One thing we hate to hear about is the prevalence of real estate scams. As the real estate process involves lots of money changing hands and the fact that many consumers aren't overly familiar with how it all works, real estate as an industry is vulnerable to scammers and fraudsters trying to take advantage.
So what should you and your loved ones look out for? Read on below for info about some common scams (unfortunately they are more common than you think!), who is vulnerable, and how to protect yourself.
Scam #1: The "Selling Someone Else's Property Scam"
What's the scam?
Fraudsters impersonate home sellers and sell homes which they do not own, thereby stealing the proceeds from the sale, leaving unwitting home buyers broke and not actually owning the home that they think they bought.
How does it work?
In this instance, scammers identify a home in which the owner does not live there (for example, rental properties, Airbnbs, vacant land.) They impersonate the sellers, likely have fake identification docs made, and then contact a Realtor. They tell the Realtor they have the home at 123 Main Street to sell, the Realtor lists the home, buyers write contracts, go under contract, and eventually close on the home. The fraudster, of course, has provided their own wiring instructions for where they want proceeds to go, and by the time the buyer figures out they don't actually own the home, it's too late. Their down payment funds are gone and the sale docs are fraudulent.
Rachel Divine with Heritage Title told me this is the second most common title claim they are seeing now so this is a widespread problem.
Who is vulnerable?
Property owners who own rental properties, vacant properties, Airbnbs, and vacant land- any property that you might own that you don't see in person frequently.
Realtors are also vulnerable in this situation as they could be conducting fraudulent sales.
How should you protect yourself?
Title companies are using different methods for verifying seller's identities and if a home is being sold and is not owner occupied, they are sending letters in the mail to verify sales prior to closing. Homeowners should carefully review documents received on official title company letterhead and don't discard them as spam or trash automatically.
Homeowners could consider setting up listing searches on Zillow or Google alerts for the property address so that if a home you own but don't live in is listed anywhere online, you will see it come through on the internet.
The best practice for Realtors is to work with home sellers you know and trust or have a thorough process for vetting sellers who are unknown to you.
Scam #2: The "Cash Offer/Easy Sale Scam"
What's the scam?
Investors or others looking to buy homes for much less than they are worth target homeowners who may be in distress or otherwise not familiar with the process. They convince the owner to sell off-market, typically the sale is very quick and only later do people learn they may have been able to sell their home for much more.
How does it work?
In this instance, scammers or others looking for an unfair deal contact homeowners with offers of selling for cash. Usually these offers come via mail. The potential home buyer typically offers to buy homes in any condition, no inspections needed, and offer to close quickly using cash. It's worth noting that not all letters with these offers are scams or terrible deals for homeowners but many of these offers are for much, much less than a homeowner could get if they sold their home on the market.
Who is vulnerable?
Elderly, people in financial distress, non-native English speakers, and any one who might be easily pressured into making a quick decision.
How should you protect yourself?
Beware of "I'll buy your home for cash now" mailings. Encourage elderly parents and grandparents to talk to a Realtor or two prior to selling off market to make sure they are getting a fair deal.
Scam #3: The "Wire Instructions Switch-a-roo Scam"
What's the scam?
In the midst of a real estate transaction, fraudsters impersonate title companies, Realtors, and lenders to intercept emails and send out fake wiring instructions. Funds are sent to the wrong bank accounts, typically out of the country, and recovery of funds is likely not possible.
How does it work?
In this instance, scammers hack into title company's, Realtor's, or lender's email systems. They monitor emails going back and forth and wait until the appropriate time in the transaction to send wiring instructions. At this time, they intercept the real wiring instructions for buyer's down payment funds and send out an email replacing the wiring instructions with their own. Once buyers' down payment funds are sent to the wrong place, it's likely too late.
Who is vulnerable?
Any buyer or seller in a real estate transaction. Realtors, lenders, title companies, and transaction coordinators who assist in transactions.
How should you protect yourself?
If you are a home buyer, always call the title company to verify wiring instructions prior to sending any funds. Use an independently acquired phone number to call the title company (don't use a phone number found in your email.) Your Realtor or lender should not be sending you the wiring instructions and wiring instructions typically do not change in the midst of a transaction- these would be big red flags.
If you are a seller, title companies should take your wiring instructions in person. They should not accept changes in your wiring instructions via email or phone.
We hope you and your loved ones don't ever run into any issues like the above. If you have questions about things real estate related or you get something in the mail or online that looks fishy, don't hesitate to reach out. We'd love to be a resource for you.
Until next time!
Allison and Ken
