5 common real estate scams, and how to protect yourself

The real estate market can be a daunting place, and unfortunately, scammers are becoming more sophisticated in targeting housing consumers. In 2022, real estate fraud resulted in nearly $400 million in losses, according to data from the FBI’s Internet Crime Complaint Center. To help you navigate the market safely, we’ve compiled a list of five common real estate and mortgage scams, along with tips on how to avoid falling victim to them.

1. Escrow Wire Fraud: One prevalent scam involves receiving fraudulent communication from someone claiming to be from a title or mortgage escrow company, providing instructions on where to wire your escrow funds. These scammers go to great lengths, setting up fake websites and using spoofing tactics to make their communication seem legitimate. To protect yourself, always verify wire instructions with the original documents you received from your lender and contact them directly using a verified phone number.
2. Loan Flipping and Predatory Lenders: Loan flipping occurs when predatory lenders persuade homeowners to refinance their mortgage repeatedly, often resulting in higher fees and payments. Seniors with memory impairment can be particularly vulnerable. To safeguard against this scam, involve a trusted relative or friend in financial discussions, review loan estimates and closing disclosures carefully, and be cautious of lenders actively seeking you out.
3. Foreclosure Relief Scams: In times of financial hardship, homeowners facing foreclosure can become targets for scammers offering relief services for upfront fees. These fraudsters often claim affiliation with government programs. To protect yourself, work directly with your loan servicer and consider enlisting the help of a HUD-accredited housing counselor. Avoid any advice that discourages you from communicating with your lender.
4. Fake Listings and Rental Scams: Rental scams are alarmingly common, with scammers posting fake rental ads to lure unsuspecting renters. They may request an upfront payment for property viewings or deposits. To avoid falling victim, educate yourself about potential scams, conduct thorough research, and get all terms in writing. Verify the property owner’s identity and use a check, not cash, for payments.
5. Bait-and-Switch Movers: Moving scams can leave you with unexpected expenses or even hold your belongings ransom. To protect yourself, research the moving company’s license number, check for complaints, and obtain multiple quotes. Be cautious of companies giving estimates over the phone. Avoid making large advance payments; reputable companies will only require a small deposit.

Reporting Real Estate Scams:

If you suspect or have fallen victim to a real estate scam, it’s crucial to report it. File a report with the FTC, which will be shared with law enforcement agencies. Additionally, consider filing a complaint with the BBB’s Scam Tracker to help alert others.

Conclusion:

Navigating the real estate market can be challenging, but being aware of common scams and taking proactive steps to protect yourself can make a significant difference. By staying vigilant and following these tips, you can reduce the risk of falling victim to fraudulent schemes in the real estate and mortgage industry.