Discover common real estate buying scams and learn how to protect yourself. Get expert tips to ensure a safe and successful home sale.
The growing popularity of online real estate sites like Zillow and Realtor.com has made it easier than ever to buy a home. You can schedule virtual viewings, submit an offer, and accomplish all the other leg work that would have previously required actual leg work in order to buy a home, all from the comfort of your couch. While the internet has helped match more homebuyers with their forever homes, it’s also made it easier for real estate scams to proliferate.
Real estate scams are an epidemic plaguing American homebuyers and sellers, and the best safeguard against these scams is knowing what to look out for. Read on as we explore common real estate scams and what you can do to protect yourself.
All real estate scams share a similar goal of stealing money, personal information, or even property from homebuyers and sellers. But, how they go about accomplishing this goal can vary dramatically. Here are some of the most prevalent homebuying scams to look for as you go through the process of buying or selling a home.
Wire fraud is one of the most common types of real estate scam, affecting nearly 14,000 people in 2020 alone.1 There are a few different ways this fraud typically occurs. In many instances, a scammer will impersonate a real estate agent or mortgage broker, sometimes using a fraudulent email address to appear legitimate, to request funds.
Scammers will often say these funds are to be applied toward closing costs or administrative fees that would otherwise invalidate the sale, causing buyers to wire funds out of fear of losing the home. In reality, these funds are likely being wired to a temporary holding account before being sent offshore, where they’re extremely difficult to trace and recover.
What to watch out for: The signs of wire transfer fraud can be difficult to detect, as scammers will often very closely mimic real estate and mortgage professionals with phony emails, phone numbers, and even convincingly realistic email signatures. Note any uncharacteristic or odd requests from your mortgage broker or real estate agent and go with your gut — don’t wire any money unless you’re 100% certain of where it’s going.
In the right hands, a bank account number can be more valuable than money, and scammers will often go to great lengths to steal this personal information. Some will even invent fake buyers to do so. In a fake buyer scam, fraudsters will send out text messages to the property owner that suggest they’re interested in buying the recipient’s house. From here, scammers may offer to send a down payment on the home to reserve it, asking for a bank account number to complete the transfer. The problem: there’s no buyer on the other end of the phone.
With even your phone number, name, and date of birth, scammers can profit from your personal information. Add your bank account to the mix, and they can do some severe damage, with potential impacts that may be felt for years to come.
What to watch out for: It’s not uncommon for major business transactions to take place over email or phone in this day and age, but an unsolicited text message to buy your home—especially one that isn’t currently listed for sale—should ring some alarm bells. If you get one of these texts, don’t worry about politeness. Skip the reply and hit the “block caller” button.
So far, the real estate scams discussed have involved scammers posing as mortgage brokers or real estate professionals. Sometimes, however, unscrupulous professionals themselves can commit fraud.
Such is often the case in bait-and-switch scams, where an unsavory real estate professional will “hook” you with an appealing property or price before attempting to sell you on a completely different one. These scammers win when unsuspecting buyers purchase a home sight unseen or agree to a much higher price than previously discussed after being pressured to do so by a salesperson.2
What to watch out for: Buying or selling a home is a lengthy process, and you want to be sure you trust and respect the professionals you’re working with. If you encounter any dishonesty or otherwise shady business tactics at the onset of this process, you can assume that they’ll continue to lie to you as the process continues. Use your best judgment and walk away.
Sometimes, scammers will trap homebuyers and sellers with the promise that they’re providing a service or “there to help.” One such instance is the foreclosure relief scam, where scam artists will target vulnerable homeowners at risk of foreclosure and charge them a hefty upfront fee in exchange for financial relief, which never comes. In some cases, scammers will even request the title to the home, putting the property owner at risk of losing their property altogether.
Sometimes included as reverse mortgage scams, these can be especially dangerous in more ways than one. In addition to defrauding vulnerable homeowners of their money, those at risk of losing their homes have limited time to improve their situation. This time-wasting scam can put them in further financial jeopardy.3
What to watch out for: Mortgage relief companies do exist, but their practices differ greatly from those of scam artists. For one, they cannot legally request payment before delivering results. They must also clearly communicate how they’re helping you, in addition to the changes being made to your mortgage. Do not proceed if these criteria cannot be met.
Loan flipping is one of the most complex real estate scams and one that can continue to erode away at your home equity for years to come. In this scam, unsavory lenders may encourage homeowners to repeatedly refinance their mortgages for longer terms. With each successive refinance (or “flip”), fees must be paid, which often come out of the available home equity. This home equity can be heavily depleted in time, potentially undoing decades of hard work and diligent mortgage payments in the process.4
What to watch out for: Refinancing can be a valuable financial tool, but refinancing your home year after year is not generally advised, especially if the potential closing costs outweigh the financial benefit. Consult with a trusted financial professional to see if refinancing is right for you before taking this step.
Home inspections are a part of the homebuying and selling process, meaning both buyers and sellers can be impacted by home inspection scams. Here’s how the scam works from a buyer’s perspective. A seller wants to conceal costly (and even dangerous) flaws with their home, so they contract a fraudulent inspector to conduct the pre-sale inspection. The inspector overlooks or covers up these flaws, and the buyer purchases a home they assume to be sound. By the time they uncover the flaws, it may be too late to back out or reverse the sale unless the buyer can prove the flaws were knowingly hidden.
What to watch out for: Communities of real estate professionals tend to be tight-knit, so you can often determine if your inspector is legitimate simply by asking your real estate agent. You should also consult online reviews, noting any reported past behavior that stands out as being dishonest.
Title scams can be some of the most harmful types of real estate fraud, as it’s not personal information or home equity that scam artists are attempting to steal. Instead, it’s ownership of your home itself. Consider that identity theft is typically a precursor to a title scam, and this type of fraud becomes all the more dangerous.
To successfully complete a title scam, scam artists must forge a deed and use your personal information to transfer your home’s title to them.5 While there are layers of security present to prevent title theft, the lasting impact of a title scam means homeowners should never let their guard down when it comes to this potential threat.
What to watch out for: The best way to avoid title scams is to practice good “cyber hygiene”: keep your passwords secure and watch for unexpected hits on your credit.
While lock-out agreements aren’t technically scams, both homebuyers and sellers should be aware of them, as they can dramatically impact the buying and selling process. Simply put, lockout agreements prevent a third party (another seller or another buyer) from participating in the sale for a set period of time. This agreement does not mandate that a seller purchase a home from a buyer or vice versa, only that this party be given the necessary time to conduct due diligence on the sale.
Sounds legitimate, right? It often is! But for homeowners who unwittingly enter into a lock-out agreement, this can stop the sale process dead in its tracks, which can be an extremely costly mistake.
What to watch out for: Read the fine print, and don’t enter into any agreements with buyers or sellers without fully understanding what you’re signing on for.
Knowing what real estate scams to look out for is only half the battle. Understanding how to protect yourself from these scams is what will make all the difference. As you navigate the process of buying or selling your home, keep these tips in mind.
In a competitive market, it can feel like you have to move fast to snatch up your dream home before anyone else does (or sell before the market shifts). Scammers prey on this sense of urgency, swooping in with false promises and fake deals in an attempt to steal your money, or in extreme cases like title scams, even your property.
Knowing this, your best defense against real estate scams will be carefully and deliberately verifying all communications related to the process. Scrutinize the language in emails and contracts, triple-check for spelling errors, and even call the professionals you’ve worked with to confirm a message’s legitimacy. Don’t worry about dragging your feet or moving too slow. With real estate transactions of this size, there’s no such thing as being too careful.
All 50 states require a license to become a real estate agent. But that doesn’t mean that everyone trying to sell you a home has a license to do so. Those without proper licensure may even try to hard-sell you, offering discounted commissions to buy a home from them over a licensed broker.
When communicating with someone who wants to sell you a home or sell your property, consult your state’s official licensing board. Here is where you’ll be able to verify their licensure and determine if they’re in good standing. If they’re not licensed, don’t work with them.
As mentioned above, personal information can be far more valuable than money. And to protect yourself from real estate scams, yours will need to be locked up tight.
Good cyber hygiene is much like good personal hygiene in that daily habits create lasting health. Routinely updating your devices will ensure you’re always employing the latest security measures. Choosing strong passwords (and always using multi-factor authentication, requiring you to verify your password on devices) can decrease your chances of being hacked. Investing in a password manager can help you keep all of your passwords and personal information in a single, Fort Knox–level vault.6
Sometimes, the best way to avoid scams associated with selling a home is to forgo putting your home on the market altogether. If you decide to go this route, Truehold’s sell and stay transaction can be a great, safe way to sell your home without having to fend off scammers. Here’s how.
You don’t have to go through the process of listing your property (or going back and forth with potentially fraudulent buyers) when you opt for Truehold’s sell and stay transaction. We offer two standard transactions in one smooth process: you sell your home and then lease it back.*
Our sell and stay transaction was designed to be a simpler alternative to selling a home.
Want to learn more about our sell and stay transaction? Connect with a Truehold representative today to see if this trustworthy solution is right for you.
Disclaimer*: After the home sale, you must comply with the terms of your lease to continue living in the home. This includes making timely payments on your rent for your minimum lease term (which ranges from 6 – 24 months).
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