May 26, 2024

How do you defend yourself from a Real Estate Scam

6 min read
How do you defend yourself from a Real Estate Scam

The threat of real estate investment scams is a reality, and rarely do they make a headline on the news or social media platforms. You would rarely hear about such scams until they hit a staggering figure and the local or national news caught wind of them and were compelled to report them.

As per the Federal Trade Commission’s latest report, in 2022, the amount of money lost to such scams was $8.8 billion, up by 30% compared to the previous year.

Many enter the real estate market to own a property for themselves; however, most buy these properties as investments and are ready to sell them in the future after analyzing the real estate market for substantial profits.

It comes as no surprise that many view property as a means to get rich quickly after following and understanding the profound words and wisdom of real estate gurus who frequently hold webinars, seminars, and workshops throughout the country.

These people are well-versed in spotting properties that are quite lucrative and rarely fall victim to such scams because they have been trained and are well-versed in the techniques to evaluate a property and sniff out a scam. They are also well connected, so falling for a scam is almost nonexistent.

If you are searching for a property for personal or investment purposes, what are the key features that you must look out for to avoid falling victim to any property-related fraudulent activity?

In this article, we will lay down certain important criteria to sniff out a potential scam related to real estate. Consider the following suggestions while you go out to shop for it:

Don’t believe anything you see.

With the help of the internet, it has become easier for you, as a buyer, to browse through several options online. As you have the option to buy any product online, you can also shop for real estate.

However, everything that glitters does not necessarily mean that it’s gold; it holds water even while shopping for real estate property.

It is advisable that after selecting a property of interest, you visit the property and verify if it is really for sale or just another scam. Scammers are known to put pictures of properties on websites, falsely claiming to be their owners. There have been a few instances where the property did not even exist.

Be cautious if someone wishes to be reluctant to show you the property physically.

Papers do matter.

If you own a car and wish to sell it, the car has to be registered in your name. It is true even when you go shopping for a property to avoid falling victim to a real estate investment scam.

For some reason, papers for certain properties are held back by the local municipal department. Scammers know this and ensure that they get hold of these papers. They take a copy of the real estate and add their name to it.

Thus, ensure that all the papers shown by the owner of the property are legitimate. These papers must be in order and ensure that not a single page is missing.

It is better to clear all doubts by seeking a professional real estate lawyer who accompanies you to the local municipal department and assures you that all the papers are documented and in order.

Such steps will also ensure that the papers produced by the owner show that the property is owned and is not subject to litigation.

Neighborhood properties

You should ask around about the rates of properties in the vicinity of the one in which you are interested. Such steps will allow you to know if the property is undervalued or overvalued. You can also understand if the property in which you are showing a keen interest is worth the money that the owner is asking based on the neighborhood.

The owner asking for an upfront deposit or fees.

Before you even see the property, the owner asks for an upfront fee or deposit. Use caution. Scammers have infiltrated popular websites like Craigslist. They might show you some property by meeting you in person and asking for a deposit to show that you are interested in the property and would buy it in the future when the deal is finalized.

Owner offering help

Sometimes the owner might refer real estate lawyers and maintenance workers to you, as a home buyer, as a helping hand while you look for the property. Regardless of the impression that the owner might have on you, it is better that you are prepared and seek out the professional help of your choice.

Be it maintenance or utility workers checking the plumbing and electrical work of the property or the real estate lawyer, you should avoid any references given by the owner. It is also advisable that you inspect the property thoroughly to check if certain amenities provided are up to standard or require repairs.

If any repair work is required, take a rough estimate of it, as you can then negotiate the price of the property after finalizing it.

Scammers work in teams, and the chances of them operating and cooperating to make a victim out of you in a real estate investment scam are very high.

Owner offering to help with refinancing

As we have already mentioned, you should rely on your professional human resources instead of the owner. Scammers, as they have a team in hand, might misguide you into signing a bogus deal that you might regret later. They might even ask you to flip the loan amount and end up paying for something that you have not signed for. You might even end up paying a lot more than you ever imagined.

Read the terms and conditions of the existing loan, and if you have any doubts or concerns or fail to understand any of them, then seek your real estate lawyer’s help.

The owner shows an unnatural urge to close the deal quickly.

If the owner is in a hurry to close the deal, then the chances of that owner being a scam artist run high. Consider all the details regarding finance, right from the owner’s bank account to the refinancing deal.

Sometimes the owners of the property might ask for a deposit, and there is always an unnatural urge of urgency to close the deal. Take your time; the owner will only gain from your money. But if it’s a scammer, then you are the one to lose a lot.

If possible, ask for a bank account number to transfer the amount rather than a wire transfer. Scammers usually use wire transfers, as they find it easier to close their accounts and open a new one after committing fraud.

However, you don’t need to believe that every wire transfer is a fraud.

Use caution while transferring money to the owner.

By now, you must have set up a team that will help you buy the property in which you have an interest. However, before you make the final commitment, use these steps to avoid falling victim to a real estate investment scam.

  • Use a secured email that is encrypted. There might be a threat from hackers who might intercept your email and provide their wire transfer or bank account details, and you might pay them instead of the real owner.
  • If you find any changes in your plans, then have them cleared on a phone call rather than writing them on a piece of paper. It would be ideal that all the changes to the deal, including changes in the wire transfer or bank account details, are recorded in a built-in call recorder, should the deal go south.
  • Always cross-verify all the details of the wire transfer or bank account before transferring the funds.
  • Always alert the owner and the broker involved before you transfer the money. It would help you a lot if you called them before you transferred the money.

Final Thoughts

For many, investing in a property that they love is a one-time investment, and for them, owning a property to live in is very satisfying. However, most have enough money to invest and later sell them when the property market is booming.

If you wish to avoid falling victim to a real estate investment scam, then consider these tips that we have mentioned in this article.

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