The FBI received over 11,000 real estate-related complaints in the US in 2022. Most of them were housing scams, revealing that the landscape has become a real danger to navigate in modern times.
Many agents in the UK confirm the surge in rental fraud at an industrial scale, using AI and sophisticated techniques to pass tenant referencing.
The monetary losses and devastating legal implications caused by housing scams can lead to financial and emotional ruin.
With so many risks, protecting yourself has never been more important, whether renting, buying, or selling.
Hopefully, armed with this comprehensive overview, readers will be left feeling confident enough to explore the housing market safely.
Housing Scams: An Overview
From fraudulent listings to identity fraud, the housing market provides a devil’s playground for those who would steal everything from under you.
With big assets at play and large sums of money expected to change hands, there is plenty to exploit, making the real estate market a prime scamming target.
Whether it is a rental scam, foreclosure relief, or document title fraud, the end result is individuals at a huge loss.
Why Are Housing Scams on the Rise?
Real estate is dealt with online often, adding digital risks to the process.
Housing demand and economic pressure make buyers and renters less vigilant when looking for somewhere to call home. Digital interaction gives scammers the anonymity needed to trick their victims.
The rise in remote work has prompted people to sell up and give their work-from-home location a better view. All of the above has contributed to house scams surging.
Fortunately, by familiarising yourself with the red flags to recognise, you can make real estate safer for all involved.
Buying: Red Flags to Recognize
There are a few things you need to know before buying a house, whether it’s your first time or not.
As the buying landscape has changed so much and some are looking to get rich quickly, there are some red flags that a buyer must stay vigilant for.
Avoid the following warning signs to avoid falling prey to a modern housing scam and face significant losses and hefty legal issues. Below are five big red flags for buyers to be aware of.
Attractively Low Pricing
A low price is appealing, especially to first-time buyers with a low budget or those buying abroad unaware of the local property value. But a property priced significantly below its market value is probably too good to be true.
Don’t let a low-priced listing lure you into a housing scam. Sellers happy to accept a low offer often try to avoid an underlying issue.
Urgent Sales
A common tactic scammers employ is to pressure the buyer with time-sensitive sale excuses. If you feel pressured to act now and buy before you lose a good deal, then pause and assess whether everything is as it seems.
We can quickly fall in love with a dream property, but if the seller suggests you act quickly, you need to have your wits about you.
Dubious Documentation
Dodgy title and escrow documents accounted for 65% of US real estate fraud in 2020.
Without proper documentation, a legitimate real estate sale cannot take place. If a seller cannot provide the necessary details, that is your red flag!
Essential paperwork items:
- Proof of ownership
- Property disclosures
- Inspection reports
Online Listing Verification
As many properties are listed online, verifying the source or seller is another critical safety element.
Never make an online payment for an unverified listing.
Do additional research on the property independently from where you saw it listed to ensure its credibility. Properties are rarely exclusively listed unless they are with a very reputable real estate company.
This helps prevent you from becoming the target of cyber-crime attacks with a real-estate hook.
When searching, ensure websites display a little padlock and use secure protocol with ‘https’ shown at the start of their address rather than just ‘http’.
Remember, VPN routers can help encrypt your internet connection, securing your online property searches and real estate transactions.
Lastly, always visit the property in person, cutting out digital anonymity altogether.
Selling: Red Flags to Recognize
Unfortunately, it isn’t just a case of buyers beware. Scammers also target homeowners with schemes to steal property and money.
Receiving An Unsolicited Offer
Receiving an offer on your property out of the blue can often come with hidden risks; if you are publicly listing your assets, people with malicious intentions will exploit the information.
So, while flattering, sellers need to scrutinise the interested party to prevent them from becoming the target of a scam.
Anyone who offers cash should be treated as suspicious, especially without viewing the property in person.
Overpayments And Refund Requests
Overpayment scams are another commonly encountered type of fraud that sellers encounter.
The prospective house buyer will send a check that exceeds the agreed sale price and ask for a refund for the mistake.
However, the initial check is often fraudulent, and the seller loses the refundable amount.
Fake Identities
The entire identity of a potential buyer could be invented. With a fake identity, it is easy to falsify any financial information, meaning real estate transactions will fall through.
Vetting buyer information and checking for authenticity is the only way to rule out that you’re not dealing with a scammer.
Inspection Bypassing
Most buyers, if they are savvy, will want a thorough report on the property they are investing in.
A scam buyer is often more interested in speedy transactions and may suggest bypassing inspections and other standard procedures.
So, if they seem disinterested in the paperwork, this should again be regarded as a red flag to sellers.
Renting: Red Flags to Recognize
Rental scams are a significant concern for tenants seeking new housing and for those with a rental in their portfolio.
Housing insecurity can make renters quick to get their foot in the door, making them the perfect victims of fraudulent rental schemes. The year following the 2019 pandemic, FBI online crime complaints for rental scams increased by 69%.
The warning signs for rental scams are similar to those listed for buyers, but we will reiterate them for readers who may have skipped a relevant section.
Bargain Deals
Low prices are a go-to for scammers pretending to rent a property; they prey on the needy and those looking for a cheap rental.
To determine whether the price is low, check the average rental price in the surrounding areas.
Upfront Payment Requests
Sometimes, a landlord will want a month’s rental payment upfront, but exercise caution if they are asking for large amounts.
Be especially cautious if they want it wire transferred or sent via similarly untraceable methods.
Vague Info
A legitimate landlord will be able to answer any of your queries about a property.
Scammers, on the other hand, often lose track of the lies they tell. So if something seems inconsistent, like two bathrooms become three en-suites, or it suddenly has a balcony that wasn’t mentioned, then step away from the rental.
A scam renter might try to remain deliberately vague when discussing a rental to avoid being caught lying.
If they seem reluctant to give too much information and instead ask whether you want it or not or make you feel like you might be wasting their time, you could be in trouble.
Zero Human Interaction
The landlord will try to remain in the shadows with most rental scams.
An authentic landlord will have no problem meeting face to face; they usually want to get to know (and judge) their potential new tenants.
So, insist on a personal visit before handing over any money or personal details.
Avoiding Housing Scams in General
With so many angles, protecting yourself against housing scams requires proactive steps and strategies to prevent the likelihood of becoming a target. Here are a few things to think about;
Reputation is Everything
Finding reputable real estate agents to simplify the processes and hiring your trusted attorneys gives you extra sets of eyes and ears to keep vigilant and scrutinise every step of the way.
A financial advisor is another great professional to have on board when making large purchases or selling valuables.
Scrutinise Credentials
Buyer, Seller, and Landlord credentials must be checked with a fine-toothed comb. The smallest discrepancy could indicate fraud.
Payment Security
More than 13,000 people fell victim to real-estate-related wire fraud in 2020.
Always use secure payment methods or let professionals deal with transactions using an escrow service for protection.
Never use untraceable methods; you need transactions recorded for disputes.
Stay Savvy
Keep up to date by reviewing the resources available from consumer protection agencies.
They often publish emerging scams, which can help you stay ahead of the curve regarding scam tactics.
Staying informed is the only way to make informed real estate decisions.
Conclusion
Unfortunately, no one is immune to scammers in the real estate market. They will approach things from all angles, and there are large amounts of money at stake.
Understanding the types of scams you might face and recognising the red flags we have highlighted goes a long way toward safety.
Buyer or Seller, you can never be too vigilant, and educating yourself is critical to knowing what to be aware of.
Now that you know what should set alarm bells ringing, you can confidently implement the information and have a smooth real estate experience with safe transactions.
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