Examples of Fraudulent Real Estate Practices

Have you ever found yourself ignoring a nagging feeling that you’re being scammed? The situation being presented to you may be just too good to be true. Or, the facilitator presenting the deal is just a little too politely aggressive, which they ostensibly claim is for your sake. Many of us have gone through these motions right before becoming the victim of real estate fraud.

If it has happened to you, you are not alone. According to the Federal Bureau of Investigation’s Internet Crime Complaint Center, over 11,300 people were the victims of various kinds of real estate frauds. These criminal acts resulted in over $149 million being siphoned from victims. The statistics may actually be higher, since many real estate scam victims are too embarrassed to report it to authorities.

To take some of the anxiety out of buying or selling a home, I’ll be presenting a list of the more prevalent and blatant forms of real estate fraud. However, since there isn’t just one form of real estate fraud, let’s explain the term first.

What is Real Estate Fraud?

Real estate fraud occurs when one party in a real estate transaction uses deception, misrepresentation, false information, identity theft, and/or other nefarious means to take advantage of the other party in the transaction.
A real estate scam artist may use complicated methods to acquire your personal information or financial information to then eventually get your money. The thing to remember is that there is not just one kind of real estate fraud.

Escrow Wire Fraud Scam

Escrow is a business arrangement where a third party, like a lawyer or banker, holds onto money during a real estate deal until a buyer and seller fulfil their contractual obligations to finalize the deal. An escrow officiant is a neutral party. They may ensure that the buyer has the finances for the deal and that the seller does everything they promised to so.

When the deal is done, escrow is released usually by wire transfer. As you are facilitating such a deal, a scammer or someone with knowledge of the deal may learn of it through phishing. So, they create fake websites and email addresses that seem similar to the escrow company you’re using. Some details may be off, but you may not notice until it’s too late.

The scam artist may politely, but aggressively request that you send the funds. By the time you realize what has happened, you’ll be out of money, the real escrow deal won’t be financed, and you’ll embarrassingly have to report it. To prevent this, double check all information and make calls. If you go through the trouble of making an escrow account, never be pressured to remit money without verification.

Foreclosure Financial Relief Scam

There are many consolidated loan payment services where you apply for a large loan to pay off smaller debts. Homeowners facing imminent foreclosure, and who desperately want to keep their homes, often fall prey to foreclosure relief scams. However, they don’t really exist, at least not in the context of consolidated loans relative to personal bankruptcy.

There are mortgage bailout and foreclosure prevention programs, but they are modified mortgages and you need to apply in advance. Scammers can peruse public records to learn which homes are in pre-foreclosure status. They then contact homeowners pretending to offer government affiliated foreclosure assistance for a few hundred or thousands of dollars. Desperate homeowners take the scam bait and may lose their last dime before foreclosure.

Sometimes, a foreclosure can’t be avoided. Your best bet is to keep lines of communication open with your lender. If you communicate with them before a foreclosure date, you could negotiate for extra time, a forbearance, or some loan modification. The biggest red flag that you are being scammed is if someone makes such an offer and tells you not to notify your direct mortgage lender.

Rental Fraud

Over 5 million people are scammed by rental fraud every year. One in three of those people lose over $1,000 to such scams. Usually, Millennials and young people fall for them. A scammer will create a Craigslist or social media ad, replete with phony pictures of properties, for an apartment or house rental. When you answer it, you’ll be instructed to pay money upfront for a property visit or rental deposit.

You don’t have to pay to view a property. Money should only change hands after documents are signed. Be suspicious of anyone demanding upfront cash payments to view a rental.

Trust Your Instincts

There are numerous forms of real estate fraud. Trust your instincts if something seems off. Also ask for credentials, references, certification, or proof of profession if someone tries to make government affiliated offers of assistance. Never click on email links from unknown sources requesting information relative to a real estate deal.

If you’ve been scammed, contact your local police or make a complaint with the FTC. It may be embarrassing to be a victim of fraud. But if you don’t make a complaint then your experience is just practice for a scammer to succeed more efficiently again.

Read More

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