Everyone’s getting into real estate these days, and unfortunately these days that seems to include criminals. Real estate-related fraud has increased by a lot these past few years. Between 2019 and 2020 alone, the number of wire fraud cases And unfortunately, those types of crimes are on the rise. So we’re going to look at how the scams work, how you can protect yourself, and what to do if you think you’ve been scammed.
First, let’s take a look at the most common real estate frauds.
- Wire fraud
The most common real estate scam. In 2020, the number of wire fraud cases related to real estate jumped by 17 percent over the year prior. Homebuyers are more susceptible to wire fraud than homesellers. They’re especially vulnerable when wiring a down payment or closing costs. Sometimes scammers will reach out to homebuyers in phishing emails pretending to be the bank, buyer, or mortgage officer and will tell the buyer to wire their fees to an account which the scammer has set up.
- Mortgage scams
Sometimes, an entire business can be fraudulent. Mortgage scams typically occur when people think they’ve found surprisingly favorable financing. Once the loan is finalized, the borrower discovers that the mortgage they’ve “lucked” into has all kinds of hidden fees and even a higher interest rate than what they had been promised. Make sure that you’re borrowing from a proven, reputable company and always read the fine print on your mortgage paperwork.
- Rental scams
According to Apartment List, over 5 million renters in the US have been the victims of rental scams. There are several different types of rental scams, but the most common one involves fake rental advertisements. In this case, a scammer copies the text and photos from an ad for a rental property that they don’t own and usually aren’t even affiliated with. They then post this new ad as their own, then attempt to collect a deposit or lease payment from a potential tenant. This scam proliferated during the pandemic, when a lot of showings were being done without a rental agent or landlord present. In many cases, they have been able to persuade people to put down a deposit without ever meeting in person. You can sidestep this scam by never paying any money towards a rental property until you’ve seen it in person and signed a lease.
- Moving scams
Moving scams tend to fall into two categories: companies that overcharge with undisclosed fees or companies that accept a deposit and then disappear without a trace. To avoid moving scams, definitely get at least three quotes from potential companies and research each company to ensure that they’re a reputable business. If you have any friends that have recently hired a mover and their experience was positive, that’s probably a good company to go with.
How to protect yourself
So now that you’re familiar with these scams, how can you protect yourself? Let’s start with the most common scam: wire fraud. As we stated above, this usually happens when you get a phishing email that’s been disguised to resemble the email address of your real estate agent, lender, or someone else working on your purchase. While the sender’s name will look like it’s someone legitimate, the actual email address will differ from the email addresses from the professionals you’re working with. That’s why it’s always best to store people’s contact information in your phone or device so it will be more obvious to you that the message is coming from a scammer.
Be sure to ask your title company, real estate agent, and lender how and when the closing funds need to be transferred. Having an agreed upon date will make it more obvious that the frantic email requesting a wire transfer right away is coming from a scammer.
If you suspect that an email might be fraudulent, do not call the number on the wiring instructions or reply to the email. If something feels off, or if you receive instructions that contradict your prior conversations, call your real estate agent and/or title company immediately.
What to do after you’ve been scammed
The chance of receiving your funds back after 48 hours is low, so if you think you’ve been scammed, you need to act immediately. Be sure to:
- Contact your financial institution and request that they notify the financial institution that received your funds of the fraudulent transfer.
- File a complaint with the FBI and contact your local law enforcement.
- Notify your insurance carrier if you have protection for identity, cyber or funds transfer loss.
- Be persistent and continue to inquire as to the status of your funds.
- If you are a company, or you were using your work computer to transact business, notify your IT department or provider and request a full incident investigation and responsive measures if necessary.
- Get a free copy of your credit report from Equifax, Experian and TransUnion to verify that there hasn’t been any unauthorized activity in your name.
The overwhelming majority of real estate transactions are legal and legitimate, but you still need to be careful. Criminals are getting more sophisticated, so make sure that you’re always a step ahead of them. If you think something is off, make sure to do your due diligence so you don’t get scammed.
