Real estate scammers and fraudsters come in different forms. They often appear legitimate and have practiced using the right words to trick law abiding people into falling for their schemes. Here are five of the most common ones to recognize.
Escrow Wire Fraud
In this scenario, the scammer claims to work with your title or escrow company and instructs you to wire escrow funds to an account that is really their own. They may have a fake website that looks almost identical to the real companies you work with in order to make them seem legitimate. Protect yourself by knowing your title or escrow company’s wiring process. Double check personally with your company contact if you’ve received a change in instructions, especially on Fridays or before a holiday when it takes longer to notice the scam.
This predatory type of lending occurs when a lender convinces a home owner to refinance with a new loan that seems better than their original one. While the borrower may gain a few extra thousand dollars at first, they are later bogged down by excessive fees, prepayment penalties, and a higher interest rate. Never refinance without understanding all of the terms of the loan.
Desperate home owners who suddenly can’t afford their mortgage payments will sometimes fall prey to foreclosure scammers. These criminals claim they will help save their home from foreclosure once large upfront fees are paid. When the money is collected, they do nothing to prevent the foreclosure. The FDIC has a comprehensive list on how to avoid mortgage rescue scams. It starts with getting proof that you’re dealing with a reputable company.
These scammers use someone else’s property photos and post them on Craigslist or other social media to advertise a rental. They ask unsuspecting renters to give large upfront payments to view the property or hold it for them as a deposit. In reality, the scammer has no connection to the real estate. Don’t pay to view a rental property. Also, identify the true owner of the property and ensure any type of lease you sign is legitimately connected to the actual owner of the property you intend to rent. Be suspicious of cash requirements.
Movers often require customers to sign an estimate for the cost of moving their belongings. The scamming ones will come up with reasons that the estimate increased after the move and refuse to deliver the items until the customer pays. To protect yourself, research reputable moving companies and read reviews by a third-party site, not the mover’s website. Deal with movers who charge based on estimated weight, not cubic feet. Don’t use a mover who asks you to sign a contract before they’ve done an in-home estimate.
Real Estate Term of the Week
Escrow: A legal concept describing a financial instrument where an asset or escrow money is held by a third party on behalf of two other parties that are in the process of completing a transaction. Escrow accounts might include escrow fees managed by agents who hold the funds or assets until receiving appropriate instructions or until the fulfillment of predetermined contractual obligations. With real estate, escrow can be used when purchasing a home, but also for the life of a mortgage.