The real estate industry can be quite tricky, whether you are selling, buying or renting a property, with scams running rampant and ready to pounce on the desperate and vulnerable.
One of the sad reality of our times is that fraud has become a part of every industry; no trade is spared from this, including real estate. Real estate scams can have severe repercussions for victims, ranging from bankruptcy to loss of house and home. These unscrupulous individuals or entities usually prey on the most vulnerable, such as low-income families, those facing foreclosure, or the elderly – but really, anyone can be a target. You may believe that you’re not one to be so easily fooled by scammers and their tricks because you know they’re out there; however, these people have become more sophisticated in their schemes.
Protecting yourself from real estate fraud requires not just a healthy dose of skepticism and good old common sense – you must remain vigilant and be prepared to conduct your own research.
1. Title Fraud
While this type of real estate scam is relatively rare, it can have devastating consequences. The perpetrator employs identity theft to conduct this scheme, falsifying documents to make it appear as if they own the property in question and use these to take out a new mortgage on the property. Once they secure the mortgage, they then take the money leaving the actual owner on the hook for payments.
How to avoid this scam: In order to guard against this type of scam, there are two things you need to do: protect your personal information and secure title insurance. Safeguarding your personal data should come naturally in these times. Refrain from carrying or leaving in vulnerable places your documents with private information, such as your passport, Social Security cards, etc. Make every effort to be careful when purchasing items with your credit cards, especially online. The purchase of title insurance safeguards you against financial repercussions brought about by false impersonation, as well as existing liens against a property’s title, encroachment issues, and errors in surveys and public records.
2. Loan Modification Scams
This type of scam targets people who are experiencing difficult financial situations, especially those who are behind on their mortgage payments and facing foreclosure. They pose as loan modification companies that can help unsuspecting individuals by offering to refinance their mortgage for very little monthly payments. In some cases, they may even offer to shoulder a portion of the amount. In return for this, they will charge you with a hefty upfront fee, or require that you provide them with your bank account information. Others might take precautions and wait until your third or fourth meeting to spring substantial processing fees on you.
Some of these entities might pose as private companies or pretend to be associated with government-initiated programs. They might present you with official-looking logos or websites, and even an office.
How to avoid this scam: The first thing you must remember is that you always need to keep your mortgage lender informed, so if anyone comes to you proposing to act as a third-party to intercede on your behalf with your mortgage lender this should trigger alarm bells. Be wary of individuals or entities that guarantee protection from foreclosure because this is just not possible. Also watch out for those who ask for an upfront fee for loan modification service or official foreclosure counseling, as well as those who are pressuring you to sign documents you can’t understand or give your personal information to them.
3. Rental Scams
The rental market is as profitable as ever, so scams targeting renters are also to be expected, especially now that people conduct most of their searches for rental properties online. Many scammers illegally pull online listings and re-post them as their own on such websites as Craigslist or somewhere similar. They then pose as agents that represent that listing. Some of these fraudsters ask for money upfront as either security deposit or broker’s fee, while others may request that you wire the funds to a friend as proof that you have the money. In the latter scenario, they will then pose as the friend to which you wired the money and collect it.
In many cases, the fraudsters tell prospective renters that they have relocated elsewhere and that’s why they’re renting the property out and will only provide photos. They will tell the renters they can visit the location, but that they can’t look inside, promising that as soon as they deposit or wire the payment, the renter can go to his friend’s office to pick up the keys.
Some scammers actually have access to the property, offer it for an enticingly low price, host an open house, and ask prospective renters to fill up an application form and pay application fees and/or down payment, after which they will either disappear or inform the applicants that they have been denied.
How to avoid this scam: Never ever rent property without having seen the interior of the place. Also, as previously mentioned, be wary of those who ask for an upfront fee and pressure you to sign documents and give a down payment right on the spot using such tactics as hinting that you should snatch it before another prospective renter who is planning to close the deal soon. Make sure to cross-check properties with various websites to determine if they are genuine listings.
As a property owner, there are some things you can do to prevent image or data scraping, such as digitally watermarking any photos that you use in rental ads, including your contact information and website. You should also regularly search the addresses of your rented units on search engines, as well as use Google Image Search and similar services to verify if any of your images have been scraped and are being used illegally.
The good news is that while these scams are becoming prevalent, knowing about them, what to be wary of and how they work is an important step towards protecting yourself. As a rule, if something sounds too good to be true, it usually is. One of the best ways to avoid real estate fraud is to hire a reputable and experienced real estate lawyer or agent and conduct your business through them or with their help.