Real estate transactions – property size and price notwithstanding – can be filled with tension and drama, including last-minute changes, that provide opportunities for errors and scams.
Dictionary.com defines a scam as “a confidence game or other fraudulent scheme, especially for making a quick profit, swindle.” The Federal Bureau of Investigation reported over 9,500 internet-only real estate complaint cases in 2023, totaling losses of more than $145 million, most of which will never be recovered.
It can be hard to know whom to trust when buying and selling a property, the largest singular financial transaction in which most of us participate in our lifetimes. Scams occur at all income and education levels, and criminals seek to become increasingly more sophisticated. Most buyers and sellers may only navigate the real estate market once, or at most, a handful of times, with each experience taking place at different periods in their lifetime and different markets. Who wouldn’t get confused at some point?
Disclaimer: The following information does not include all real estate scams that can occur in the space and does not constitute legal advice. If you’ve been a scam victim, see resources under the section below, “Resources for victims of scams.”
Your Social Media Information Can Make You a Target
Homeowners who are under duress due to age, health issues, divorce, death, loss of employment or local politics are especially vulnerable to scams. Online platforms, such as Facebook, Instagram and X, may all provide opportunities to scammers and a list of potential victims. Oversharing personal data, from financial to career and health issues, online or even face-to-face, makes one vulnerable. If an individual feels hopeless or without options, then the “helping hand” extended by a scammer appears a viable solution. The scammer may believe they are helping those they are victimizing. Scammers are clever, manipulative individuals, but ultimately, they are only interested in their own profit. At their most extreme, scammers may feel altruistic, which can further fuel their efforts.
Beware of Phone Call Scams
It can all begin with a phone call. A smooth, professional and articulate individual works to gain your confidence, asking if you would consider refinancing or selling your home while referencing their affiliation with and endorsement by the federal government.
Why are you receiving this call? It may be a random dial by a call center, or your home may be on a list due to missed payments, but it is vital you provide no information, hang up and block the caller. Better yet, ignore all unsolicited emails, texts and phone calls. Legitimate refinancing services and “homes for cash” companies never solicit by telephone. The best defense is to shut down the call immediately.
Once information is shared verbally, or worse, online, it cannot be retracted. It is never a good idea, even in the heat of the moment, to conduct financial transactions of any value on the telephone or online. Face-to-face meetings, scheduled far enough in advance that consumers can research the individual and their firm, are the only way to proceed. Reputable realtors and mortgage representatives will never, under any circumstances, solicit consumer financial details online or on the phone.
Email Scams Right Before Closing
Another stressful and vulnerable time for buyers is the period leading up to closing on a property, when funds are being organized by buyers in order to write checks to complete a transaction. Assets such as stock portfolios may be sold to be liquid for the closing, and scammers understand that buyers are particularly vulnerable to last-minute changes where funds are to be wired. In the last days before closing, it is not uncommon for buyers to receive an email that “there was a mistake” involving emailing closing funds. This is a classic scam, with the new instructions sending the funds to a scammer’s account, not to a legitimate, reputable recipient. A boilerplate disclosure at the bottom of many real estate attorneys’ emails cautions everyone to avoid wire transfers or emailing funds.
Specific Types of Scams
Scams can be multilayered, with disreputable individuals employing the internet and hacking client email accounts to engage in identity theft, solicit and pressure homeowners to investigate loan modification, aggressive “we pay cash for homes” scams and, for really desperate sellers, “foreclosure counseling.”
If you have been the victim of a scam, you are not naive, careless, or unsuspecting. Rather, the deal’s complexity, the number of parties involved and the sophisticated software commonly available enable thieves to mimic legitimate realtors’ websites and access buyers’ and sellers’ personal and financial data. Even the savviest client may become prey, but scammers target first-time buyers, senior citizens and homeowners who are in danger of losing their homes due to nonpayment of their mortgage.
Here is just a small fraction of the types of scams that can occur within a real estate context:
1. The providing financial info scam
Obtaining financial records that are bogus or do not belong to the potential “buyer” (read: scammer) is easy: online hacking into bank accounts, intercepting financial statements from residential mailboxes or glibly interviewing unsuspecting, trusting individuals by phone. This scam involves the alleged buyer supplying financial documents that are not theirs to “purchase” your home. At the closing, they may present IDs for the identity they are assuming, maybe from a stolen wallet or deceased individual. This scam hinges on identity theft and what appears to be legitimate financial documents. Beware the buyer who has no online presence or who is not represented by a licensed realtor.
2. The refinancing scam
You may get a random phone call from someone who is articulate and reassuring and offers to help you save money by refinancing your high-interest mortgage. The key to this scam is the repeated use of the term “federal government-approved” or “authorized.” Beware any phone calls soliciting or offering to help with mortgages or credit issues. Under no circumstances should you supply financial information or Social Security numbers over the phone. The U.S. government will never call to ask for personal data.
3. The fake real estate agent scam
After a buyer has lost a few properties, they may become vulnerable to high-pressure tactics and the “need to act now” approach to buy a home. In the heat of the moment, it may feel appropriate to take shortcuts and trust a realtor to finally buy a great home. Beware, however, the insistent agent, who may have lifted a listing from a legitimate realtor’s website, rebranded it with their logo, which may or may not be bogus, and will attempt to sell it as their own. This “listing agent” will insist you wire them funds so that they can send them to the seller. The amount can be as much as 10 or 20 percent of the asking price as a down payment or even the full price for an all-cash sale. Stopping, slowing down and reconsidering, researching the agent, their firm and the seller will prevent you from being scammed.
Protect Yourself: Do Your Due Diligence
Ken Fisher, the financial analyst known for his 25-year tenure “Portfolio Strategy” Forbes column, is the author of the 2009 book, “How to Smell a RAT – The Five Signs of Financial Fraud.” Chapter Five in Fisher’s book is aptly entitled “Due Diligence is Your Job, No One Else’s,” making it clear that asking questions and proceeding cautiously with the information sellers and buyers receive is the best hedge against scams. The moral of the story: Only you can protect yourself.
The majority of real estate agents are honest professionals. But next to fraudulent real estate agents, it should be no surprise that attorneys, home inspectors and financial services can also be dishonest. Real estate agents can be researched online, and the state where they operate will have a licensing bureau, typically in the state’s capital, which will authenticate their license and advise if their license is current.
Many agents are members of professional organizations that will provide endorsements or evidence of past problems. Each state has a website that will vouch for attorneys, indicate if they are members in good standing of the state’s bar association when they passed the bar, and how many years they have been in practice. Inspectors must be licensed by the states in which they operate. The licensing bureau of the state will indicate if they are legitimate.
Surround Yourself With Trustworthy Professionals
Brian Scott Cohen, a senior loan officer at Guaranteed Rate Affinity, an associate of Coldwell Banker, has been in the mortgage industry for about 20 years and stresses the benefits of leveraging secured fintech platforms. “Mortgage fraud is a huge focus right now, so it’s crucial to work with a trusted, reliable loan officer who takes security and privacy seriously,” he says.
Lenders have systems and checks in place, but Cohen always believes clients should do the right thing and be open and honest about their situations, no matter what they are. A reputable lender will never guarantee they can fix any mortgage or financial problems, but they’ll work in their client’s best interest to get them approved.
Resources for Victims of Scams
If you have been the victim of a scam or even suspect a scam, move swiftly and report as much information as possible to the Federal Trade Commission. Another resource that will protect you and prevent scammers from taking advantage of other real estate buyers and sellers is the U.S. Attorney General . The Better Business Bureau is another option to shut down scammers.
Remember always to do your due diligence, surround yourself with the right professionals and think twice before wiring money anywhere.
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Source: realestate.usnews.com
