The last thing consumers really need to worry about is being scammed if they purchase or rent a home, or consider refinancing options. Unfortunately, criminals have become more creative in the way they target their victims, resulting in major financial headaches for their unsuspecting victims. In 2017 alone, 9,645 victims reported scams associated with real estate fraud, producing losses in excess of $56.2 million, as reported by data from the Federal Bureau of Investigation’s Internet Crime Complaint Center.
Most people are too embarrassed to file complaints, which makes it harder to catch the scammers who repeatedly victimize unwitting homeowners and home-buyers, says Melinda Opperman, executive vice president of Community Outreach and Industry Relations with Credit.org, a nonprofit credit counseling agency and member of the National Foundation for Credit Counseling, or NFCC.
“It’s a huge problem,” Opperman says. “A lot of the time, people don’t realize that using public WiFi connections where they conduct personal business through email or websites opens them up to (these scams) because the communications are not secure.”
The 4 Most Common Mortgage and Real Estate Scams
The following are four common real estate and mortgage scams to keep on your radar-and suggestions to avoid becoming a scammer’s next victim.
Escrow Wire Fraud
What It Looks Like: You receive an email, phone call or text from someone purporting to be from the title or escrow company with instructions on where you should wire your escrow funds. Fraudsters set up fake websites that appear very similar to the title or lending company you’re working with, which makes it appear to be the real deal. Scammers use spoofing tactics to make phone numbers, websites and email addresses appear familiar, but one number or letter is off-an easy thing to miss at first, Opperman says.
So you follow the wire instructions and assume all is well when, actually, you’ve just become the latest victim of escrow fraud. The scammers? They’ve withdrawn the funds from an offshore account somewhere and are sailing into the sunset with your hard-earned money. Meanwhile, you have few methods of retrieving it.
Tips on how to Protect Yourself: Before you send money to a third party, go back to the first documents you received from your lender and call the phone numbers listed there to confirm the wiring instructions you received. Never click on email or text links, or send money online, without verifying wire instructions with a live person on the phone from a number that you’ve called and verified, Opperman says.
Be cautious of any email or text requesting a change to wiring instructions you already possess, says Odeta Kushi, senior economist with First American Financial Corporation. Always verify the escrow account number before wiring money, and call your settlement agent to verify the transfer of the funds right after you’re done, she advises.
Loan-Flipping
What It Looks Like: Loan-flipping is when a predatory lender persuades a homeowner to refinance their mortgage repeatedly, often borrowing additional money every time. The scammer charges high fees and points with each transaction, and homeowners get stuck with higher loan payments they can’t afford after being duped into borrowing most of their home’s equity, Opperman says.
Seniors with memory impairment are particularly susceptible to these scams given that they have significant home equity and may not realize they’re being exploited, Opperman says. Predatory lenders convince homeowners they can help them locate a better loan product or utilize a cash-out refinance to pay for home renovations to make their homes more accessible as they age in place, Opperman says.
How to Protect Yourself: Elderly homeowners who have cognitive issues should involve a trusted relative or friend in any key financial discussion, especially about tapping home equity. If you’ve recently completed a mortgage refinance, it’s typically not in your best interest to do another transaction immediately, Opperman says.
If predatory lenders are actively seeking you out and you haven’t requested their help, that’s another red light that something is off. Work only with known banks or lenders, and question all fees and penalties presented to you, Opperman says. Lenders have to provide loan estimates and closing disclosures that list all fees and third-party costs; review these documents carefully, or have a trusted advisor do this, if you are refinancing your mortgage.
Foreclosure Relief
What It Looks Like: People who fall on hard times and get behind on their mortgage payments may be desperate to save their homes. That’s when scammers, who have access to public records of homes in pre-foreclosure, swoop in with offers of foreclosure relief to take advantage of homeowners’ vulnerability, Opperman says.
“Scammers will claim that they can help homeowners save their homes and reduce their mortgage payments for a large, upfront fee,” Opperman says, “but they often leave our clients in worse financial shape.”
Some fraudsters claim they’re associated with the government or government housing assistance programs, and might swindle homeowners out of hundreds or even thousands of dollars in fees, as reported by the Federal Trade Commission, or FTC.
How to Protect Yourself: The way to avoid foreclosure is to work directly with your loan servicer to modify your current loan, request forbearance, or make some other arrangement. Homeowners can first enlist the assistance of a HUD-accredited housing counselor to see what options they have, then include their counselor on a three-way call to their lender to discover solutions, Opperman says.
“A scammer will tell you not to talk to your lender, and that’s a huge red flag,” Opperman says. “It’s hard to speak to your lender when you’re in imminent default or become delinquent because you’re afraid it might speed up (losing your home), but you have to open the lines of communication with your lender.”
Rental Scams
What It Looks Like: Scammers post property rental ads on Craigslist or social media pages to entice unsuspecting renters, sometimes using photos from other listings. The scammers, who have no link to the property or its owner, will ask for an upfront payment to let you see the property or hold it as a deposit. The fact is, they’re just looking to get fast cash through nefarious means.
Rental scams are alarmingly common. Approximately 5.2 million U.S. renters say they have lost money from rental fraud, based on a recent survey from ApartmentList. Younger renters are the likeliest victims, with 9.1% of 18- to 29-year-old renters having lost money on such a scam, compared with 6.4% of all renters, the survey revealed. Of those who did lose money to scammers, one in three lost in excess of $1,000, likely after paying a security deposit or rent on a fake rental property, ApartmentList found.
How to Protect Yourself: Be suspicious of someone who requests a cash deposit upfront to see a property, says Nicole Durosko of Warburg Realty in New York City. Ensure you’re working with the real property owner before negotiating rental terms or seeing a property in person. You can search the local property appraiser’s website to find out who the current property owner is and look for contact information online.
“Avoid doing transactions via email or on the phone,” Durosko says. “It’s best to be face-to-face to confirm the property ownership, sign any required documentation, and (make a) payment.”
Utilize a check (never cash) to make a payment so you have an automatic receipt of it, Durosko advises. Finally, always insist on actually talking to the property owner before signing a contract or making a payment if they say they’re representing the owner. If they claim to be a real estate agent, ask to see their license and take a picture of it so you can verify the information online through your state’s division of real estate licensing, Durosko says.
Next Steps to Take If You’re Targeted
Rely on your gut if something doesn’t feel right or seems too good to be true. Work with only professional lenders associated with local and/or national trade associations, and request referrals from family members and friends. If you’re an older homeowner (or a caregiver to someone who is), be on your guard when companies pressure you to tap your home equity.
If you believe a scammer is making an attempt to target you, don’t open any email links or reply to any messages. Instead, report the activity to your local police department. To report fraud, identity theft or financial scams, go to the FTC’s complaint website, click on the FTC Complaint Assistant icon, and answer the questions.
Have a questions or concern? Nick, Cindy & Nicholas Davis with RE/MAX Premier Group are here to assist you with all your Real Estate Needs. We are always available at 813-300-7116 to answer your questions or you can simply click here and we will be in touch with you shortly.
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