Real estate scams are a big problem in today’s real estate market thanks to homeowners desperate to stave off foreclosure and con artists who are eager to rip off those looking to buy or rent. It can be hard to know a legitimate opportunity when it comes along, especially if that opportunity seems to good to be true. Working with a reputable real estate agent can be a great way to avoid the most common types of real estate scams but there are other things you can do to protect yourself. Let’s start by identifying the most common real estate scams you may face while either searching to buy a house, rent a house or buy income property and then let’s talk about a few ways you can protect yourself from being scammed.
Common Real Estate Scams
This is a big one and often seems entirely legitimate but this one also falls into the “if it’s too good to be true, it probably is” category. The problem with this particular scam is that initially, there is often no cost to you. You’ll be offered free tickets to a seminar, usually offered a free gift for attending and promised that you will not be subjected to high pressure sales tactics. When you arrive at the seminar though, you almost always learn the “free” gift is only offered to those who purchase tickets to additional seminars. That’s not a big deal if you have the money to shell out for additional seminars because they’ll make these additional seminars sound amazing. The problem? Most often, they’re not. They’re a waste of money that will teach you nothing of any valuable, aside from teaching you to be a little more careful about how you spend your money.
“Renting” Empty Houses
This is a disturbing, but not uncommon, real estate scam that makes victims of homeowners and renters alike. In this one, enterprising con artists will look for homes that will be abandoned for an extended period of time – often while the actual homeowner is on an extended vacation or is working in another state or even country – and posts listings for the home online. They’ll sometimes claim to be the owner of the home but will also sometimes claim to be someone authorized to rent on behalf of the homeowner. Sometimes the con artist will break into the home and change the locks. Other times, they’ll just access the home using a spare key they’ve discovered somewhere on the property. It also isn’t unheard of for an especially enterprising criminal to pay a locksmith to let them in. Many people who run this type of scam will forge official looking documents for the renter to sign and will then collect rent until the scam is discovered. The end result is always the same. A well meaning renter will contact the con artist about the home listing, will “rent” the home, usually paying in case, and then the real homeowners will return finding someone they don’t know living in their home.
“Renting” Foreclosed on Houses
There are a few ways this one works. Sometimes the perpetrator is a con artist who works the scam much the same way as the scam we talked about above with vacation or seasonal homes. Other times, the homeowner themselves are the perpetrator. Facing foreclosure and feeling there are no other options, they’ll rent their home to an unsuspecting family and take the money to get their own home somewhere else. When the eviction date arrives, the new family will have no choice but to leave although in some cases, the bank will allow the new family to stay in the home for up to three months so they can try to find another place to live.
Another common foreclosure scam involved a fake agent selling a foreclosed on home. A fake agent will gain access to the home (often breaking in) and will take a family on a tour of the home. Often they offer a far lower than market value price on the home to entice buyers. When a buyer decides they are interested in the home, the fake agent will take a deposit and give the buyer a fake phone number. Some fake agents will actually take “deposits” from several buyers at once, all of whom will lose their money. After taking the deposit, the fake agent will have the buyer sign a fake property title deed (most of the time, but not all of the time) and promise to meet said buyer at the home on a specific date to give the buyer the keys to the home. When the buyer arrives on the agreed upon date, usually with moving trucks, the fake agent is nowhere to be found and the phone number doesn’t work. They can’t get into the home they think they purchased and before long, realize they’ve been the victim of a particularly cruel scam.
“Renting” Houses that are Legitimately For Sale
In this scam, a fake real estate agent will post a fake rental listing for a home that is actually for sale. They’ll offer the house at far less than it is worth to draw in potential buyers more quickly. Should the buyer ask about the low price, the fake agent will tell the buyer the person who owns the home has to rent out the property quickly because they are leaving the state for a job, school or something along those lines. The fake agent will take a deposit from any and all interested buyers, have the buyers sign fake rental agreements and will then disappear. This one is especially dangerous because it is often a multi-layer scam. Buyers may not just lose the deposit but the con artist may also use any information provided on the phony rental agreement to steal the potential buyer’s identity.
“Renting” Unavailable Apartments to Out of Town Renters
This is another big one and it is nearly impossible to catch the perpetrator. For this one, the con artist will target out of town renters who are looking for a temporary home while visiting a city for work on while on vacation. The con artist will list a real home for apartment as a temporary rental and then ask potential renters to wire money to cover the security deposit and rent. The renter then arrives at their destination and finds out the property they rented isn’t actually for rent and they have no place to stay. Making it even more difficult, it’s just about impossible to recover the money that was wired as it is incredibly difficult to trace.
How to Protect Yourself from Real Estate Scams
First and foremost, remember that old adage, “if it seems too good to be true, it probably is”. While there are great deals out there is real estate and you do sometimes come across dream opportunities, we all know that old saying for a reason – it’s usually true. Do your homework. Working with a real estate agent can be the best way to protect yourself against many of these scams but you need to do your homework. Make sure the agent you are working with is licensed. Check online reviews of your agent. Ask your agent questions. If someone you know has purchased a home or rented an apartment, ask if they used an agent, who that agent was and what their impressions were. Con artists rarely do legitimate sales or rentals so if your friend or family member got what they were promised from an agent, that agent is probably okay.
Second, avoid using cash or wiring money. It’s hard to trash cash or wired money. It’s much safer to use credit cards, checks or other forms of payment that can be easily traced should something go wrong. Even though you may be offered a receipt for cash transactions, that may not necessarily be enough to protect you. Insisting on writing checks or using credit cards or some other type of traceable payment form is often enough to scare off potential scam artists and sends the message that you’re an informed buyer, making you look like less of an easy target.