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Real Estate Scams

Learn about the different types of real estate scams, how to spot them and what you can do if you are a victim.

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The Basics of Advance Fee 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.

Step 1:Recognize

Red Flags of a Real Estate Scam

There are some red flags to look for that may indicate that you are experiencing a real estate scam, such as:

  • The property is being offered at an unusually low price.
  • The seller is in a hurry to close the deal.
  • The seller refuses to provide a title search or proof of ownership.
  • The deal involves “rent to own” or “lease to own” options.
  • The property is located in a foreign country.
  • You are asked to wire money to an escrow account.
  • You are asked to sign a blank contract or deed.
  • You are asked to pay a deposit or down payment before you’ve seen the property.
  • They ask you to pay using unusual payment methods, such as gift cards, cryptocurrency or prepaid debit cards.

Step 2:Immediate Actions

If you think you are the victim of a real estate scam, it is important to take action right away to protect yourself and your finances. Here are some steps to take if you think you have been scammed:

  • Keep all documentation related to the scam, including any emails, messages or paperwork. This will be helpful when you file a police report or take legal action against the scammer.
  • Contact a lawyer who specializes in real estate law. They can give you advice on how to proceed with your case.
  • If you provided financial information, like your credit card number or bank account information, contact your bank or credit card company right away. They may be able to help you cancel the transaction or get your money back.
  • If you paid using gift cards or cryptocurrency, contact the issuer. They may be able to help you stop the transaction.
  • If you provided personal information, like your Social Security number, you may be at risk for identity theft. Contact the three major credit reporting agencies – Experian, TransUnion, and Equifax – and place a fraud alert on your credit reports. This will make it harder for the scammer to open new accounts in your name.
  • If the scam involves bankruptcy, contact a local U.S Trustee office.

Step 3:Report

Reporting any type of cybercrime, including real estate scams, is imperative to help others avoid being scammed. As a society, the more people that report online scams and fraud, the more national reporting data that is collected, and the better chance law enforcement has to catch the criminals and decrease cybercrime.

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Step 4:Recover

Learn the Three Golden Rules to Spot a Scam

Scammers often utilize tactics to encourage you to act quickly and will use false information to persuade you to send money or personally identifiable information (PII). When faced with a questionable situation online, always follow the three golden rules to spot a scam:

Slow it down — Be wary of any deal that asks you to act quickly without due diligence. When it sounds too good to be true, it usually is — be especially careful with investments that promise above-average returns with little or no risk.

Spot check — Don’t take someone’s word for it, especially if you don’t know them well. If you’re being pressured to make a decision, get a second opinion from a trusted source like a family member or friend.

Stop! Don’t send — Don’t give in to pressure to pay deposits or down payments immediately, especially using unusual methods like gift cards or cryptocurrency. These are almost always scams.

Take 5 Steps for Better Online Security

Along with making sure you follow the three golden rules to spot a scam, it’s important to strengthen your online security to help avoid all types of online scams. Take action to improve your digital posture by following these steps:

  1. Implement Multi Factor Authentication (MFA): Passwords are generally easy for scammers to crack, and even if you use strong passphrases, there’s still the possibility that a cybercriminal can obtain your passphrase in a data breach. Implementing MFA is a great way to maximize your security and ensure that you are the only one who can gain access to your accounts. MFA should be implemented on all accounts where it is available. Check your account’s security settings to see if it is something you can set up.
  2. Update Your Privacy Settings: Privacy settings allow you to control your personal information (name, address, phone number, date of birth, financial details, photos or videos, etc) and how that information is used. Review your privacy settings on all of your accounts including your social media accounts. Consider restricting who can see your friends list, contacts, photos and posts.
  3. Activate Automatic Updates: Automatic updates are a set of changes to an app, software or operating system that are automatically pushed by the developer to fix or improve it. Oftentimes, cybercriminals take advantage of security flaws to plant malicious software on your devices. By activating automatic updates, you will automatically patch security vulnerabilities to protect your data.
  4. Use a Password Manager or Create Strong Passphrases: A password manager is a software tool that securely stores all of your login credentials in one place, allowing you to create and manage strong, unique passwords for all of your accounts. If you are unable to afford a password manager, use strong passphrases. A passphrase is a combination of random words or a sentence that is much longer and more complex than a typical password. Using a passphrase instead of a password makes it much harder for hackers to guess or brute-force their way into your accounts.
  5. Learn the Elements of a Phishing Attempt: Familiarize yourself with the elements of a phishing email. Phishing emails tend to include a sense of urgency and multiple grammar and spelling errors. If they are asking you to reveal personal information, be suspicious. If you get a strange email, try contacting the company another way to confirm they sent that email. If the email is suspicious, mark it as spam.

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