Higher return on invested money, hedge against inflation, passive equity building, tax breaks – these are only some of the advantages of investing in real estate. Provided that everything’s done legally, all parties involved – buyer, seller, agent/broker – gain great value from a single real estate deal. With the large amount of money generated from such deals, real estate remains to be a billion-dollar industry.
Its impressive cash flow, however, is the same reason why more and more scammers target this industry. The thing about real estate investment scams is that any of the parties involved could commit the crime. Sellers, for instance, commit fraud by omitting relevant facts or the status of the property. Buyers can also execute such scams by using Straw-Buyer, Silent Second, or credit qualifications acquired through identity theft. Agents or brokers may also commit the so-called appraisal fraud. Even lenders can be scammers via loan flipping, double selling, mortgage servicing fraud, and more.
There are, indeed, various types of scams, and there’s no doubt that scammers are creative. Read on as we’ll be discussing what is real estate fraud and sharing some ways and tips on how to avoid realtor scams.
What You Need To Know About Real Estate Scams
Real estate transactions are inherently complex which increases as the value and the number of people involved rise. Such complexity is made even harder by scammers who get creative with their real estate scams. By definition, real estate scams occur when one party in a transaction falsely represents or withholds relevant information to any of the parties involved.
Fraudulent transactions could range from real estate investment scams to real estate agent scams and everything else in between. Such scams could involve a ton of money. The FBI reported that consumers lost more than $220 million to such fraudulent schemes in 2020. Scammers could be the seller, agent, lender, or buyer but the end goal remains the same – tricking you out of your hard-earned money.
Here are some red flags to watch out for to avoid falling victim to scammers:
- Deletions or any alterations on the documentation.
- Lenders offer extremely low rates or changing rates.
- The seller is not on the title.
- The owner is not the seller shown on the sales contract.
- Buyer is deleted from or added to the sales contract.
- The seller won’t let you inside the house.
- The purchase price is substantially higher/lower than the current market value.
- Excessive Real estate agent commission.
- Excessive fees.
What Are The Types of Real Estate Scams?
Fraud that involves property could lead to the loss of money people have saved up for years. It could be fraud involving properties that are up for sale or rentals just like the infamous Craigslist real estate scams. Scammers may get creative, posing as fake buyers, creating faking documents, or getting the realtor or agent to their side.
Scammers could trick people out of tons of money, even driving some into bankruptcy through different real estate scams or fraud schemes. Familiarize yourself with the following types of real estate fraud to help you identify a fraudulent real estate transaction.
- Equity Skimming is when a false appraisal, inflated appraisal price, or the like is used to create fake equity or eliminate real equity for quick cash.
- Property Flipping is when related parties buy and sell the same property, obtaining fraudulent appraisals to artificially inflate the property value.
- Foreclosure Rescue is when scammers prey on people behind their mortgage by offering help like a “temporary” title transfer.
- Home Improvement Fraud is when scammers or even agents apply for loans using fake or unsuspecting people’s information.
- Fraudulent Loan Origination is where agents help unqualified buyers. Agents would often falsify documents to help them acquire properties beyond their ability to pay.
How Can Kiwi Searches Help You Avoid Real Estate Scams?
Don’t fall victim to real estate agent scams or any other property scams. Scammers have many tricks up their sleeves. Anyone could scam you out of your money, even your supposed agent. Make sure you are not dealing with scammers through reliable people search engines like Kiwi Searches.
Kiwi Searches can provide in-depth reports about your prospective buyer, the seller, the property involved, or even your agent, that could contain the following:
- Contact Information
- Education and Work History
- Previous Addresses
- Criminal History
- Previous Owners
- Property Tax Records
Where Should I Report Real Estate Fraud?
FBI data from 2018 contains reports of real estate scams or rental fraud, resulting in financial losses of more than $149 million. These numbers are already insanely huge, but the agency admits these records don’t even include unreported estate scams or fraud cases.
To fully address the rising issue of real estate investing scams, it’s not enough that you only take precautionary measures to protect yourself. Filing a formal complaint against a scammer agent or a legal report regarding scams, per se, can go to great lengths. Regardless if you’ve incurred money/financial losses or not, the state and/or federal governing agencies must be made aware of these scammer agents or real estate fraud schemes.
Federal Trade Commission (FTC)
For over a hundred years, FTC has been protecting consumers and entrepreneurs alike from deceptive, malicious, and fraudulent business practices. They regulate and balance competition, and ensure every transaction adheres to any existing law. Report fraud, scams, and bad business practices at ReportFraud.ftc.gov.
Local US Trustee Office
If a real estate scam you got involved with led to your bankruptcy, you may also reach out to your local US Trustee Office. This is a division of the Department of Justice that governs bankruptcy laws and oversees related cases.
It also helps to file a formal report to the local police where you reside or where the property in question is situated. Since it’s within their jurisdiction, they can further assist how to properly go about your situation.