Five Real Estate Scams Every Agent Should Avoid

Identifying Real Estate Scams - What to Look Out For 

Real estate scams are becoming more frequent and more sophisticated. Clients put a lot of trust in their real estate agents, and a real estate scam can take advantage of that trust. It's essential to protect your clients and be aware of common real estate scams. This guide will explain common real estate scams to look out for. 

Wire Transfer Fraud 

Being one of the fastest real estate scams in the U.S., wire transfer scams involve a seller asking their real estate agent to send a large sum of money via wire transfer. According to FBI data, in 2019, 11,677 people fell victim to wire fraud in the rental and real estate sector, with losses of more than $221 million (a 48% increase over 2018). 

While wire transfer scams can happen to any real estate professional, they are most common among agents that work with foreign clients. Malicious wiring instructions are usually sent when the seller is out of the country and cannot be reached. Luxury listings and international buyers are particularly prone to this fraud.

Before accepting a wire transfer, make a phone call to your client and use an escrow service to ensure you don't become a victim of real estate fraud. The ease of a wire transfer opens up the possibility for a scammer to impersonate both parties in an offer, not just the seller.

How to spot a potential wire transfer fraud:

• The deal is too good to be true, even if it's a foreclosure.
• You haven't traveled or done business with the other party before.
• The seller asks you to send a large sum of money via wire transfer or over the internet.
• Receiving an email claiming you won a jackpot lottery with a subsequent request to wire money overseas.
• Receiving an email from the IRS claiming you owe taxes and must send money via wire transfer to an overseas bank to keep from being arrested.
• The fraudulent party sends you a fake check and instructs you to wire back the overpayment after depositing it from their bank account.

Real Estate Rental Scams 

Real estate rental scams pop up often, especially when you are working with renters. Fraudulent rental ads are all over the internet — on Craigslist, Facebook Marketplace, and on other social media platforms, primarily. To make matters more complicated, you can find genuine rental listings on the same sites as the scammers. 

One of the most common rental scams is a scammer posting a fake listing on Craigslist or other sites offering an apartment for rent and asking for a security deposit or the first month's rent upfront. Once you send them the money, you'll never hear from them again. The scammers also take security deposits after moving into the place and then move out again. 

How to spot real estate rental scam red flags:

• Excessive upfront fees and payments required by landlords. You should never pay the total sales price upfront, nor should landlords ask for too much upfront.
• The owner is not willing to provide contact information such as an address or phone number. Always check that the number you have is correct before signing any documents. When renting through an agent, ensure that the agency provides a physical address, telephone numbers, fax numbers, and email.
• The price seems too good to be true; scams are often offered at much lower costs than similar listings.
• The photos look like stock images or are taken by an amateur photographer — usually out of focus, blurry, or poor quality.
• The listing has grammatical errors, in particular, the incorrect use of capital letters.
• The landlord is "out of town" or cannot be reached. Pay attention to the replies as well — if they are short and curt and don't seem genuine, it is a scam.
• The property owner wants you to transfer money via wire transfers before viewing the place in person.

Did You Know? 

The average length of homeownership in the U.S is 13 years. Since people don't move very often on average, they aren’t well-versed in real estate transactions and they rely more on their real estate agent guide them through any transactions. This can make them more vulnerable to real estate scams.

Moving Scams 

Moving scams are common, especially when working with people moving locally or first-time home buyers. Many people believe that getting scammed by a moving company is rare, but moving companies are the primary culprits.

These scams usually happen when you have just found a new home and the movers offer to do a free estimate or give a discount on moving services if you book them now. If your client is a first-time homeowner or mover, it's essential to guide them accordingly.

It is important to inform your clients about these scams and help them avoid getting scammed. You can do this by teaching them how to identify moving scams. Always get estimates in writing from at least three movers, including a binding estimate. 

Be wary of "too good to be true" quotes — if the price seems too low, hold back on signing anything with that company until you get another quote. A moving company should also show proof of insurance to show their genuineness and professionalism.

How to spot a potential moving scam:

• High down payments or upfront fees.
• No physical address of the moving company.
• Lack of professionalism from the staff.
• Unlicensed movers operating under another name or a different company's license.
• The mover demands full payment before scheduling a move date.

Hidden Property Damage

Before completing any real estate transaction, it's essential to investigate the home and its background thoroughly. Working with a reputable inspector is a great way to make sure that you don't get ripped off and that your client doesn't either.

After buying a property with hidden damage, common issues that pop up include pest infestation, remodeling damages, mold issues, and water damage. When clients fall prey to these kinds of hidden property scams, they not only fail to get the total value of their investment, but they also lose money in repairs.

It's crucial to be aware of every piece of detail that comes with your property — especially when you're dealing with clients who are new homeowners. 

How to spot a potential real estate damage scam:

• Ensure to check for any defects, whether it's in the roof, fence, or lawn.  
• Look at the heating and cooling systems and look out for any signs of disrepair, such as rusting pipes or moldy vents. 
• Check all doors, windows, and locks to ensure that they keep intruders out properly; all doors should also have working deadbolts.
• Investigate and check the property for pest infestation.
• Make sure that the electrical system is in proper working condition. 

Loan Fraud 

Getting a real estate property is an expensive affair that might require your client to obtain a loan. However, loan frauds are common with banks just as they are with private lending agencies.

Shady loan officers and managers can falsify your application information to get additional money from the bank. It's essential to detect potential loan scams by looking at each step of the process individually.

Loan fraud can happen in several ways — from misleading you about the kind of mortgage that suits your needs to taking advantage of you by not providing the service that they promised.To prevent your client from falling into loan fraud, you should have a network of professional lenders that you trust and are reliable.

How to spot a potential loan scam:

• The lender offers you a discount on loans if you pay them upfront (usually through wire transfers or checks).  
• The bank officer or loan manager insists that you give the money to them in any way possible, even if they're not authorized to do so. 
• The lender gives you misleading information about your financial standing or credit score (for example, by inflating it). 
• Lenders promise quick and easy approvals for loans but later ask you to send your documents over again after asking for additional fees.
• The offer seems too good to be true. The best way to go about this is by comparing all terms and rates with other lenders before signing anything with anyone.
• Look out for "gimmicks" such as free money offers, no closing costs, or no tax at closing options since these are often scams designed by sleazy agents looking to take advantage of buyers.

Reporting Real Estate Scams 

If you suspect that you or your client are being scammed, it's essential to document the entire situation.

Taking photos and getting as much background information on the potential scammer as possible will help consumer protection agencies and law enforcement with the investigation process. If you've already paid any money for anything, even if it's a small credit card payment, you should report it immediately.

Filing complaints with state agencies is also an option — usually, real estate agents or brokers are licensed by their respective state governments. Those reports can help detect shady practices within your area.

The best place to start is at the Federal Trade Commission's complaint portal, where reports will be entered into databases reaching local and federal law enforcement agencies. The Better Business Bureau Scam Tracker is also a great way to report frauds as they work with the FTC and local law enforcement officials. IdentityTheft.gov Is the government's online portal for anyone who has been victimized by a criminal, or for anyone who feels they are at risk of identity theft.