Real estate scams and cons have come a long way from, “I have a bridge to sell you!” But the shocking degree of predatory tactics is nothing to laugh at and can have devastating financial repercussions.
In 2020, at least 13,638 people fell victim to real estate or rental fraud, according to the FBI’s Internet Crime Complaint Center. And while the connectivity we enjoy now has helped innovate the industry, the rise of the internet and other new technologies also deliver more opportunities for creative con artists to lure in unsuspecting victims.
Here is a short overview of the most common scams:
Escrow wire fraud: Scammers will claim to be from your client’s title or escrow company with instructions on where to wire their escrow funds. Fraudsters will go to great lengths and will set up fake websites that appear similar to the title or lending company with which your client is working, making it seem like the real deal.
Loan flipping: Loan flipping occurs when a predatory lender persuades a homeowner to refinance their mortgage repeatedly, often borrowing more money each time.
Foreclosure relief: Homeowners who fall on hard times and get behind on their mortgage payments can become desperate to save their homes. Scammers will swoop in with offers of foreclosure relief to capitalize on homeowners’ vulnerability.
Rental scams: Scammers post fake property rental ads on Craigslist or social media to lure in unsuspecting renters, using photos from other listings. These scammers, who have no connection to the property or its owner, will ask for an upfront payment to let your client see the property or hold it as a deposit.
Moving scams: Your client has found a new place to call home, and now they have to find a way to move all of their belongings. They fill out a form for a moving company estimate, outlining all their belongings, and they receive an estimate for $4,000 to ship everything from their current home to their new one. Once this is done, the “company” will raise the estimate and corner your client into paying more for their belongings.
Real estate agent fraud is real — and risky
As much as agents need to be trusted advisors, a subset of agents perpetrate their own versions of scams on buyers and sellers.
That isn’t to be confused with agents that aren’t good at their jobs or provide poor advice. Fraud is where there’s proof that the real estate agent had the intent to defraud, deceive, or misrepresent facts to the detriment of the buyer or seller.
An agent can purposely list a home with larger square footage or fail to disclose vital information, such as recent water damage or knowledge that new construction will soon happen right next door to the listing.
Breach of contract is a common kind of fraud by agents when they violate the agent/client contract. Breach of duty is another instance of when the agent did not act in their client’s best interests.
Red flags to watch out for
Certain signs can indicate that you are not dealing with a person, company, or situation that is above board.
- The other party is not willing to provide contact information such as their address or phone number, and they lack proper documentation. Always check that the number you have is correct before signing any documents.
- You haven’t done business with this person before nor have any of your colleagues, and you can’t find them online.
- Your client is asked to send a large sum of money via wire transfer or over the internet. The receiving party sends you or your client a check with instructions to wire back the overpayment after depositing it from their bank account.
Overall, it’s always best to do your research and don’t ever be afraid to ask questions. Legitimate business deals take time, so if the other party is rushing you or your client into acting quickly, that’s the best time to slow down and check-in.
Being aware of the latest scams can help you and your clients stay out of harm’s way, and every agent can benefit from a great education on ethical business practices in the industry. In fact, every member of the National Association of REALTORS® (NAR) has to complete 2.5 hours’ worth of approved Ethics coursework by the end of 2021 to maintain membership.
Explore options with The CE Shop’s award-winning Ethics courses.