Real Estate scams are on the rise and cost United States citizens billions of dollars nationwide every single year. The most common form is wire fraud, a type of scam that accounts for over $200,000,000 yearly in stolen funds alone, but it is certainly not the only means for scammers to swindle honest, hard-working people out of their money. Rental scams, fraudulent property sales, and predatory contract schemes all make a huge impact on the real estate industry.
Unfortunately, when someone falls victim to one of these schemes, they often lose everything with no means to get it back. Once money is wired to a fraudulent account, it’s gone, and the bank will not take responsibility for your loss. It’s because of this that we believe in educating our partners and clients on the impact these real estate scams have here in Central Florida. If someone knows what signs to look out for, their risk of becoming a victim is extremely diminished.
Common Scams & How to Avoid Them
Email Account Compromise
Email Account Compromise, sometimes called Business Email Compromise, is one of the most prevalent phishing scams in the world. With these schemes, a scammer will duplicate an official email from a well-known company but replace the links so they lead to a site designed to steal the user’s email log-in information. Once a scammer has access to an email, the user may not even know it. They often work quietly in the background to gather as much information from the user as possible, especially if that user works in an industry that involves the transfer of large sums of money – like real estate.
EAC is one of the number one ways scammers commit wire fraud. Once they gain access to a real estate agent, title company, lender or financial institution’s email account, they can duplicate inside documents with fake wire information and send them to the clients expecting to receive emails from that account. Unknowing clients will then be duped into sending thousands of dollars in funds to a fraudulent accounts and once they send it, there’s no way of getting it back.
Tips to Avoid Email Account Compromise and Related Wire Fraud:
1. Never send a wire to anyone without calling to verify the account, especially if they sent you the full account number via email.
2. Always look up an institution’s phone number on their website, do not use phone numbers from emails.
3. Double check the sender’s email on any message you receive. Don’t just look at the name on the email, actually confirm that the sender’s email address is correct.
4. Don’t click on suspicious links sent to you via email during your transaction, especially if you don’t recognize the sender.
5. Make sure your password for your email, bank, and any closing system (like Qualia) are all different and unique to those accounts.
6. Consider using checks instead of wires. A check can be cancelled but a wire is gone as soon as it leaves your account and there is little to no way to get it back. Other parties in your transaction are not held responsible if you fall victim to a scam.
Property Selling Scams
Another prevalent scam on the rise in highly populated areas is the property selling scam. There are quite a few variations of this scam but it almost always involve the attempted sell of property with out-of-state or out-of-country owners.
With this type of scam, the scammer in question will create a fake listing for a home or vacant land online. They often list the home or land at a lower price than comparable properties to garner someone’s interest. They will also tell the potential buyer that they are not willing to pay real estate agent fees and want to do a “For Sale by Owner” or “FSBO” contract. In reality, a real estate agent is more likely to notice something is fishy and removing them from the equation removes some of the potential buyer’s protection.
Once the “contract” is signed, the realtors are out of the question, and the potential buyer is on the hook, they will send an email with fake wiring instructions to the buyer – usually from another email account pretending to be a title company or closing attorney. Once the potential buyer wires the funds, they will cease all communication and disappear with the money with no way for the buyer to get it back.
Occasionally, these scammers get very crafty with their attempts to make these sales look legitimate and we have heard firsthand stories of the lengths they will go to. For that reason, we believe it’s worth mentioning a couple of alarming examples:
1. An individual working for a property management company was caught “showing” the rental properties he managed for out-of-state clients and pretending to be a real estate agent selling the homes as party of a multi-party fraud scheme.
2. A real estate agent was contact by a client to sell vacant land. Signs were put up, listings were posted, and when the contract was written for sale, the seller provided falsified documentation and was caught attempting identity theft.
The second example above is part of a larger scheme that has much more dire consequences. Sometimes a fraudulent seller will actually get away with selling vacant land or property that belongs to an out-of-state or out-of-country owner by creating falsified documents and committing identity theft. If they get way with this scam (many of them do) they walk away with much more than the down payment wire. The real property owners then have to retain a real estate attorney and fight to get their property back from the buyers that had no idea it was a fraudulent sale.
Tips to Avoid Property Stelling Scams
1. Use a real estate agent and be wary of any seller that asks you to sign a contract without one.
2. Look the property up online – the same property being listed by different sellers is a red flag.
3. Never buy a property you haven’t seen in person.
4. Be wary of any property being sold below market value for no reason.
5. Search County records to verify ownership and locate the seller online if you can.
6. Trust your gut! If something seems off about the deal, you might be right!
Moving Company Scams
Not all scams related to the real estate industry are focused on the property or the transaction and although our biggest concern is always making sure we get our clients to the closing table without incident, we also want to make everyone aware of the rising prevalence of moving company scams. In general, these scams have three methods of operation with increasingly alarming results:
- The contact at the moving company will require you pay a deposit up front. Then, on moving day, they simply don’t show up and run off with your funds. This is usually a true scam in that there is no moving company at all.
- The moving company will quote you a price for your items but after they have everything loaded in the truck and have driven off with the contents of your entire home in their possession, they will then up the price. Until you agree to pay the increased price (sometimes several thousands of dollars more than you agreed to) they will hold your possessions hostage. Companies often try to legitimize this practice by claiming they had to use an excessive amount of packing materials or that the items in question exceed their weight or volume estimate. It is worth noting that this is only considered a scam if there is more than a 10% increase in cost over the initial quote. The FMCSA has instituted a consumer protection regulation that states a moving company cannot demand payment greater than 110% of the original written estimate.
- The most alarming and heartbreaking moving scam involves property theft. In this type of scam, the moving company is actually a front for common thieves who steal everything you own right out from under your nose. They will agree on a price, show up the day of to load everything for you, but when they drive off they will never come back with your possessions.
Tips to Avoid Moving Company Scams
- Research the company you want to hire. You can look up a moving company’s registration on the FMCSA site via their USDOT number.
- Look through the reviews on various online rating websites, including Google, Facebook and the BBB.
- Verify the company’s address. If they are a real company, they should have a store front and somewhere they keep their vehicles. You can use Google maps street view to look at a location without visiting in person but an in-person visit is always best if you can.
- Only work with companies that are willing to provide a written contract. Do not deal with anyone that only provides over-the-phone quotes and estimates that aren’t bound in writing.
As a title company, we don’t have any direct interaction with individuals looking for rental properties but these scams still make an impact on the real estate industry by stealing thousands of dollars from unsuspecting individuals that could have been saved for a down payment in the future.
These scams operate a lot like property selling scams in that a scammer will identify a property and create false rental listings online, usually at a lower price than the market standard to bait interested renters. They often take photos from recent home sales to make the listing appear legitimate, as these photos are readily available publicly via sites like Zillow and Realtor.com. Once they have an interested renter on the hook, they will attempt to convince the renter not to view the property in person, to sign a contract without meeting their landlord, and the ultimate goal is to obtain a deposit from the interested renter without ever showing their face or the home in question.
Tips to Avoid Rental Scams
- Never agree to rent a home you have not seen in person.
- Never send money to an individual you have not met or a company that does not have a verifiable storefront.
- Be wary of any company that does not have some type of tenant screening process. It can seem like a blessing if you are worried about your credit but any legitimate company will require it.
- Search for the listing online, especially if it seems too good to be true. Multiple listings by different companies or a current listing showing the home for sale are red flags.
It’s impossible to cover every type of scam in the real estate industry but it’s important to us that we spread awareness in our community. The most important thing to remember is that you should never send anyone money for anything, be it purchasing property, hiring a mover, or renting property, without properly investigating who you’re sending that money to.
If you have a transaction with us and think at any time that you may be the target of a real estate scam, please do not hesitate to contact our office so we can work together to verify the legitimacy of the request you have received.