Homebuyers beware: Scam artists are out there trying to take advantage of your homebuying dreams and steal your money. Real estate scams — defined as the theft of money or assets from a homebuyer or seller that otherwise would go toward the purchase, sale, or financing of a home — are all too common. The FBI found that over 11,727 people fell victim to real estate fraud in 2022 for a total of $397 million in losses.
Scammers use a variety of tactics to try to deceive you, so it’s important to know common real estate scams and how to avoid them.
1. Wire Fraud
Many scammers will pose as a real estate agent or lender and ask you to wire them the funds for your down payment, closing costs, or escrow. Perpetrators of this type of fraud can appear quite convincing. They often replicate an agent’s contact information and already know your personal information, the home you want to buy, and the lender you’re working with.
They also might reach out to you pretending to be a representative for your lender, and tell you that they need to change your monthly mortgage payment’s wire details.
Wire fraud is at once the most common and the most dangerous real estate scam — once money has been wired to a fraudster, it’s impossible to get back.
How to avoid wire fraud
Always call and verify whose name is on the account you are being asked to wire money to. Use the contact info on your original loan documents to verify the correct account to send any cash to, and double-check the email address of anyone you’re sending money to.
2. Fake Long-Term Rental Listings
These scams involve people who don’t own or have the right to rent out a property putting it on the market with idyllic photos and glowing descriptions to steal application fees and security deposits from interested occupants. The scammer often will say that for an upfront payment you can rent a great place at a suspiciously low price. Such scams have been increasing in recent years.
How to avoid fake rental listings
If a rental listing seems too good to be true, use the property’s address to verify the owner or rental company. If you find a different name listed as the owner, it is likely a scam. Avoid working with any landlord who expects you to wire money before you have a chance to see the property in person.
3. Bait-and-Switch Home Listings
Some scammers pose as real estate agents and entice aspiring homebuyers with listings for cheap homes that are no longer for sale. Once you’re interested, they’ll tell you it’s already been sold and then recommend you buy another home that’s typically more expensive or in poor condition. While bait-and-switch scams violate the Federal Trade Commission Act for being unfair and deceptive, they often are difficult to prove.
How to avoid bait-and-switch home listings
Do your research and ask real estate agents questions before working with them. Pay attention to reviews left by previous clients. If you see a listing with a suspiciously low price, check the prices of comparable homes in the area and ask for clarification if it seems like the home is already sold. You also should ask for additional pictures of the home, tour it in person, and get the offer in writing so you can prove that you were trying to buy a different home when scammers try to recommend another listing.
4. Moving Scams
Nearly 15,198 complaints were filed with the Better Business Bureau against moving companies in 2022, and consumers reported losing more than $129,040 to moving scams.
There are several types of moving scams. Sometimes, a moving company will give you a quote, take your deposit, and never show up. Other times, a mover will provide you with a quote based on the expected weight of your belongings, but once your possessions are loaded on the truck will tell you it’s going to cost much more than the original estimate. Some fraudulent movers will even drive away with your belongings and hold them hostage.
How to avoid moving scams
Research any moving service you plan to use, and read reviews left by previous customers before hiring one. If the mover’s website lists no address or lacks insurance information, that’s a red flag. Beware of any moving service that asks for a large advance payment. If you’re moving between states, the moving company must be listed with the Federal Motor Carrier Safety Administration.
5. Home Inspection Scams
Home inspections are meant to give the buyer a thorough understanding of a home’s condition before finalizing the sale. Inspections typically must be performed by a licensed, third-party professional, but some scammers pose as home inspectors and collude with sellers to hide damage and flaws that would reduce the price of the home. If this scam isn’t discovered, you’d inherit a home with possibly severe safety or structural problems that will be expensive to repair.
How to avoid home inspection scams
Research your home inspector online to make sure they’re licensed in your area. Attend the home inspection and ask questions to make sure the inspector covers everything.
6. ‘We Buy Homes For Cash’ Scams
Companies that offer to buy your home for cash can be legitimate and helpful for homeowners who need to sell quickly to avoid foreclosure. However, some such companies are not what they seem. They’ll offer to buy your home as is, but ask you to sign over the deed before they pay for the house. In other cases, they’ll charge you hidden fees after you’ve signed the contract, which reduces what you keep from the sale of your home.
How to avoid ‘We Buy Homes for Cash’ scams
Before doing business with a “We Buy Homes for Cash” company, check their reputation with the Better Business Bureau. You also can search their name with the word “scam” to see if any previous incidents have been reported. Don’t pay any fees before closing, and be sure to ask for a proof of funds letter, which verifies the buyer has the means to pay for a home purchase.
7. ‘Get Rich Fast’ Real Estate Investment Workshops
Investing in real estate and building home equity can be financially rewarding, but some scammers take advantage of inexperienced investors by offering bogus workshops. Scammers will pitch you training programs that promise to show you how to buy rental properties to get rich fast. These so-called investment workshops offer little of value, and the scammers then will try to convince you to buy expensive, “more-advanced” programs.
How to avoid ‘get rich fast’ real estate investment workshops
Don’t pay for or attend a seminar before doing some research. Ask reputable real estate professionals about the program before you pay. Any workshop or seminar that guarantees you’ll get rich fast without much experience should be considered suspicious.
8. Messages From Fake Buyers
Some scammers will ask homeowners via text, email, or phone if they’re interested in selling their home, often at a tempting price. But these scammers have no intention of buying your home — they want to collect your personal information to steal or sell your identity.
How to avoid fake buyers
If you get unsolicited correspondence from someone who wants to buy your home, don’t reply. You may even want to block that number. A serious buyer will work with a real estate agent and approach you with a written offer.
9. Foreclosure Relief Fraud
Homeowners at risk of foreclosure can be especially vulnerable to real estate scams. Scammers either will offer to modify your loan terms or stop foreclosure altogether — in exchange for upfront fees. Sometimes, they will ask you to sign over your deed to them as part of a leaseback deal. Then, they jack up the rent and evict the former owners.
How to avoid foreclosure relief fraud
Any loan modification program or foreclosure counselor you work with should be properly vetted. If you are asked to pay upfront fees or are pressured to work with them, that’s a red flag. And remember, your mortgage payment should always go directly to your lender and never to a third party.
10. Loan Flipping
Loan flipping is when a lender convinces you to repeatedly refinance your mortgage quickly with little or no benefit to you. Each time you refinance, you borrow more money, and the lender charges you excessive fees and closing costs. You end up with a higher monthly payment, less home equity, and a longer repayment term.
How to avoid loan flipping
Here are some tips for avoiding loan flippers:
- Be wary of any unprompted contact pressuring you to refinance.
- Verify the broker’s information on the Nationwide Mortgage Licensing System and Registry.
- Work with a housing counseling agency that’s approved by the Department of Housing and Urban Development.
- Meet with the loan officer in person.
- Make sure you fully understand the closing disclosure.
11. Reverse Mortgage Scams
A reverse mortgage allows homeowners 62 and older to turn their home equity into income.
There are many types of reverse mortgage scams, but a typical example would be a team of unscrupulous lenders, appraisers, and loan officers convincing an elderly homeowner to borrow a lump sum with a reverse mortgage, then pocket the cash for themselves, and vanish.
Such scams deprive vulnerable homeowners of their hard-won equity and possibly even their homes.
How to avoid reverse mortgage scams
It’s important to check your reverse mortgage lender’s reputation with the Better Business Bureau. Make sure you ask your real estate agent or attorney about the process of getting a reverse mortgage. Never let yourself be pressured into signing a contract you don’t understand. Also, beware of contractors who suggest you take out a reverse mortgage to pay for home repairs.
12. Notice of Pendency
Some buyers target homeowners by trying to change the deal at the last minute. The deal will appear normal until there’s money in escrow. Then, the scammer will demand a discount for unspecified repairs. If the seller refuses, the scammer will file a notice of pendency — also known in legal terms as a lis pendens — to indicate that a lawsuit is about to be filed on it. This prevents the seller from finding another buyer until the matter is resolved, putting pressure on them to sell at a lower price or pay a hefty fee to settle the matter and dismiss the notice.
How to avoid notice of pendency
Beware buyers who seem eager to push the home purchase process along but suddenly have reservations during the closing stage. If you have a notice of pendency put on your property, contact a real estate attorney and look into filing a motion to expunge. Expunging the notice of pendency will require a court order and remove it from the property without the need to resolve the lawsuit.
13. Off-Market Sales From Unsolicited Buyers
Some scammers make unsolicited offers on homes that aren’t on the market. The idea is to flatter the homeowner and make them wonder how much they could get for their home. Meanwhile, the scammer collects your personal information and may make you an offer far below market value. Homeowners in a tough financial position are more vulnerable to this type of scam.
How to avoid off-market sales
Be suspicious of unsolicited communications asking for details about your home. If someone makes an offer and wants you to act quickly, pump the brakes. A legitimate offer typically will be put in writing and come from the buyer’s real estate agent.
14. Forged Deeds
Deed fraud occurs when ownership of the home is transferred without the legitimate owner’s consent or the owner is tricked into signing over their home’s title. Scammers may try to transfer ownership of a property to another party or try to get a loan using it as collateral and steal the proceeds. They’ll draft a phony deed, get it notarized, or record the new deed at the country recorder. Then, they’ll take out a mortgage, home equity loan, or home equity line of credit on the home and use the funds for their own use. This type of fraud is particularly dangerous because it’s expensive to resolve and could result in the owner losing their home.
How to avoid forged deeds
Deed fraudsters tend to go after homeowners who have a lot of equity. If you own a vacation or rental property, you also may be at risk for deed fraud. If you haven’t been receiving your mortgage or property tax bill — or your credit score has mysteriously taken a hit — these are signs that you may be a victim of deed fraud. You can buy identity theft protection and title insurance that covers your home title. It’s also important to do a title search before buying a home.
15. Lock-Out Agreements
A lock-out agreement in a contract gives a buyer the exclusive right to buy the home and prevents a seller from finding another buyer for a set time. Once the seller signs a lock-out agreement, the buyer will ask for a lower purchase price or request processing fees. Sellers strapped for cash and eager to sell may give in to these demands to avoid the time it would take to get out of the contract and find a new buyer.
How to avoid lock-out clauses
Be sure to read every contract carefully and make sure you understand what’s included. You may want to have a real estate lawyer explain anything that’s unclear to you. In general, it’s a red flag if buyers seem pushy or try to get the deal done quickly.
16. Refunds on Fraudulent Cashier’s Checks
Scammers posing as buyers sometimes use fake cashier’s checks. They’ll offer to buy the home sight unseen as long as you agree to close the deal quickly. They’ll send you a fraudulent cashier’s check that’s much more than the amount you agreed on. The scammer will then ask you to wire the surplus back to them as a refund and pocket the money before you realize the original check is fake.
How to avoid refunds on fraudulent cashier’s checks
Beware of buyers who claim they don’t need to visit your house in person before buying it. The transfer of funds from buyer and seller always should go through an escrow account to protect both parties. Don’t trust buyers who expect the seller to send them money.
17. Suing a Seller for Illegitimate Undisclosed Issues
In most states, sellers are legally required to document any known problems that could affect the home’s value on a disclosure form. Some buyers may take advantage of that and file a lawsuit after closing that claims undisclosed problems have been found that negatively affect the home’s value. Even if the seller was forthright in disclosing factors affecting value, they may feel pressured to settle the lawsuit to avoid a protracted and expensive legal battle.
How to avoid getting sued for illegitimate disclosed issues
Be upfront with buyers in your seller’s disclosure, but also beware of buyers who want to rush into the deal.
18. Short Sale Scams
Short sales are long and complicated, which makes them a prime target for scams. Homeowners facing a short sale usually are in financial trouble, which means they need cash fast and are unable to hire a real estate expert or attorney to vet the deal or explain the process. Scammers often offer owners facing a short sale a “fast and easy solution” for an upfront fee and vanish once they’re paid.
How to avoid short sale scams
Beware of buyers who dispute the value of your home, and make sure to use a qualified appraiser.
19. Upfront Administrative Fee Scams
Some scammers pose as real estate agents and approach sellers claiming they have an interested buyer. Then, the scammer tells the seller that they just need the administrative fees paid in advance before they can complete the sale. Once the scammer gets your money, they vanish.
How to avoid upfront administrative fee scams
Be suspicious of anyone who approaches the seller and expects them to pay administrative fees upfront.
Real Estate Scam Red Flags
New real estate scams are being hatched all the time. The best way to protect yourself from any type of scam is to learn about the homebuying process and to watch for and question requests, documents, or demands that deviate from the norm. Here are some red flags to watch for.
Promises that sound too good to be true
While you should always look for legitimate ways to save money on a home purchase, you also should know what’s realistic. Be wary if a lender offers you a suspiciously low interest rate on a mortgage or refinance, or if someone tells you they can save your home from foreclosure in exchange for an upfront fee.
Lack of necessary documents
Always make sure the lender can provide the necessary paperwork for a loan. For example, the lender should be able to give you a loan estimate and closing disclosure. Additionally, if you’re buying a home, the seller should be able to provide the deed.
Pressure to act immediately
Scammers often try to create a sense of urgency to get you to act before you think to start asking questions.
Requests for money to be wired directly
Real estate transactions use escrow accounts to ensure the large sums of money involved are handled in a secure and accurate way. If a seller, agent, or other third party asks you to wire money to them directly, that’s a red flag.
What To Do If You’re a Victim of a Real Estate Scam
If you think you’ve been the target of a real estate scam, here are some actions you can take:
- Report the scammer to local law enforcement or the Federal Trade Commission.
- Save your communications with the scammer.
- Contact your bank, lender, or mortgage service provider.
- Freeze your credit with the three major credit bureaus, and monitor your credit for unexpected changes.
- If you’ve given a scammer your Social Security number, visit IdentityTheft.gov and get a recovery plan.
- Monitor your credit report.
FAQ: Common Real Estate Scams
Here are answers to some common questions about real estate scams.
Some steps you can take to avoid real estate scams include:
— Work with a licensed real estate agent.
— Never pay upfront fees.
— Be suspicious of a buyer who’s in a rush to close.
— Verify any changes that are made to the deal before closing.
— Avoid off-market transactions.
Wire fraud. In 2020, there were around 13,638 victims of wire fraud in the United States, with losses totaling more than $213 million.
You might be dealing with a scammer posing as a buyer if they:
— Claim to live overseas.
— Don’t visit the home in person.
— Rush the transaction.
— Send you too much money and then ask you to refund the difference.
The Bottom Line on Common Real Estate Scams
Real estate scammers can target anyone involved in a real estate transaction, including buyers, sellers, owners, and renters. It’s important to be familiar with the different types of scams you might encounter so that you know how to protect yourself. Keep an eye out for red flags, protect your personal information, and work with a reputable real estate agent and lender. If you know how real estate scams work, you can reduce the likelihood that you’ll fall victim to one.
- FBI Internet Crime Report (2022)
- FBI’s Internet Crime Complaint Center (2022)
- Better Business Bureau (2022)
