The Dirty Dozen
Real Estate Fraud Schemes
By being aware of these common real estate scams, buyers can better protect themselves from fraudsters looking to exploit the complexities of real estate transactions. Always conduct thorough due diligence, consult with professionals, and trust your instincts to steer clear of deals that seem too good to be true. Your vigilance is your best defense against falling victim to these deceptive practices.
Each of these scams poses significant risks, and being aware of them can help you navigate safely in the real estate market.
Here’s a numbered list of the top 12 real estate scams every buyer should watch out for, each accompanied by a brief description:
- Title Fraud: Scammers forge deed documents to appear as the property owner and either sell the property or secure loans against it, leaving the real owner in financial distress.
- Fake Real Estate Agents: Individuals pose as licensed real estate agents to collect advance fees or personal information from unsuspecting buyers.
- Rental Scams: Fraudsters advertise properties they don’t own, collect deposits and rents upfront, and disappear without providing access to the property.
- Mortgage Loan Fraud: Scammers offer attractively low mortgage rates to collect fees or steal identity, disappearing once payment is made.
- Foreclosure Relief Scams: Companies falsely claim they can stop foreclosure in exchange for upfront fees but fail to provide any meaningful assistance
Overpayment Scams: A supposed buyer sends a check for more than the home’s price, asking the seller to refund the excess amount before the check bounces
- Bait-and-Switch Schemes: Initially attractive deal terms are swapped with less favorable ones at the last minute, pressuring buyers to agree under time constraints.
- Equity Skimming: An investor uses falsified documents to purchase a home, rents it out without repaying the mortgage, and ultimately lets the property go into foreclosure.
- Property Flipping Fraud: A property is bought, falsely appraised at a higher value, and quickly sold, deceiving the buyer with an inflated price.
- Off-The-Plan Scams: Buyers pay for properties in developments that are nonexistent or never completed, often with no recourse to recover funds.
- Land Fraud: Scammers sell nonexistent land or the same plot to multiple buyers, leading to legal and financial complications.
Loan Modification Scams: Companies charge upfront fees claiming they can secure favorable mortgage terms, but little to no service is actually provided after payment.
Read on to learn more about each of these.
The Dirty Dozen: Top 12 Real Estate Scams Every Buyer Should Beware Of
Navigating the real estate market can be fraught with pitfalls, particularly for those who are not well-versed in the nuances of property transactions. Unscrupulous individuals often exploit the complexity and emotional nature of real estate deals to deceive buyers.
Here are the top 12 real estate scams that buyers should be on high alert for:
- Title Fraud:
Title fraud occurs when a scammer uses false documents to pose as the property owner, sells the property or borrows against it, and then vanishes. This can leave the real owner with significant debt or, in worse cases, legal battles to prove ownership.
Benefit of Awareness: Understanding title fraud helps buyers ensure the legitimacy of the property’s title and safeguard their legal rights. - Fake Real Estate Agents:
Scammers may pose as real estate agents and collect fees or personal information from prospective buyers. Always verify an agent’s credentials through your local regulatory body.
Benefit of Awareness: Prevents financial loss and identity theft, ensuring that you’re dealing with a licensed professional. - Rental Scams:
In this scam, fraudsters list properties they don’t own for rent, collect deposits and first month’s rent, and then disappear. Always verify ownership and never pay cash without a signed agreement.
Benefit of Awareness: Keeps your deposits safe and ensures the legitimacy of your rental agreement. - Mortgage Loan Fraud:
Scammers posing as mortgage brokers might offer unusually favorable terms to lure in buyers, only to charge high fees or steal your identity.
Benefit of Awareness: Helps you avoid excessive fees and protects your personal information. Foreclosure Relief Scams:
Here, companies claim they can stop the foreclosure process for a hefty fee. Often, these are bogus claims, and the homeowner ends up even further in debt.
Benefit of Awareness: Enables distressed homeowners to seek legitimate help and avoid worsening their financial situation.Overpayment Scams:
The scammer, posing as a buyer, will send a check over the purchase price of the home and ask the seller to wire back the difference. The original check often turns out to be fraudulent.
Benefit of Awareness: Protects sellers from fraudulent transactions and potential financial losses.
- Bait-and-Switch Schemes:
A bait-and-switch occurs when a buyer is lured in with attractive terms that mysteriously change at the last minute under pressure to close the deal.
Benefit of Awareness: Ensures that buyers can recognize and avoid last-minute changes that could be detrimental - Equity Skimming:
An investor may use a straw buyer, false income documents, and fake credit reports to purchase a home, then rent it out without repaying the loan.
Benefit of Awareness: Protects buyers from participating in fraudulent schemes that could lead to legal troubles. - Property Flipping:
While not always illegal, flipping can become fraudulent when done by inflating the property’s value through false appraisals.
Benefit of Awareness: Helps buyers evaluate the true value of the property and avoid overpaying. - Off-The-Plan Scams:
Buyers might be lured into non-existent real estate developments or properties that will never be built. Always research the developer and ensure the project is legitimate.
Benefit of Awareness: Prevents investment in fraudulent projects and ensures the real estate exists. - Land Fraud:
Scammers sell land that doesn’t exist or sell the same plot to multiple buyers. Always check land titles and survey the property.
Benefit of Awareness: Protects your investment and ensures the legality of the land purchase. - Loan Modification Scams:
Companies charge upfront fees, claiming they can negotiate terms with your mortgage lender, but provide little or no service.
Benefit of Awareness: Saves you from unnecessary expenditures and false promises during difficult financial times.
