In the increasingly competitive real estate market, buyers have very little time to deliberate. As a result, you need to make an offer fast, or the opportunity to purchase that property could slip through your fingers. The problem with haste is that it leads to rash decision-making; if you aren’t careful, that dream home could quickly become a nightmare. Let’s look at five common real estate scams and how you can avoid them.
1. Escrow Wire Fraud
According to the FBI and the National Association of Realtors, over 13,500 people were the victims of real estate-related wire fraud in 2020, a number that has constantly increased each year. Scammers will fool new home buyers into wiring fake closing costs directly into their accounts by pretending to be their real estate agents. Unfortunately, once those funds are transferred, there is little chance of recovering them.
How to Avoid this Scam: Make sure you check all closing documents closely and confirm both the amounts and destination of any wire transfers. That way, you can make sure your money ends up going to the right place: your real estate agent or closing company.
2. Loan Flipping
Loan-flipping involves convincing homeowners to refinance their homes multiple times, tacking on high fees with each subsequent refinancing. This constant refinancing results in high loan payments and reduced equity. This scam tends to target senior citizens or those with cognitive issues.
How to Avoid this Scam: Stay in close contact with the seniors or disabled people in your life. If they talk about refinancing, ask clarifying questions to ensure the process is on the up and up.
3. Fake Rental Listing
With most rental listings appearing online, it’s never been easier for scammers to list fake properties. Fake rental listings can end up being low-quality rentals that charge exorbitant prices or, in some cases, ones that don’t exist at all.
How to Avoid this Scam: The best way to avoid this scam is to use a reverse address lookup to make sure all the information checks out. You’ll also want to visit the property before signing any rental paperwork or making a deposit.
4. Appraisal Fraud
A form of mortgage fraud, appraisal fraud involves artificially inflating the value of a home above its actual fair market value. Scammers rope in an appraiser willing to apply a false value to a house, and unsuspecting buyers are then stuck with a damaged or decaying home.
How to Avoid this Scam: Your best shot of avoiding this scam is to get a second opinion; consider getting a second appraiser to make sure the number is accurate.
5. Home Inspection Scam
Similar to appraisal fraud, a home inspection scam involves an unscrupulous inspector and a seller looking to take advantage of a hurried buyer. Inspection scammers will hide issues within the home to increase the perceived value, purposefully neglecting to make note of major structural problems or mechanical issues. These issues are often not noticed until long after the sale is finalized; once they are, the costs of those repairs are passed on to the new owners.
How to Avoid this Scam: Take a look around a home you are considering for purchase, and don’t be afraid to ask questions. Make sure to study their report closely, and if an inspector does not have access to a certain area but declares it free of problems, consider that a red flag.
You Can Avoid Real Estate Scams With the Right Tools
It’s scary to think about, but preparing yourself for a scam can help you identify a scammer when you see one. With any real estate transaction, it is essential to know who you are dealing with; by using all the tools at your disposal and doing thorough research, you can rest easy knowing you purchased the right home at the best price.