a member of a professional organization. But be careful. Before you sign with any agent, make sure you are aware of your obligations as part of the contract.

Also consider reading: Should You Use an Agent to Sell Your House?

Fake foreclosure relief

Scammers like to prey on bad situations. Those who have gotten behind in their mortgage payments and find themselves close to foreclosure are prime candidates. The scammer comes in and offers to reduce your mortgage payments in exchange for a large fee you have to pay upfront. Making false claims that they’re associated with a government assistance program can further trick vulnerable homeowners. The scammer runs off with the fee, and you’re left in an even worse situation than before.

How to avoid the scam

The best way to dodge this type of scam is to take care with whom you work on your finances. If it becomes necessary to modify your existing mortgage, only work with your current loan servicer. You can also contact a HUD-accredited housing counselor. If someone recommends that you not contact your lender to handle this type of business, run away. They’re going to scam you.

See also: Facing Foreclosure? 5 Things You Need to Know

Equity-Striping scam

This is another scam that preys on people facing foreclosure. Here’s how it works. A person comes in and offers to pay off your delinquent mortgage by purchasing your home. They say they’ll let you stay on as a renter, with the option to buy back the house when you’re financially stable again. The deal feels good because you never lose possession of the house.

Unfortunately, what really happens is the ‘buyer’ cashes out the existing equity and then disappears, taking the title of your home with them. You end up losing home ownership and are still at risk of foreclosure. 

How to avoid the scam

Preventing this scam is also possible if you stick to working with people you know and trust. Instead of partnering with someone who comes to you with a deal like this, talk to your current lender, a HUD counselor or someone from the Federal Housing Finance Agency.

Further reading: How to Handle Housing After Losing Your Job

Avoid scammers

There are all kinds of people out there looking to take advantage of high-stress situations like buying or refinancing a home. Trust your gut to avoid scams. If something feels off, it most likely is.

If you’re worried about deals falling through when it comes to selling your house, consider working with an off-market buyer for both a quick and reliable offer. At Sundae, our Market Experts have the ability to make a competitive offer after just one visit to your home. As a trusted business, our offers are always legit.

If you’re worries about deals falling through when it comes to selling your house, consider selling your home on the Sundae marketplace to receive a range of offers from trusted investors. Unlike the traditional way of selling houses as-is, Sundae is the only marketplace that connects homeowners who are looking to sell their house as-is to the largest network of qualified  investors. Through the marketplace, we enable investors to bid on your house to get you the highest price possible.

Contact Sundae to learn more about selling your house as is.

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