5 Typical Property Frauds In Real Estate Industry
Updated: Sep 5, 2022
In any real estate transaction, whether you're buying, renting, or refinancing your mortgage, the last thing you need to stress is being scammed. Unfortunately, thieves find new and ingenious ways to defraud businesses and individuals. The Internet Crime Complaint Center at the National Security Agency received real estate or rental fraud reports from more than 11,578 victims last year.
1. Rental Fraud And Fake Listings
Scammers routinely use online rental advertising platforms like Craigslist and social media to target the unwary. Scammers with no affiliation with the real estate or its owner will ask for money in advance for showing you around or holding the property for you. In actuality, all they want is to make some fast money via unethical ways.
The prevalence of rental fraud is disturbing. Approximately 5.2 million American tenants have fallen victim to the rental scam, according to statistics compiled by ApartmentList. One-third of those people suffered a loss of $1,000 or more. Due to the widespread nature of this issue, the Federal Trade Commission has a page on its website just for rental listing frauds.
2. Scam Loans And Dishonest Moneylenders
Predatory lending, or "loan flipping," occurs when a lender repeatedly convinces borrowers to refinance their mortgage for more significant amounts. After being tricked into borrowing a large portion of their home's value, the victims are left with exorbitant interest rates and monthly payments they can't afford, as explained by Opperman.
Opperman elaborates that the elderly with memory loss who have substantial home equity may not understand they are being exploited or are a prime target for con artists. Lenders that prey on the elderly tell the owners they can assist them in getting a better loan or utilize a cash-out refinancing to pay for home improvements that will make it convenient for them to stay in their homes as they age.
3. Movers Who Use Deceptive "Bait And Switch" Tactics
After deciding on a new residence, the challenge of moving all your belongings there becomes a priority. Then there are the moving-related frauds to consider.
Let's pretend you submit a detailed inventory to a moving firm and obtain a $4000 quote. However, when the business finally comes up, they inform you that the final price would be closer to $10,000. Or maybe the industry arrived there, packed everything away, and then told you the final bill would be far more than they had initially estimated. Maybe they stole your money and never showed up, but that's also possible.
The Better Business Bureau (BBB) gets an average of 13,000 complaints and unfavorable reviews regarding moving firms yearly, so this stuff is relatively standard. Moving scams have become so widespread that two industry heavyweights, Mayflower and United Van Lines, have joined forces to create MoveRescue, an initiative aimed at protecting movers and aiding people who have fallen victim to moving scams.
4. Criminal Gang Involved in Amnesty Link
You mostly get a phone call, an email, or a text message from someone claiming to be from the insurance or escrow firm with wiring instructions. Scammers create websites that look similar to the legitimate ones of the title or lending companies you're dealing with. Fraud artists use spoofing to make their phone numbers, websites, and emails appear legitimate. Chief relationship officer at Credit.org, Melinda Opperman, a nonprofit credit counseling firm, says that in these circumstances, one number or letter is commonly wrong, which is easy to overlook at first sight.
If you follow the wiring instructions without questioning them, you may become the next prey to escrow fraud. Who are the scam artists? They've cashed out their offshore account and are now gone into the moonlight with your money. In the meanwhile, your choices for regaining access to it are limited.
5. Aid For Homeowners Facing Foreclosure
People who have had a bad run of luck and cannot keep up with their mortgage payments may feel desperate to keep their houses. Opperman warns that con artists who learn about a homeowner's preforeclosure via public records would quickly pounce on the family, promising to stop the foreclosure process.
Opperman adds, "Scammers will promise that they can assist homeowners in keeping their houses and lowering their loan installments for a big, upfront charge." Still, they typically leave their customers in worse financial situations.
According to the FTC, some scammers pretend to be part of the government or state residential aid programs and trick homeowners into paying fees that may add up to thousands of dollars (FTC).
As a result of the pandemic, people's ability to make ends meet, there has been an uptick in the number of foreclosure relief scams. Despite the government's efforts and many banks' new aid programs for troubled borrowers, criminals continue to prey on people's anxieties. Some companies may offer to help you bargain with your lender in exchange for a fee, or they may charge an extra fee directly while they do the job.
How To Avoid These Frauds
Before you deposit cash to a private entity, go back to the original paperwork you got from your lender and contact the phone numbers indicated there to check the wire instructions you received. Never accept scam email or text links or transfer money online without calling and validating wiring instructions, adds Opperman.
If fraudulent lenders aggressively hunt you out, that's another red flag. Opperman advises working with reputable banks and lenders and questioning all fees and penalties. Lenders must disclose all fees and third-party charges in lending estimates and final disclosures. Review these papers or ask a trusted advisor if you're refinancing your mortgage.