The world of real estate is not supposed to be a wild jungle full of scammers. But here we are in the middle of the fact: a hard pill to swallow. After all, these types of scams are nothing new—from pricey repairs slips to fraudulent contract audits, they’re ever-present threats whenever an unfamiliar home buyer is involved. Sure, you can learn how to stay protected, like from Pinto Capital Investments.
But what once seemed like a straightforward process of purchasing a home may come with some hidden dangers, such as those outlined below. If you plan on buying property this year, it’s important to be aware of the most common and dangerous real-estate scams so you can protect yourself from becoming their victim.
Bait & Switch Loan Rates
Taking a loan out on a house is always tricky. You can’t be sure whether the lender is reputable or not, and the rates and terms of the loan might be up for interpretation (which could mean a higher rate than you were expecting). In one particular scam, buyers are presented with an attractive offer from a lender that includes a low-interest rate and other benefits. Once the buyer has accepted, however, the lender then changes their offer to one that’s far less attractive.
Inflated Appraisal Values
This scam is usually done when a seller wants to have an appraisal on their property that shows a higher value than what it’s worth. A dishonest appraiser will then be hired to provide an inflated appraisal of the home, which can help the seller get a higher price from potential buyers. The worst thing about this scam is that buyers don’t realize they’re being scammed until it’s too late—usually when the appraisal comes in and they can no longer back out of the deal.
Closing Wire Fraud
Have you ever been in a situation where you’ve received an email or call asking you to wire money for the closing costs? Beware of this one: scammers are going after unsuspecting homebuyers with fake emails and phone calls asking them to wire the funds for the closing costs. The scammer will then provide instructions on how to do it, and once the buyer does, they’ll never see the money again.
In other words, it is a scam that involves hackers intercepting wires between the buyer and the closing agent. The hackers will then change the destination of the wired funds, often to an untraceable account overseas. This type of fraud can be particularly devastating for buyers, as they are typically left without money and with no way to recover it.
So how do we ensure we’re on the right track to buying a property? It’s best to always bring in a lawyer or an agent you trust and have experience with on real estate issues. They can provide valuable advice and help you verify that the home and loan are legitimate. Furthermore, it’s important to stay informed about current scams so that you can be aware of when something is amiss. Being aware of any suspicious activity is key to avoiding real estate scams—buyers, beware.