Buying or renting a home is one of the most significant and exciting decisions a person can make. Yet, despite the abundance of information online, one area many individuals often overlook is real estate scams they need to avoid.
Real estate scams occur when one party, including a lender, a real estate agent, or a mover, uses fraudulent practices to take advantage of the other party, a buyer, renter, or seller. The scammer's goal is to steal money and often uses the victim’s lack of knowledge as the primary weapon.
Are you interested in learning more? This article will cover some of the most common types of scams, the signs to look out for, and what you can do to protect yourself.
What Kinds of Real Estate Scams are There?
The search for a new home can be an enjoyable yet overwhelming process. First, you’ve got to consider the money you’ll be spending, all the required documents you need to provide, all the things you have to pack for moving, and many other things along the way.
Of course, real estate scams are the last thing you want to experience, but unfortunately, they are a lot more common than people realize. That is because of the substantial amounts of money involved in the process and the personal information exchanged between several parties.
Understanding the most common types of real estate scams is crucial in avoiding unpleasant scenarios. In the next section, we’ll cover some examples of schemes targeted at homebuyers and renters and ways to prevent them.
Scam 1: Escrow Wire Fraud
You may be wondering what escrow wire fraud is and what you can do to avoid it. It is simply a scam where someone acts as your real estate agent and persuades you to transfer your closing costs to a fake account.
These types of mortgage scams involve a complex method of hacking called phishing. The scammer uses a fraudulent email, phone number, or website to pose as an individual you know and trust by using contact information almost identical to that of your real estate agent. In addition, scammers often phish personal data from your agent's inbox before the attack occurs.
There is another type of wire fraud scam called spoofing, where scammers use a specific computer program to duplicate your lender’s contact information so that when they contact you, it appears that you are speaking with them. Scammers aim to obtain your closing costs into their account as quickly as possible. Always remember, if something doesn't feel right or you feel uncomfortable, schedule a meeting with your lender or agent.
Scam 2: Loan Flipping and Predatory Lenders
An example of loan flipping by predatory lenders is when a lender entices you to refinance your mortgage or home with a high-cost long-term loan, even though you will not benefit from it. Although you may receive some extra cash, it is usually diminished by steep fees, high penalties, and the increased interest rate on the new mortgage. In addition, if you refinance your loan more than once, you risk draining your equity while raising your monthly payments.
Predatory lenders primarily target and exploit borrowers that lack financial experience by using deceptive sales tactics. Many state, federal, and local laws try to protect homeowners from predatory lending. For example, "The Truth in Lending Act," known as TILA, mandates lenders to provide specific information before entering into a loan agreement that goes over your total costs, loan terms, and the annual percentage rate. Researching and educating yourself is essential when it comes to preventing predatory loans. You must read and understand any loan documents you agree to and calculate precisely how much you will have to pay.
Scam 3: Foreclosure Relief
Quite often, scammers prey on vulnerable homeowners trying to avoid foreclosure. They claim that they can modify your loan to allow you to remain in your home, for which they charge a hefty upfront fee. Regardless of what they promise, you should never pay an upfront fee for something they haven’t delivered.
The Mortgage Assitance Relief Services, also known as MARS, states that companies cannot charge you until they've presented you with a written offer for a modification of your loan or other assistance offered by your lender and you accept that offer. If you agree to the lender’s proposal, the company must give you a document showing you what loan changes will occur and the precise fee you will have to pay for this service.
Scam 4: Fake Listings and Rental Scams
When you often see an advertisement that seems too good to be true, it’s probably a good idea to be cautious because it may be a rental scam. Con artists frequently create fake listings to take advantage of people searching for bargains on long-term leases or short-term vacation rental properties. The following are some red flags you should look out for as well as ways to avoid such scams:
- If they are rushing you to move into a property without seeing it first
- If they are not interested in meeting you in person
- If you have to pay for rent before signing your lease
- If the price of the apartment is way too low in comparison to the homes around
- If they don’t run a credit and background check on you
- If the listing has a lot of spelling errors
Any legitimate company must follow the proper application process and prepare a lease before asking for payment. Make sure you only work with reliable and trustworthy real estate companies with extensive experience.
Scam 5: Bait-and-switch Movers
When inquiring about a moving quote, you should be cautious of companies that offer you a low quote at first and raise the price afterward. In most cases, these scammers give you an estimate over the phone without considering the number of items that need to be moved and then charge you a fortune after the job is completed. However, keep in mind that a legitimate moving company will send a representative to your house so they can physically check the items you need moved and give you an accurate estimate.
Being asked to pay multiple deposits before moving or having last-minute changes to your contract should raise a red flag. A trusted moving company will be transparent about potential changes before signing your contract and won't pressure you to take on new terms at a higher cost.
Learn more about how to choose a moving company to find the right team for the job.
How Do I Protect Myself from Real Estate Scams?
It’s never been easier for scammers to hack into your personal accounts and get access to your sensitive information. But when it comes to protecting yourself against real estate scams, there are a few things you can do.
- Invest in a virtual private network (VPN) service and install it on your laptop and smartphone, so your internet connection and emails remain secure.
- Whenever a wire transfer is requested, ensure you immediately follow up with a phone call. In addition, don't ever transfer money without verifying it with your lawyer, broker, or real estate company.
- Remember that when something seems too good to be true, it probably is. Therefore, it is best to stay away from deals that seem too low and unrealistic until you consult with your lawyer or real estate agent.
- Whenever possible, avoid paying upfront, especially for a service from a company with a tendency to pressure you and make you feel uneasy.
- Make sure you avoid transactions that take place off-market or ones that are changed at the last minute. Research carefully and make confident decisions without losing sight of the facts.
What to Look for When Choosing a Real Estate Agent
Since houses sell exceptionally quickly, you'll need help making the best decisions in today's hot Florida real estate market. Choosing the right real estate agent makes all the difference in renting, buying, or selling a home. An agent who has been in the area for a while and has expertise will be able to help you pick the neighborhood that best suits you and will make you feel at home.
Nearly everyone has sold or bought a home in this market, and asking for recommendations from your family and friends is an excellent place to start. Ask them about their experience with their agents and if they would hire their services again. It’s essential that when choosing a real estate professional, you treat it as an interview—don’t be afraid to ask many questions and ensure they are patient and respectful of your time. It's imperative that the real estate agent you choose listens to your needs and has your best interests at heart, especially if you’ll be working with them for a while. After all, you’re putting your future in their hands.
Avoid Scams and Have Peace of Mind with Royal Shell Real Estate
Avoiding real estate scams can save you thousands of dollars and countless hours of stress. Knowing about frequent fraudulent practices will help you recognize red flags so that you don't become another victim. Moreover, this is why finding a trustworthy real estate agent has never been more critical.
There is no need to look further; Royal Shell Real Estate’s professional team is here to help. For more than 26 years, Royal Shell has earned the trust of thousands of clients, from purchasing and selling properties to rental and vacation assistance. We would love the opportunity to help you! Call Royal Shell Real Estate at (866) 242-9926 or connect with us online.