Real Estate Fraud on the Rise: Protect Your Finances from Scammers
Real estate fraud is on the rise, with criminals becoming more crafty in their attempts to scam unsuspecting individuals attempting to purchase or rent a home. Falling victim to these scams can lead to significant financial hardships for those affected. In 2017 alone, there were 9,645 reported cases of real estate fraud, resulting in losses exceeding $56.2 million, according to data from the Federal Bureau of Investigation’s Internet Crime Complaint Center.
Unfortunately, many people are too embarrassed to file complaints, making it difficult to apprehend repeat offenders who continue to victimize homeowners and buyers. Melinda Opperman, the Executive Vice President of Community Outreach and Industry Relations with Credit.org, a nonprofit credit counseling agency, emphasized the importance of reporting these incidents to assist in catching scammers.
To protect yourself from real estate and mortgage scams, it is crucial to be aware of common tactics employed by fraudsters and take the necessary precautions. Here are four widespread scams and tips on avoiding them:
1. Escrow Wire Fraud:
Scammers contact individuals posing as representatives from the title or escrow company and provide instructions on where to wire escrow funds. They may even create fake websites resembling legitimate companies to deceive victims. To avoid falling prey to this scam, it is essential to verify wire instructions with a live person from the original lending documents using a phone number you obtained independently. Never click on email or text links or send money without confirming the legitimacy of the source.
2. Loan Flipping:
Predatory lenders convince homeowners to repeatedly refinance their mortgages, often borrowing more money each time. These scammers charge excessive fees and points and leave homeowners with unaffordable loan payments and diminished home equity. To protect yourself, avoid engaging in multiple loan transactions immediately after refinancing. If lenders are actively seeking you out without your request, it is a warning sign. Work only with reputable banks and lenders, review all fees and penalties carefully, and involve a trusted relative or friend in financial discussions, especially if cognitive issues are a concern.
3. Foreclosure Relief Scams:
Desperate homeowners behind on mortgage payments are vulnerable targets for scammers who claim they can help save their homes for a large upfront fee. Some even pretend to be associated with government housing assistance programs, swindling homeowners out of substantial sums. The best way to avoid foreclosure is to work directly with your loan servicer to explore modification options or alternative arrangements. Seek assistance from a HUD-accredited housing counselor, and involve them in three-way conversations with your lender to find legitimate solutions. Beware of scammers who discourage communication with your lender.
4. Rental Scams:
Scammers frequently post fraudulent property rental ads on platforms like Craigslist, luring unsuspecting renters with upfront payment requests for property viewings or deposits. To protect yourself, remain skeptical of cash deposits requested before seeing a property. Ensure you are dealing with the actual property owner before negotiating rental terms or making payments. Verify property ownership through local property appraiser websites and use checks instead of cash to ensure automatic receipts. Face-to-face interactions are recommended for confirming details and making payments. If someone claims to be a real estate agent, verify their credentials through your state’s division of real estate licensing.
Protecting yourself from real estate fraud requires vigilance, skepticism, and diligence in verifying information and conducting transactions. Trust your instincts and seek referrals from reliable sources when engaging with lenders or professionals in the industry. If you suspect you are being targeted by scammers, report the activity to your local police department and consider filing a complaint with the Federal Trade Commission. By staying informed and cautious, you can safeguard your finances and avoid falling victim to fraudulent schemes.
