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When you’re looking into renting or buying a home, it’s easy to get preoccupied with everything involved in the application and decision-making process — from debt-to-income ratios and down payments to location and budgeting.
You might get so overwhelmed with weighing all the pros and cons of a situation that you miss a real estate scam coming at you.
But if you learn how to identify scams and are careful about who you give your money and sensitive data to, you’ll be in a better position to protect yourself from fraud.
- Who’s at risk for housing scams?
- Recognizing a housing scam
- Types of homebuying scams
- Types of home-selling scams
- Types of rental scams
- Types of foreclosure relief and refinancing scams
- Avoiding and reporting housing scams
Who’s at risk for housing scams?
The short answer? Practically anyone. If you’re looking to buy, sell, rent or refinance a home, you might be targeted by a scammer at some point. Housing scams may include rental scams, illegal property flipping, or “non-disclosed” silent second mortgages, for example.
Scammers might make false promises of helping you maintain or save your mortgage. Some may try to lure homeowners into “special” financing offers — other scammers will target renters and trick them into wiring a deposit for a property that’s actually unavailable. In each case, the scammers try to take advantage of you during what can be a complex and emotional situation involving one of the most important things in your life: your home.
Recognizing a housing scam
Housing scammers may call, text or email you, claiming to be a legitimate representative from a real company or agency asking for money, access to your account or other financial information.
Some target homeowners who are behind on mortgage payments. During this stressful time, scammers hope they can prompt you to send money or give them financial details that they can use for fraudulent purposes.
Threatening you with legal action, repossession of property or even jail are also common tactics in housing scams.
Here are some common scenarios to watch for:
- You’re asked to pay a fee to prevent foreclosure: This “fee” will end up going straight into the pocket of a scammer — legit lenders or housing counselors don’t request fees to stop foreclosure on your home.
- They “guarantee” loan modification: Scammers will make big promises — real lenders and counselors approved by the Department of Housing and Urban Development will not guarantee that you qualify for a home loan modification or refinance.
- You’re asked to stop or redirect your mortgage payments: No legitimate lender or housing counselor will ask you to stop mortgage payments or begin transferring payments to a third party.
Housing scams can target people in the process of homebuying, home selling, renting or refinancing.
Types of homebuying scams
A homebuying scam specifically targets those looking to buy a home or to apply for a mortgage. A scammer may contact you while you’re looking for lenders, applying for grants or down payment assistance, or dealing with other services associated with your mortgage.
Wire transfer or mortgage closing scams
Homebuyers may be contacted through a fraudulent email that looks authentic and seems to come from a lender, real estate agent or escrow or title company asking you to send account information or wire a down payment, for example.
If you get an email soliciting your info or money …
- Check for things like spelling and grammatical errors or generic greetings (“Dear customer”). Also check the sender’s email address — it might be similar to that of a well-known, legitimate company but off by a number of characters. All of these are red flags that the message may have come from a scammer.
- Confirm instructions with your real estate agent or lender to make sure any payment request is genuine.
- Do your homework. If you know when and how your closing payments will be handled, fraudulent requests will be easier to spot. Ask your mortgage lender about specific wiring instructions so you’ll know exactly where you’ll be sending your funds.
Types of home-selling scams
Home-selling scams target property owners who are trying to sell their real estate. Sometimes scammers who claim to be buyers will bring you or your agent bogus offers.
If you’re selling property, here are a couple of scenarios to watch for.
Cash for homes
This type of scam can go by different names, but the basic premise is this: You are approached by a third party who wants you to sign the deed of your home over to them, often under the guise of helping you sell quickly.
With this type of scam, the owner loses the deed and control of the home but is still on the hook for mortgage payments.
Fake real estate representatives
While specific requirements and qualifications may vary by locality, you can check with your state or local government database to verify that a real estate agent you are working with is licensed and in good standing.
If a real estate rep is reluctant to disclose information on their experience, training or license, it’s a good idea to avoid doing business with them.
Types of rental scams
Renters can be scammed in a variety of ways. Over-promised amenities and false advertising can deceive prospective tenants.
Hijacked ads and phantom rentals
You may find online ads posted to entice potential renters with promises of low rent and terrific amenities — but they can be fake. Scammers may target renters with no credit or bad credit with these too-good-to-be-true rental opportunities.
In some cases, scammers will urge you to wire money — sight unseen — for an application fee, deposit or first month’s rent — perhaps saying they are out of town and unavailable to show you the property. After transferring the money, the prospective renter will find that the property they are supposedly moving into doesn’t exist or is already occupied.
Types of foreclosure relief and refinancing scams
Just about any homeowner — but particularly those experiencing financial difficulty paying their mortgages — can be a target for mortgage relief or refinancing scams.
Scammers know that if you’re worried about foreclosure, you might be more inclined to grasp at promises of relief. They may claim to be a legitimate company (such as a bank, lender or other financial entity) or even a government housing agency.
Sometimes these scammers ask for a fee for their services or may offer to buy off the outstanding debt in exchange for assuming temporary ownership of the house deed. The scammer might then charge the homeowner rent to stay in the house, or else offer to sell the home back at a higher price.
Other mortgage relief scams
You may be contacted by someone pretending to represent a mortgage relief, refinance or lending organization.
How can you tell if it’s a scam? If you have been contacted by a third party that you didn’t reach out to first, that’s the first red flag. And if you’re told to stop making mortgage payments, or to redirect funds that should go to your loan servicer, it’s a good idea to speak to a trusted financial resource before agreeing to do this.
Avoiding and reporting housing scams
Here are some steps you can take to help avoid falling victim to housing scams.
- Use secure payment methods. Always verify your lender’s account information and money transfer details for making wire transfers securely. This can help ensure the money goes to the correct entity and that your personal financial information is not compromised.
- Partner with real estate professionals and work closely with them. Ask for referrals, and work with your lender to make sure you are working with a reputable, licensed agent.
- Watch out for scare tactics. Be wary if a third party or someone unknown to you is threatening you with repossession, eviction, legal action or other measures. While it could be legitimate, it’s always worth asking for credentials before taking such threats seriously.
- Verify. If someone contacts you with any kind of offer, take extra time to validate who they are and speak to multiple representatives.
If you are a renter, homeowner or potential homebuyer and think you have been scammed online, you should file a report with the FBI’s Internet Crime Center (IC3). You can also report scams to your local FBI field office.