How to Protect Yourself from Real Estate Scams
Buying or refinancing a home is one of the most significant financial decisions you’ll ever make. Unfortunately, real estate scams are increasingly common and can have devastating consequences. Scammers prey on first-time homebuyers, homeowners in financial distress, and even people looking to rent, causing both financial loss and emotional distress.
We all tell ourselves that we would never let ourselves be a victim of fraud. However, the Federal Trade Commission reported over $10 billion lost to fraud in 2023 alone, with real estate scams being one of the leading contributors.
In this blog post, we’ll highlight the most common real estate scams, how to spot them, and how to protect yourself.
Common Real Estate Scams to Watch Out For
To best protect yourself against the most common scams, you’ll need to know what to look out for. Here are six of the most common real estate scams happening in the current market:
1. Foreclosure Relief Scams: Scammers often target homeowners facing foreclosure, offering fake relief solutions that only make the situation worse. These con artists promise to negotiate with the lender on your behalf for a fee, but instead, they pocket the money and disappear, leaving you even closer to losing your home.
2. Loan Modification Scams: Fraudulent companies lure homeowners struggling with mortgage payments by offering “too-good-to-be-true” loan modifications. They might charge high fees upfront, guaranteeing changes to your loan terms, but they have no intention of following through. Always verify that you’re dealing with a legitimate lender or financial advisor.
3. Rental Scams: Fake rental listings and impersonating landlords are common scams in the rental market. Scammers may collect deposits or rental payments for properties they don’t own or that don’t even exist. Be wary of deals that seem too good to be true or landlords asking for money before you’ve even seen the property, especially on sites like Facebook Marketplace or Craigslist.
4. Title Fraud: In this sophisticated scam, fraudsters manipulate property ownership records to steal a home’s equity or even transfer ownership without the homeowner’s knowledge. This can lead to legal battles, or worse, the loss of your property entirely.
5. Wire Fraud: Wire fraud is one of the most financially damaging scams during real estate transactions. Hackers intercept emails and pose as real estate agents, lawyers, or title companies, redirecting large sums of money to their own accounts. Once the funds are gone, they’re nearly impossible to recover.
6. Identity Theft: Scammers may try to steal your personal information to try and use it to open fraudulent accounts or take out loans in your name. In the context of real estate, identity theft can lead to unauthorized purchases or loans being taken out against your property.
Red Flags to Keep an Eye Out For
Recognizing suspicious behaviors is a key part of protecting yourself from scams.
Here are a few common red flags:
- High-Pressure Sales Tactics: Scammers often create a sense of urgency to push you into making quick decisions or payments without thinking it through.
- Unsolicited Offers: Beware of unsolicited emails, calls, or letters offering too-good-to-be-true deals on loan modifications, foreclosure relief, or investment opportunities.
- Requests for Upfront Fees: Legitimate companies typically don’t ask for large sums of money upfront. Be cautious of anyone demanding payment before services are provided.
- Unlicensed or Unregistered Individuals: Always check the credentials of any individual or company you’re dealing with in a real estate transaction. NMLS Consumer Access is a free and easy way to check the license status of the loan officer you are vetting.
- Requests for Personal Information: Be wary of requests for sensitive data, such as your Social Security Number, unless you’re sure you’re dealing with a trusted party.
- Guarantees of Results: Scammers often promise guaranteed outcomes, such as approval for a loan modification or quick foreclosure relief. In reality, no one can guarantee these results.
Tips for Protecting Yourself from Real Estate Scams
When dealing with large sums of money, it is always better to be overcautious.
With that in mind, here are some actionable steps you can take to guard against scams:
- Work with Trusted Professionals: Choose reputable real estate agents, lenders, and attorneys with a track record of honesty and reliability.
- Do Your Research: Before working with any individual or company, check their reviews, ratings, and professional affiliations. Make sure they are properly licensed and have positive feedback from previous clients.
- Verify Information Independently: If you receive wire instructions or contract details, always verify them directly with the relevant party using a separate, verified communication channel, such as a phone call to a number you’ve called them on before.
- Be Cautious with Personal Information: Only share sensitive personal or financial data with trusted professionals, and always be skeptical of unsolicited requests for this information. Also, be wary of what personal information you share on social media. Oversharing your personal or financial data online can make you a target for scammers.
- Never Wire Funds Without Verification: Before wiring any money, especially during a real estate transaction, confirm wire instructions with your attorney or lender in person or via phone.
- Report Suspicious Activity: If you suspect you’ve been targeted by a scam, report it immediately to the Federal Trade Commission (FTC), local authorities, or the relevant regulatory agency.
The best way to protect yourself from any potential real estate scam is to work with a trusted mortgage advisor.
At First Heritage Mortgage, we prioritize protecting our clients from fraud and ensuring a smooth and secure experience. Get started with one of our expert loan officers for guidance and support through every step of the homebuying journey.
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