Investing in real estate may be both satisfying and profitable. Whether you're a first-time home flipper, a certified professional, or anywhere in between, real estate may be financially life-changing. If you're looking to rent or buy a home, there are numerous resources and websites to help you narrow down your search. When determining how to spend your time and money, there are certain bargains you should certainly avoid, just like in any other business. Real estate scams can be financially devastating, but there are methods to spot warning signs of fraud before it's too late.
Be Wary Of The Following Six Real Estate Scams
If anything sounds too good to be true, it most often is! Here are six real estate scams to avoid.
1. Rental Scams
When looking for a rental, you should start by visiting a reliable website. Although Facebook postings and Craigslist ads are frequently valid, they are not sites designed for advertising specific real estate properties, making it easier to post fraudulently. Swindlers on the internet have been known to post about a property, request money ahead as a security deposit or downpayment, and then disappear once the money is received. Scammers frequently target first-time tenants, making young folks especially vulnerable to rental fraud. Be wary of this scam, as it is common practice to inspect a home in person and ask simple questions before making a deposit.
- The merchant requires payment in advance.
- Post from a social media account that does not include any pictures
- Avoids transmitting more images in response to a request.
- Inadequate documentation
- Payment is requested prior to a property visit.
2. Wire Transfers Internationally
In the last few decades, globalization has forced different sections of the world to become increasingly connected. In terms of real estate, the internet has made it easier for wealthy purchasers to invest in foreign real estate. This expanding worldwide market is beneficial in many respects, but it also provides new chances for scammers. According to a Miami Herald article, the FBI reported that about $1 billion was "diverted or attempted to be diverted" and wired to illegal accounts in 2017. In other words, this is becoming a more serious problem than ever before. Nobody is immune, since both the chairman of MIT's Board of Trustees and a Supreme Court Justice were apparently victims of internet real estate fraud.
- Errors in spelling in emails or other messaging systems
- Decisions are presented as having stringent deadlines.
- Rapid modifications to the terms and conditions of the rental agreement
- Refusing to speak on the phone or seek a translator
3. Cosmetic Surgery On Real Estate
Sellers are sometimes under time constraints to get properties under contract, leaving little time to cope with the unexpected. Whether it's mildew, termites, or even lead-based paint from decades ago, dishonest contractors and sellers will try to hide problems.
While many sellers are respected specialists who would completely remedy the problem before listing, it never hurts to do your homework as a buyer. Making sure that a cosmetic modification isn't hiding a disaster beneath might save you thousands of dollars. Because appearances can be deceiving, make careful to get documentation proving that routine inspections have been completed.
- The house has undergone recent or unexpected cosmetic alterations.
- A refusal to deliver routine documents
- Closed doors or taped-off areas of a building
- Overselling a recently refurbished house area
4. Loan Forgery
Although it may be tempting to accept a loan with incredible interest rates, be wary of offers that appear too good to be true, as they are frequently frauds. Fraudulent lending companies, which are sometimes presented as a "mortgage agency," guarantee lower loan rates in exchange for an upfront charge. If a service requests personal information or bank information, it's definitely a good idea to do more research before signing up.
Furthermore, it is perfectly acceptable to request testimonials or references from previous clients who have used their services. To be safe, any organization other than a typical bank or well-known broker should be thoroughly studied and cross-referenced.
- Big promises made without eliciting any background information
- Requesting information from a private bank
- Personal interaction, either over the phone or in person, is lacking.
5. Fake Real Estate Attorneys
Intelligent con artists are capable of imitating real estate lawyers in order to profit from a certain sale. There are a few basic steps you may take to ensure that a real estate lawyer is who they claim to be. For example, if a seller provides direct contact information for their lawyer, the lawyer is most likely genuine. As a buyer, you can quickly confirm with the seller via email, phone conversation, or in-person meeting that their lawyer matches the one on file. If, after confirming with the seller, you are still skeptical of the lawyer, you can double-check their graduation from the legal school from which they claim to have graduated.
Though this fraud is relatively new and uncommon, doing your homework can help you avoid being taken advantage of during a real estate closing. The financial consequences can be disastrous, therefore it's probably worth your time to investigate their qualifications.
- A lawyer contacts the buyer independently of the seller.
- The lawyer is unknown to the seller.
- The lawyer does not have a professional online presence.
- There is no trace of the lawyer at their ostensible alma mater.
6. Unlicensed Real Estate Agent
A real estate agent with an expired license is just as dangerous as one without one, so ask your real estate agent for their license to ensure the legitimacy of your real estate transaction. Social media accounts and testimonials aren't always indicative of a real estate expert's license, and a true professional won't mind offering their client some peace of mind by checking their credentials. Real estate transactions are frequently both long-consuming and costly, so the time commitment will be well worth it.