7 Common Real Estate Scams to Watch For
Some people have lost their entire life savings.
Our homes are our primary source of physical and emotional security, not to mention financial equity. That's why falling for a real estate scam, like 69-year-old Vicki Ragle did last spring, can be so devastating. But they're increasingly common, whether you own or rent: More than 5 million people lost money to rental scams last year alone. Ragle, a retired Colorado teacher lost her entire life savings to a common real estate scam when she was closing on the purchase of a home; she had no idea anything was wrong until it was too late. Read on to find out what happened, and about six other common real estate scams to watch for.
In this common form of escrow wire fraud, a scammer sets up a fake website that looks similar to one belonging to a legitimate title firm or lender you're working with. They may also use spoofing to make phone numbers, websites, and email addresses appear familiar. One number or letter is often off. To protect yourself, always confirm with your realtor, title company, or lender that you need to send the money. Try to deliver the funds via check and in person.
More than 5.2 million renters in the U.S. lose money in a given year because of rental scams. Most typically, a fraudster advertises a property they don't own to get a deposit or rent payment from a prospective renter. Some potential red flags: If a listing seems too good to be true, or if a "landlord" requests an unusually high deposit, refuses to meet in person, or pressures you to make a quick decision.
In this scam, a predatory lender convinces a homeowner to refinance their mortgage repeatedly, often borrowing more money each time. The scammer charges high fees, and homeowners get stuck with loan payments they can't afford. Seniors are particularly vulnerable to these types of scams, because they have significant home equity, Bankrate.com reports.
"This is one of the most common scams I'm seeing, especially in large metropolitan areas," Shaun Martin, owner and CEO of Denver Real Estate Solutions in Colorado, recently told Realtor.com. "The scam artist will advertise a property for sale or rent at an unbeatable price. When you call or email to inquire about the property, they will say it has already been sold or rented, but they have others that are just as good. They will try to get you to tour the other properties, which are usually overpriced or in poor condition."
In March, retired Colorado teacher Vicki Ragle lost her entire life savings of $200,000 when hackers took over an email chain in which she was buying a townhouse and tricked her into giving them the money. Ragle, 69, had been exchanging emails with the lender, realtor, and title company. The hackers managed to intercept the communications, and Ragle sent a payment through a fraudulent email—straight to the hackers. Authorities say billions of dollars are lost to these "business email compromise" scams every year. To protect yourself, verify payment and purchase requests in person or by calling the person to ensure they're legitimate.
As a homeowner—whether your house is on the market or not—you might receive letters or text messages from people who want to buy your house. The scammer might offer a generous amount or promise to make an bid you can't refuse (usually with fraudulent funds obtained through identity theft). Experts recommend ignoring anyone who wants to buy your house without looking at it first.
"Home sellers in financial straits are a common target of this con," Robin Antill, director at Leisure Buildings, told Realtor.com. "A buyer, a.k.a. the con artist, who seems to be in a hurry to close the deal may pressure you into a contract with a hold clause that bans you from selling your home to anybody else. The con artist gambles that you will pay any amount to get the deal done quickly, and uses that knowledge to his advantage by asking for admin fees or even a drop in the agreed-upon price."