How to Spot and Avoid Real Estate Scams
This content was created in collaboration with Dr. Phil, a spokesperson for 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. During times of uncertainty or when people are on edge, there are shady operators looking to take advantage. Even in good times, scammers still succeed in taking money away from unsuspecting people.
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.
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.
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 sellers 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.
Sundae has taken great strides in protecting sellers from bait-and-switch buyers. Homeowners who use Sundae to sell their homes don’t need to worry about this type of predatory behavior. Don’t believe us? Hear what our official spokesperson, Dr. Phil, has to say:
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 vigilant. Scammers 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.
Real estate agent imposters
Licensed real estate agents, especially those with the realtor designation, must meet high industry ethics standards. They must always be able to prove that they’re licensed 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 people that engage in sketchy tactics. Phishy behavior that should raise red flags about your real estate agent includes:
- Asking for an upfront fee to list your home. Real estate agents 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 the 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 real estate agent 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: How Does Sundae’s Marketplace Get Me a Better Price Than the MLS
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
Avoid the scams altogether by working with a buyer you can trust. Many homeowners have built significant equity via their homes during the pandemic. Now is a great time to consider cashing out. If you are ready to make the move, now may be the time to consider your options. If you have a home that is market-ready and want to sell quickly, consider using an iBuyer. But, if you want to avoid repairs and unnecessary fees, consider selling to an investor on Sundae’s Marketplace.
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.
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 worried about deals falling through when it comes to selling your house, consider selling your home on Sundae’s Marketplace to receive a range of offers from investors.. Through our marketplace, we enable investors to bid on your house to get you the highest price possible. Avoid predatory buyers and work with someone you can trust.
EMBED How Sundae is Different from a traditional buyer DR. PHIL VIDEO HERE
Sundae’s partnership with Dr. Phil goes beyond your typical brand endorsement. We’ve recently joined forces to create a partnership focused around the mission to help sellers in need.
The number one thing that creates stress in people is a lack of information. Everybody wants to know what’s going on at any given moment, and that’s what Sundae provides sellers. They’re never out of control of the information. They’ve got all the information, every step of the process, and can hit the eject button at any time. – Dr. Phil
Further reading: Dr. Phil: Why I’ve Partnered With Sundae
Dr. Phillip C. McGraw is a paid spokesperson for Sundae and made this content in partnership with the company. The views and opinions expressed by Dr. McGraw are solely his own and do not reflect those of CBS Media Ventures.