Avoid These Common Real Estate Scams

Avoid These Common Real Estate Scams

  • Betsy Phillips
  • 04/25/22

When you buy or rent a home or refinance your mortgage, the last thing you should worry about is being scammed, Unfortunately, criminals are getting more creative in how they target consumers. I've put together a list of five common real estate and mortgage scams to keep on your radar — and tips to avoid becoming a scammer’s next victim.

1. Escrow wire fraud

What it looks like: You get an email, phone call or text from someone purporting to be from the title or escrow company with instructions on where to wire your escrow funds. Fraudsters set up fake websites that appear similar to the title or lending company you’re working with, making it seem like the real deal. 

How to protect yourself: Before you send money to a third party, go back to the original documents you received from your lender and call the phone numbers listed there to verify the wiring instructions you received. Never click on email or text links, or send money online, without verifying wire instructions with a live person on the phone from a number that you’ve called and verified.

2. Loan flipping 

What it looks like: Loan flipping is when a predatory lender persuades a homeowner to refinance their mortgage repeatedly, often borrowing more money each time. The scammer charges high fees and points with each transaction, and homeowners get stuck with higher loan payments than they can afford after being duped into borrowing most of their home’s equity. Seniors with memory impairment are especially vulnerable to these scams because they have significant home equity and might not realize they’re being taken advantage of.

How to protect yourself: Elderly homeowners who have cognitive issues should involve a trusted relative or friend in any key financial discussion. If you’ve recently completed a mortgage refinance, it’s usually not in your best interest to do another transaction right away. Work only with known banks or lenders, and question all fees and penalties presented to you.

3. Foreclosure relief

What it looks like: Homeowners who fall on hard times and get behind on their mortgage payments can become desperate to save their homes. That’s when scammers, who have access to public records of homes in preforeclosure, swoop in with offers of foreclosure relief to capitalize on homeowners’ vulnerability. Scammers will claim that they can help homeowners save their homes and reduce their mortgage payments for a large, upfront fee.

How to protect yourself: The best way to avoid foreclosure is to work directly with your loan servicer to modify your existing loan, request forbearance or make some other arrangement. Homeowners can first enlist the help of a HUD-accredited housing counselor to see what options they have, then include their counselor on a three-way call to their lender to find solutions.

4. Rental scams

What it looks like: Scammers post property rental ads on Craigslist or social media to lure unsuspecting renters, sometimes using photos from other listings. The scammers, who have no connection to the property or its owner, will ask for an upfront payment to let you see the property or hold it as a deposit. In reality, they’re just looking to get quick cash through nefarious means.

How to protect yourself: Be suspicious of anyone who asks for a cash deposit upfront to see a property. Ensure you’re dealing with the real property owner before negotiating rental terms or seeing a property in person. You can search the local property appraiser’s website to find out who the current property owner is and look for contact information online. Avoid doing transactions via email or on the phone. It’s best to be face-to-face to confirm the property ownership, sign any required documentation and make a payment. Use a check (never cash) to make a payment so you have an automatic receipt.

5. Moving scams

What it looks like: You found a new place to call home — now, you have to deal with getting your belongings there. You fill out a form for a moving company estimate, outlining all your belongings, and you receive an estimate for $4,000 to ship them from your current home in Wisconsin to your new one in Kansas. When the company shows up, someone tells you that it’s actually going to be $10,000. While you’re upset about the overcharge, it could be even worse: The company could have taken your deposit and not bothered to show up at all.

How to protect yourself: Moving is expensive, so it can be tempting to go with the most affordable offer to transport your belongings. This is an area, though, where you can’t simply shop based on the price. Ask the moving company for their license number, and see if any complaints have been lodged with the Federal Motor Carrier Safety Administration (a division of the U.S. Department of Transportation). The BBB also recommends getting three in-person or virtual quotes from different companies; if a company simply gives you a quote over the phone, it’s a red flag. Lastly, avoid giving any large chunk of money in advance. While a small deposit is normal to reserve the movers, reputable companies will not require full payment until the job is actually completed.

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