The process of buying or selling a house can be complex and overwhelming, especially if you’re a first-timer or haven’t been involved in a transaction for many years. The real estate business is constantly evolving, with rules and regulations varying from state to state on a regular basis. Then there’s all that potentially confusing verbiage and outside influences such as home appraisers, loan officers, escrow officers, and home inspectors, to name a few.
In today’s technology-driven world, scams seem to thrive in the real estate arena. For example, a con agent could pluck an existing listing from Craigslist and falsely market the property as their own, or someone masquerading as a real estate agent might request a wire transfer that leaves funds untraceable.
That’s why working with a licensed real estate professional who can answer your questions and guide you through the home buying or selling process is always a good idea.
With so many sketchy scams awaiting eager buyers and sellers, it’s essential to always be vigilant, skeptical, and avoid suspiciously attractive offers. Below is a list of common scams and sketchy terms, and how to avoid them, that can help protect you from predatory real estate practices.
Upfront fees, refinancing options, and unsolicited calls from an agency are red flags of loan-modification scams. These companies target homeowners who are soon to be (or who might already be) facing foreclosure, then claim to offer the solution from a dire situation. The fake lender will often present an answer to dreaded foreclosure options, such as reduced mortgage payments, all for the low price of a fee or access to your bank account information. Even though some of these companies have official-looking websites and names, avoid them at all cost. Watch out for the following:
This dangerous real estate scam robs you of more than a deposit or fee–it involves identity theft. To lure victims in, the false party fabricates documents to make it look like they are the property owner. Then, using this information, the scammer takes out a new mortgage on the property. With a secured loan, the false owner can take the cash and then leave the real owner on the hook for the remaining payments.
Two of the best ways to protect against title fraud are title insurance and safeguarding personal information.
Title insurance provides financial protection from false impersonation and improperly recorded legal documents that a scammer might try to forge.
Guarding your personal data is always key. Don’t carry documents that contain private information–such as passports and Social Security cards–if it isn’t necessary, and always use caution with credit card purchases and transferring large of sums of money.
Some unethical people pass themselves off as licensed real estate agents. They could try to sell you questionable properties and access your bank accounts. How can you know for sure if your agent is reputable? A safe bet is to walk into a busy, well-known real estate office to meet with a new agent. In California, all licensed agents carry a plastic credit-card-like card issued by the state real estate bureau. It contains the person’s name, title, like broker or sales agent, and licensee number. Don’t be afraid to ask to see it, and check the expiration date as all legitimate agents must renew their license every four years. If you’re really concerned, check online to see if anything concerning shows up. To find someone you trust, ask for a referral from a close friend or family member.
Need somewhere to start? All of our agents are licensed.
Vet the agent you’re considering working with. Just because someone has a LinkedIn page doesn’t make them an ethical human being. For example, at least 14 unsuspecting homebuyers in towns around Monroe County, New York, gave down payments to a real estate agent whose license had reportedly expired. The homeowners wrote him checks, but instead of putting their funds in escrow, the agent allegedly pocketed the money.
Get-rich-quick schemes were common during the housing bubble, and now that housing affordability remains high, more people have renewed their interest in real estate investing. In this scenario, a self-proclaimed investment guru will host educational real estate seminars that they promote online, with infomercials, or direct-mail pieces. You see their pitch and sign up for an initial course that may cost little or no money. You arrive at the seminar, veiled in mystery and ambiguous tips, and the sales pitch continues. The guru promises to shower you with a wealth of information–maybe even actual properties to invest in–if you shell out tens of thousands of dollars for an advanced course that promises the opportunity to become a millionaire.
You fork over your hard-earned cash for the advanced course, but those promises of double-digit returns and fast money are never realized. You feel taken advantage of, but here’s the catch: When you enrolled in the courses, you signed a release that prevents or limits your ability to take legal action. And that’s the reason many of these workshop gurus continue to operate–despite complaints–and make millions for themselves in the process.
One of the wisest precautions you can take is to avoid fooling yourself into believing being scammed can’t happen to you. While the ideas of predatory lending and identity theft seem ominous, they’re often less easy to recognize than you might think.
Sometimes, you actually do stumble into a great deal, and want to act quickly before someone else stumbles on and snags this same “great deal.” But rushing means you have little time to question what you’re doing. It’s important to ask the owner probing questions about the property, such as: What type of insurance claims have you made on the house? Or simply: Why are you selling the home?
“When there isn’t a very good reason for the sale, that can be a red flag.”
Understand the details. You might think you do. But be honest with yourself. Do you really know what you’re getting into? The more complex a transaction is, or the more murky everything seems, the more you need to slow down and educate yourself or find trusted friends and associates who can help you understand what you’re buying or selling. Scammers renting and selling homes that they don’t own is rampant in many areas, so it is almost imperative that you ask to see proof of a mortgage statement before turning over any money.
You think you will, but then again, you might not, especially if you really, really love the property. If you’re uncomfortable with a transaction, walk away.
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October 30th, 2017 at 11:00 am