Real Estate Fraud is NOT okay. Let’s talk about 5 scams to avoid and how to avoid them!
Hey everyone, welcome back! I’m Lindsay, with the Wise Move AZ Team at Realty ONE Group. If you want to stay up to date on all things Anthem and Real Estate then you need to subscribe to our YouTube Channel. Pro Tip: You’re also going to want to hit that little bell icon while you’re there so that you’re the first to know when our new videos are posted every single Thursday!
Okay, so we’re releasing this post on Halloween and Carolynn and I put our heads together and thought what’s spookier to talk about on Halloween, than Real Estate Fraud! As your Anthem, Arizona REALTORS® we take our job of protecting our clients and their hard-earned money, very seriously. So, today we’re going to share 5 scary scams that you could fall victim to and how to make sure you don’t!
Before I start I want to give a little disclaimer. We are going to be talking about 5 different real-estate related scams to watch out for. There are WAY more than 5 scams out there. Our best advice to you is to trust your gut. If something doesn’t feel right, ask more questions. Hopefully, between your REALTOR®, Lender, and Escrow Officer, you have a team of dedicated professionals you can trust to protect you.
Let’s be honest, we are all bombarded with scam artists daily, they phone, they email, they text, and they skim your card at the gas station. Next thing we know, we’ll probably be dealing with scam drones showing up at our doors, or something. These fraudsters are cunning, creative and non-discriminating. They don’t care how old you are, or what you look like. They don’t care about YOU! But guess what, we do! So, let’s take a closer look at real estate fraud.
First things, first! What is Real Estate Fraud?
It’s when a person or group of people make misrepresentations and/or use false information to take advantage of another person using a real estate transaction as the means of committing the fraud.
Scams to Avoid
Here are five common real estate scams to keep on your radar if you are buying, selling, renting or mortgaging a home:
#1: Escrow Wire Fraud
When you are buying a home in Arizona, it is not uncommon for the Buyer to wire the earnest money deposit or the cash to close to the Escrow Company.
Here is how wire fraud works: A person claiming to be from the escrow company calls, emails or texts you with instructions on where to wire your funds. Behind the scenes this fraudster may have set up fake websites, phone numbers, email addresses, banking details and, any other tools needed to appear legitimate. If you’re buying a home, you’ve probably been expecting this call, so you do as you are told and send the money in accordance with the instructions provided. Before you realize you have been scammed, the fraudsters have withdrawn your money and are nowhere to be found.
So, how do you protect yourself from this one?
The easiest way is to use another method to transfer funds, like a cashier’s check. Talk to your REALTOR® and escrow officer about your options. If you have to wire money, don’t worry! Before you send any money, call your escrow officer, to confirm that the wire instructions are correct.
#2: Mortgage Fraud for Profit
This one can take many different forms and it can get a bit technical, so let me explain one way in which an unsuspecting buyer can fall victim to this fraud.
Let’s say you’re looking to buy into a neighborhood and a friend who already lives there tells you that one of their neighbors is selling. The owner says he will sell the home to you for a great price, since you’re doing the transaction “off the market” and don’t have any REALTORS® involved that he has to pay commission to. He may even show you that he’s taking the commission amount off the price.
You go and see the house, and it’s exactly what you wanted.
Then the Seller tells you that he can put you in touch with a great Lender who offers awesome rates.
How nice is this guy?
You’re new to the area and wouldn’t have known who to call anyways. You talk to the Lender and they’re happy to help. The transaction moves along smoothly, you close on the house of your dreams, and everything is good, right?
Let me tell you what’s happening from the scammers perspective. In this case the fraudster is the Seller. Unbeknownst to you, they have inflated the price of the house. That good deal you’re getting is actually $60,000 over market value, but how would you know, the houses in this part of the country are so much less than where you’re from.
In the background the Seller has been working with an unscrupulous appraiser and may even be talking to the Lender directly. In the end, you’ve paid way to much for your home and the Seller is on a beach somewhere with your money.
So, how do you prevent this? Well, the easiest way is to find a REALTOR® that you trust to protect you and your hard-earned dollars. This means talking to friends and family, and doing some research online. Then ask your REALTOR® what they do to make sure you’re paying a fair price for a home. They will be able to walk you through their process for running comps and anything else they do. A good REALTOR® thrives on getting the best deal possible for their client. The other thing I would say, and you’ve heard it a million times before, if it sounds too good to be true, it probably is.
If you’re thinking, hmmm, this story sounds oddly specific, Lindsay. It is! Carolynn was able to save a couple from this very situation a few years ago. These buyers were going to pay cash, so the fraud didn’t even rely on the Seller colluding with an appraiser or lender…. YIKES!
#3: Mortgage Fraud for Housing
This type of fraud generally involves home buyers who attempt to get a loan using inaccurate or misleading information about their financial background. It often, but not always, involves identity theft. If you’re thinking about buying a home and need a loan, know that a good lender is going to fully investigate your financial situation. Don’t lie, chances are, you’ll get caught.
On the flip side of this, it is always important to keep an eye on your credit score and finances to ensure you haven’t been the unsuspecting victim of identity theft. If something doesn’t look right, contact your bank, immediately.
#4: Rental Scams
This is another one that can take MANY forms and sadly it’s frighteningly common. With this type of fraud, the scammer posts a property for rent, typically on social media. They often go as far as posting real or fictitious photos of the property. The catch is that this fraudster has no interest in the home and has no right to rent it out. When a potential renter asks to see the home, the fraudster asks for an up-front payment to let you see the property and to hold as a deposit, usually promising to return it to you if you do not rent it in the end. Your payment is quick cash in the fraudster’s pocket and they are nowhere to be found when you show up to see the home.
How do you protect yourself?
Do everything you can to ensure you are dealing with a legitimate REALTOR®, property manager, or the homeowner directly. This will require you to do some research online. Additionally, you should not need to hand over a deposit just to see the home.
#5: Foreclosure Rescue Fraud
Okay so all of these frauds make me mad, but this one particularly makes my blood boil because it’s really taking advantage of people in a tough spot.
Foreclosure rescue fraud involves fraudsters who promise to help borrowers who are underwater on their mortgages. They promise to reduce the homeowners mortgage payments for a large up-front fee. Once the fee is paid, the fraudster disappears leaving the homeowner in worse financial shape than before.
First off, if you are in a position where you are struggling with your mortgage, I am so sorry. Secondly, to prevent yourself from falling prey to this fraud, reach out to a Lender that you trust to talk about your options, You can ask family and friends for recommendations or do research online. There are also HUD accredited housing counselors who can work with you and keep you safe.
So, there you have it! Pretty scary, right?
I hope that this video will help you to identify some of the red flags when it comes to real estate fraud!
Wire Fraud Advisory
As promised, if you would like your free copy of the Wire Fraud Advisory, simply click here!
See you next Thursday!