Your path to the American dream very likely starts with a house. That dream of a home, full of laughter and love and real estate values is a powerful lure. But if you are victimized by a real estate scam, that dream soon turns into a nightmare. From opportunistic realtors feigning incompetence to impostors claiming to be lawyers or notaries, the house market hides real fraudsters that prey on the ignorant buyer or unsuspecting seller. This blog teaches you how to recognise and defend against real estate fraud, so that you can realize your dream of a home, and protect your fortune and future against would-be con men.
The Many Faces of Real Estate Fraud:
Real-estate fraud is defined as any fake activity used to rob money or property. Here are the most common of such scams:
- Title fraud: Perpetrators forge documents or use stolen identities to sell land that they don’t legally own, and you could end up buying a titled property. This could lead to costly lawsuits and even a loss of money.
- Wire Fraud: Typically an advanced scam will occur by impersonation via phishing or telephone call by a fraudster posing as an escrow agent or attorney. Once a wire is sent to the imposter’s account, the funds are immediately received and impossible to retrieve.
- Mortgage fraud: Presenting fraudulent financial information in loan applications to acquire mortgages on behalf of unqualified buyers, who then proceed to default, leaving your lender holding the bag – and potentially you without property!
- Foreclosure Scams: Predatory lenders promise to keep distressed homeowners safe from foreclosure for a fee, but are actually either fake-negotiating or delaying, without either party pulling the home from the brink. In the end, the scam sexers are evicted and the shady scammers pocketed the fees.
- Rental Scams: Forgers pose as landlords online and either list fake properties or discuss the rental of legitimate properties on their behalf. After collecting baseless application fees or rent deposits, the scammers abscond with the money. In some instances, this scheme entirely impoverishes prospective renters, gets duped and ends up being evicted.
Warning Signs: Spotting a Scam Before it’s Too Late
The key to avoiding real estate fraud is vigilance. Here are some red flags to watch out for:
- Deals That Look Too Good to Be True: A very low-price tag or sellers who are too eager to sell should set off warning bells. Do your homework to find out what a comparable property (referred to as ‘comps’) sells for.
- High Pressure: Real sellers realize that buying a home is a big deal. Be on the lookout for anyone who rushes you into a deal or pressures you to waive contingencies in the purchase contract, such as those related to inspections.
- Unwilling to disclose: All sellers are required to list ‘noticeable and material defects’ in the property. If a seller won’t answer questions or provide paperwork, walk away.
- Strange forms of communication: A legitimate transaction will always have clear lines of communication. Be wary of sellers or their agents who want to communicate exclusively over email or text, particularly if they require wire transfers for down payments or closing costs.
- Forced Use Of Specific Professionals: Sellers shouldn’t dictate who you use as your lawyer, title company, or lender. Choose reputable professionals you trust to work for you and on your behalf.
Building Your Defenses: Essential Safeguards
Knowledge is power when it comes to protecting yourself from real estate fraud. Here are some crucial steps to take.
- Find a Licensed Real Estate Agent: A qualified agent can explain the transaction process, point out potential problems, and refer you to quality tradespeople.
- Use a Real Estate Lawyer: Make sure you have an experienced lawyer review all the legal documents for you, conduct a title search, and protect your rights. See Pun Associates, LLP, the name you can trust in real estate law.
- Beware of being asked to wire money: scammers often ask their victims to wire money, since it’s practically impossible to reverse the transaction. However, you can avoid becoming a victim if you simply take care to verify any account details you’re instructed to send funds to directly with the payee before sending the wire. The contact information provided in the email, such as an address, website, and phone number, may all be fake, so don’t fall for it.
- Do Your Own Research: It’s not enough to take the seller’s or the agent’s word for it. Investigate the history of the property, confirm that the seller really does own it, and get a proper independent inspection to spot problems.
- Exploit Contingencies: Insert contingencies into your purchase agreement that allow you to opt out of your contract if the inspection or title search turns up major problems with the house.
- Be Wary of Online Scams: Online ScamsBe wary of scams while searching for real estate online. Work only with reputable real estate websites and listing services, never send any of your personal information or financial information to anyone (particularly anyone overseas) whom you haven’t met in person and verified by your own due diligence.