The Basics of Real Estate Scams
Real estate and mortgage scams defraud home buyers and sellers. These scams can take many different forms, but they all have one thing in common: they’re designed to steal your money.
A real estate scam is designed to cheat homeowners or home buyers out of their money. There are many different types of real estate scams, but they all have one thing in common: the perpetrator stands to gain financially while the victim suffers a loss.
A mortgage scam is a type of real estate scam that targets people who are trying to get a mortgage loan. For example, a scam artist may pose as a mortgage broker and offer to help the potential borrower get a loan with favorable terms. But instead of actually helping the borrower, the scammer will pocket the money for themselves.
Common Types of Real Estate Scams
There are many common types of real estate scams that you should be aware of, such as:
- Escrow Wire Fraud: A scammer posing as a legitimate escrow company contacts a buyer or seller and requests that they wire money to an account for the purchase of a home. The money never makes it to the intended party, and the scammer walks away with the cash.
- Title Fraud: A scammer uses falsified documents in order to gain ownership of a property. This can happen if a scammer obtains a property owner’s personal information and uses it to forge documents that transfer ownership of the property. Once the scammer has ownership of the property, they can apply for loans in the owner’s name, or sell the property without the owner’s knowledge.
- Loan Flipping and Predatory Lenders: A borrower is persuaded to refinance their loan multiple times in a short period of time, often with the same lender. This can lead to the borrower paying excessive fees and interest, and ultimately defaulting on their loan. They target borrowers with poor credit histories or limited income, and offer them loans with unfair terms and conditions.
- Refinancing and Foreclosure Relief Scams: Some scammers will offer to “save” your home from foreclosure by convincing you to transfer ownership of the property to them. Other scammers will offer to help you modify your loan or get a new loan, but will charge you upfront fees for their services.
- Fake Rental or Real Estate Listings: This type of scam occurs when a fake rental or real estate ad is placed online. The scammer will usually require that potential tenants or buyers send a security deposit or down payment before they can view the property. Once the deposit is paid, the scammer disappears and is never heard from again.
- Mortgage Fraud: A scammer uses someone else’s personal information to open a mortgage. They may then default on the loan, leaving the victim with a damaged credit score.