Buying a home is one of the most stressful experiences out there—in fact, nearly 70% of people who have bought or sold a house report finding it more stressful than having a baby, changing jobs, or getting married, according to a survey. And why not? After all, this is the largest purchase that most of us will ever make, and a huge chunk of your life savings are on the line.Of course, all that cash is likely to attract some shady characters hoping and even plotting for ways to take advantage of you. And all that stress could just cause you to ignore warning signs. That’s why even people who should know better sometimes fall for real estate scams.Having a savvy real estate agent at your side can help reduce the chances you’ll fall prey to one of these real estate scams. But you should also know for yourself the dangers that lie out there for unwary home buyers—and how to outwit them.
Real estate scam No. 1: You transfer funds to a fraudster
You’ve done your shopping, you’ve made your offer; and it’s time to put your money where your mouth is. At least you think that’s what you’re doing, but when you respond to an emailed request to send money to this account or that person, it winds up someplace else—perhaps someplace far, far away. Outwit it: Cybercrime can hit any industry, and real estate is no exception, says Amy Mizner, principal of Boston-based Benoit Mizner Simon & Co. Real Estate.
She recommends that buyers only respond to a verbal request for a wire transfer, rather than an email, and that they always consult their agent when proceeding with any step in the transaction.
Real estate scam No. 2: You’re renting a home that doesn’t exist
Wait, what? But you can see it online, and it’s spectacular. Nice neighborhood, huuuuuge backyard! Sorry; that house might indeed have those features, but it’s not actually available.
Here’s how this racket works: The scammer “borrows” the address and photos from a vacant home listed for sale and creates a bogus home-for-rent ad online, explains Tom Hume of the Hume Group in Tacoma, WA.
When you ask to meet the supposed landlords, the answer is that they’re out of the country and can only communicate via email; sometimes, the scammers will use a phone call to draw you in. They ask you to send a deposit and rental payment to their overseas P.O. box, and tell you that the key is hidden on the property, or they’ll send you the code to the door once they have your funds.
Surprise! Never going to happen.
Outwit it: Before you fall in love with the home, make sure that you are speaking with the rightful owner of the property or an established property manager by conducting an online records search. You can start with a simple Google search of the property address or go to the county website. Many states also have searchable online databases, some of which track owners’ names, or you can use a free service like CourthouseDirect.com, which can provide relevant information for that property.
In a similar scenario, a bad actor could be renting out a foreclosed home, pocketing your rent money and forcing you to relocate when the bank comes calling. All foreclosure notices are filed with the county clerk’s office, so pay a visit to see if you can determine if the house is at any stage of the foreclosure process, suggests Paul Cones, president of CourthouseDirect.com.
If you’re local, make sure you drive by the house and do a little door knocking. Neighbors often know quite a bit about the house; and, bonus, if it’s for real, you’ve just met a potential neighbor! Above all, never ever send a cashier’s check overseas without doing your homework, Hume says. (And that’s good advice for any life situation.)
Real estate scam No. 3: The moving company holds your items hostage
You’ve found your ideal house, and you’re ready to go. But moving is such a hassle, and you just don’t have time to research moving companies. So, you retain the cheapest one that grabs your attention. Unfortunately, after driving off with your stuff, the movers decide that they’d like a little more cash for their trouble, and hold your belongings hostage until you pay way more than they originally quoted, explains Mike Glanz, the CEO of HireAHelper. It’s essentially ransom.
Outwit it: This scam is so prevalent that it’s listed on a U.S. Department of Transportation site called Protect Your Move. As you might imagine, the best prevention is to conduct due diligence to ensure that your mover is registered and insured, and that you have a written estimate. Your best bet is to have a representative from the moving company check out your stuff in person before drawing up the estimate.
If you’re moving locally, Glanz recommends decoupling the moving labor from the transportation; instead of hiring a full-service moving company, you can hire hourly moving laborers to load and unload a rented moving truck.
“This approach allows consumers to stay in control of their belongings at all times, since they are driving their own rental truck,” Glanz points out, adding that this approach typically offers substantial cost savings as well.
Real estate scam No. 4: ‘I’ll sell your home or buy it myself’
This is a bait-and-switch gimmick that many less-than-scrupulous real estate agents use to get new clients.
This is simply a tactic to win appointments, says Ryan Hoffman, real estate broker at Leverage Real Estate in Albany, NY. He says that these programs come wrapped up in a bundle of stipulations that most homeowners would never agree to, such as a required asking price determined by the agent, pre-determined price drops every 30 days, a requirement to buy a new home through this agent, and possibly only from homes listed with their firm. The agent’s offer to buy the home if it doesn’t sell is typically well below market value.
“When home sellers realize they would never agree to these terms, the agent switches the tone to, ‘OK, fine, let’s just list the home the standard way,’” Hoffman says.
Outwit it: “If it sounds too good to be true…” Well, you know how that phrase ends. However, if you do fall prey to the sales shtick, and the terms don’t meet your approval, just don’t sign up this person as a listing agent. Got it?