5 Real Estate Scams You Need to Know About

A home is one of the largest purchases most people make, and in a competitive real estate market, there’s pressure on buyers to make quick decisions. But these large investments tend to attract scam artists who prey on inexperienced home buyers and people looking to close on a home fast. 

To protect yourself from being defrauded, become familiar with these common real estate scams and their warning signs to avoid falling for them.

1. Real Estate Wire Fraud Scams

Since many real estate transactions happen virtually, these scams are, unfortunately, common. They typically occur when an offer you make on a home is accepted. Someone claiming to be from your title or escrow company calls, emails, or texts you with instructions on how to transfer your funds, often using spoof websites, fake phone numbers, and email addresses that look real.

The simplest way to avoid wire fraud scams is to verify that you know the person you’re dealing with. Reference the official documents from your lenders and call the numbers listed to verify any wiring instructions. Don’t click links or send any money until you’ve gotten clear verification. If you receive official wiring instructions, then a follow-up message says they’ve changed, that’s a red flag.

2. Bogus Real Estate Investment Seminars

If anyone promises that their investment method can help you “get rich quick”—or if they have to assure you that their method isn’t a “get rich quick” scheme—politely walk away. Some seminars promise to teach you how to make money buying real estate with no money down, and then sell you expensive books and coaching and leave you with less money.

If you’re interested in real estate investment, work with an experienced real estate professional. Red flags for this type of scam include any deal or seminar that promises large, fast returns, pressures you to liquidate your assets or “act now,” or fails to put its claims in writing.

3. Rental Scams

If you’re looking for a rental home, beware of fake listings. Scammers find vacant homes listed for sale, and then use the address and photos to create bogus home-for-rent ads on popular rental websites or social media. They’ll often ask you to send deposits and payments to a P.O. box in exchange for letting you see the property or for access codes that you never receive.

Avoid rental scams by always meeting the landlord in person. You can confirm property ownership and find contact info by checking the local property’s appraiser’s website. Avoid paying cash or providing any form of payment before you’ve seen the property. If someone claims to be a real estate agent, verify that they have an active license number online.

4. Foreclosure Assistance for Mortgage Payments

When homeowners fall on hard times and get behind on mortgage payments, public records may list their homes in preforeclosure. Scammers then call the homeowner—often pretending to be part of a government assistance program—offering to help reduce payments. They tell the homeowner to pay large upfront fees of hundreds or thousands of dollars to join the program.

Always work directly with your lender to modify your existing loan or seek other solutions. If you don’t have a lender, reach out to a local real estate agent who can refer you to one. You’ll find reviews for lenders and realtors online. If someone contacts you offering assistance but tells you not to talk to your lender, that’s a red flag.

5. Loan-Flipping

This type of mortgage fraud commonly impacts senior-age community members with significant equity built up in their homes. Predatory lenders will reach out, often unsolicited, persuading homeowners to repeatedly refinance their mortgage by promising better loan products or convincing them to pay for accessible home renovations. They then charge high fees for every transaction.

Sidestep this scam by only working with lenders you know, and involve a trusted friend or family member in important financial decisions to help you carefully review all loan estimates and other documents. Avoid refinancing your mortgage if you’ve already done so recently. It’s a major red flag If lenders contact you even if you haven’t asked for help.

Questions to Ask to Avoid a Real Estate Scam

While scammers can be hard to detect, you can ask for specific information to help identify them. A legitimate real estate professional should never get defensive, brush your questions aside, or pressure you to make a decision. Depending on who you’re talking to, ask the following questions to protect yourself.

What is your name, and what company do you represent?

If someone you don’t know contacts you out of the blue, verify their identity. If you’re speaking to someone on the phone, tell them you’ll call them back, then contact the organization they claim to work for to confirm their legitimacy. 

If speaking to someone you don’t trust:

• Never give out personal or financial information, especially through emails or website links.

• Never pay upfront for a service to your home, especially if you feel pressured.

• Verify any notifications about changes to payment processes with your lenders.

May I have your license number? 

You should only hire reputable real estate agents with a valid license, which they are usually happy to provide on request. You can then look up their license number in public records to ensure that the number is legitimate and not expired.

Can you send me a copy of the deed?

If you’re interested in purchasing a home, it’s a huge red flag when the seller can’t or won’t provide the necessary paperwork. Some scammers may promise the paperwork only after sending them money or financial information.

What to Look For In a Real Estate Contract

A real estate contract, or a purchase and sale agreement, is required for a valid home purchase. Don’t provide any money without a written deal. Contracts can be complex and difficult to read, so ensure you have a trusted real estate agent or attorney to help you understand the terms. Always ask questions about anything you don’t understand.

The buyer’s agent usually creates the contract based on an existing form, with the following terms typically spelled out:

• The price of the property

• A target closing date

• An expiration date for the offer

• An earnest money deposit amount

• Details about who is responsible for funding inspections, surveys, and title insurance

• Details about adjusting utilities, property taxes, and other fees

• Contingencies for the contract to proceed

Some red flags to watch for include:

• Custom contracts with many additional stipulations

• Short deadlines that won’t leave you enough time for a property inspection and appraisal

• Terms that aren’t written in the contract

How to Report Real Estate Scams

While most real estate professionals are reliable and trustworthy, it’s important to be aware of the red flags that may indicate that a scammer is targeting you or your home sale.

If you believe a scammer is targeting you, notify the Federal Trade Commission (FTC) by filing a report online. Your report will be entered into a database accessed by local, state, and federal law enforcement.

If you believe you may have already fallen victim to real estate fraud, you should immediately report the suspected scam to local law enforcement. If you’re worried that a criminal has access to your private information, you should report suspected identity theft to the FTC.