One of the reasons many home buyers fall victim to scam artists is that there are so many different types of real estate scams. It’s impossible to be aware of every possible scam, but here are seven common ones provided by Rocket Mortgage that you should familiarize yourself with.
1. Wire Fraud Scam
There are many different types of wire fraud that can occur in real estate scams, from escrow wire fraud to mortgage wire fraud. This typically happens when a scammer poses as your real estate agent and tricks you into wiring the funds for your closing costs to a fraudulent account.
REALTOR® imposter scams can be hard to spot because scammers often use special software that mimics your agent’s email address or phone number. Unfortunately, once you wire money to someone, it’s nearly impossible to get those funds back.
Protect yourself by calling the phone number included with the physical copy of the wiring instructions. Stay on the call during the wire transfer. Scammers will often rely on scare tactics and false time constraints here. Do not send any money until you are on the phone with someone from the number included in your instructions.
2. Foreclosure Relief Scam
In a foreclosure relief scam, scammers will target individuals on the brink of having their homes foreclosed on. A company may reach out and promise to either stop the foreclosure or modify the loan in exchange for an upfront payment.
This type of scam is especially devastating because not only will the victim be unable to get their money back, but they’re still at risk of losing their home. To protect yourself from this type of scam, never agree to pay a company upfront for a service that hasn’t been completed.
Do your due diligence about the individual or company promising to help you. For instance, if you’re contacted by someone claiming to be an attorney, check your state’s bar website to determine whether that person is legitimate.
3. Loan-Flipping Scam
In a loan-flipping scam, scammers will convince victims to refinance their homes repeatedly, charging high fees and points on every transaction. As a result, the borrower will end up with high loan payments that they can’t afford and limited equity in their home.
Seniors often fall victim to these types of scams because they often have significant equity built up in their homes. Not realizing they are being taken advantage of, they can easily fall victim to scam artists.
To protect themselves, senior homeowners should only work with lenders they know and trust. If possible, they should have a friend or family member they can consult with before making these types of financial decisions.
4. Messages From Fake Buyers
An insidious scam that’s becoming more popular is unsolicited emails or text messages asking homeowners if they’re interested in selling their home. Scammers will use this interaction as an attempt to steal personal information.
Use a real estate agent that you can trust to protect yourself from this particular scam. Your real estate agent will vet potential buyers before bringing them to you. If you want to list your home as for sale by owner (FSBO), you’ll need to do more legwork on your own.
5. Home Inspection Scam
Home inspections are vital to the home buying and selling process because this is how the lender ensures you’re paying the fair market value for the home. In a home inspection scam, an unqualified provider performs the inspection and hides potential problems with the home.
To prevent this type of fraud, make sure to ask lots of questions and look for signs of irregularities when arranging the inspection. Ask your real estate agent if they’ve worked with this inspector before and try to find reviews online. Once the inspection begins, make sure the inspector can access all areas of the property and ask to look at the report yourself.
6. Rental Scam
Most renters will start looking online to find a new apartment or rental home. Scammers often take advantage of this by listing properties that don’t actually exist to trick borrowers into sending them money. Other times, scammers will pull a bait-and-switch by posting low-quality rentals at a high price point.
To prevent rental scams, it’s a good idea to check listing photos for the MLS watermark. Make sure to go see the property in person before committing to renting it. You should never sign anything or wire money until you’ve seen the property.
7. Title Or Deed Scam
There are two main types of title or deed scams. The first occurs when there’s an involuntary transfer of property ownership without the owner’s knowledge. If a scammer gets access to an owner’s personal information, they can use that to try and transfer the title into their name.
This scam can be disastrous for homeowners because they could potentially lose their property. To guard against this, you can monitor information regarding properties that you own via the county deeds office.
Scammers will need your sensitive personal information to run this scheme, so if you receive word that your data has been compromised somehow, like a health care or bank data breach, you should make sure to check your deeds office and review any new paperwork you don’t recognize.
For additional peace of mind, you always have the option to purchase identity theft protection that also monitors your property titles.
The second version of a title or deed scam is when a buyer believes they’re purchasing a property, but the scammer uses a fake title. The buyer will transfer money for a down payment or earnest money deposit only to realize the property isn’t actually for sale.
You can safeguard against this by making sure your real estate agent meets with the seller in person before any funds are transferred and that they verify the seller’s identity with multiple forms of identification.
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