Real estate scams can rob prospective homebuyers and owners of their cash and prevent them from purchasing their dream home. Scammers often target the inexperienced, the elderly and other vulnerable or less informed buyers and owners. An understanding of the real estate purchase process and the warning signs of a scam is critical for those who want to protect their investment and ability to purchase a home.
Real Estate Scams Devastate Home Buyers
Home purchases have become a prime target of scam artists who see the large sums of money involved as easy pickings. In 2017, fraudsters diverted nearly a billion dollars in home purchase down payments and fees. Real estate scams that target the vulnerable and inexperienced home buyers can be especially devastating, depriving them of funds to purchase a home now or in the future.
Common Real Estate Scams
To protect their home purchase, buyers and homeowners should be familiar with the types of scams used to steal their money.
Closing Fraud
One of the most prevalent real estate scams, closing fraud occurs as the purchase closing date approaches. Scammers send emails or messages to the buyer that appear to be from the title company or real estate agent requesting a last minute change in the wire transfer account, stealing the buyer’s down payment and transaction fees.
Foreclosure Scams
This scam targets homes that are in danger of foreclosure. The fraud generally includes a promise to buy the home if mortgage payments are diverted to the scammer. Desperate homeowners see this as a way to protect their home and credit rating, but the scammer never buys the home. They steal the money paid for their alleged services, and the homeowner still loses their home to foreclosure.
Mortgage Refinance Fraud
Scammers approach homeowners with offers of lower monthly mortgage payments through a mortgage refinance. The new mortgage has a much longer term, adding years to the mortgage payoff, resulting in much more interest getting paid. The additional interest reduces the equity in the home, lowering the owner’s return when they sell their house.
Avoiding the Scam
Fraudsters continue to develop new scams to prey on the unwary. Home buyers and owners must protect themselves by understanding real estate purchase laws and verifying all offers and information before transferring funds or signing a contract.
