Deborah Kearns: The 4 most common mortgage and real estate scams and how to stop them
The last thing consumers should have to worry about is being scammed when they buy or rent a home, or consider refinancing options.
Unfortunately, criminals are getting more creative in how they target their victims, leading to major financial headaches for their unsuspecting victims.
In 2017 alone, 9,645 victims reported real estate fraud, resulting in losses of more than $56.2 million, according to data from the FBI’s Internet Crime Complaint Center.
Many people are too embarrassed to file complaints, making it harder to catch the scammers who repeatedly victimize unwitting homeowners and homebuyers, says Melinda Opperman, executive vice president of community outreach and industry relations with Credit.org — a nonprofit credit counseling agency and member of the National Foundation for Credit Counseling, or NFCC.
“It’s a huge problem,” Opperman says.
Here are four common real estate and mortgage scams to keep on your radar — and tips to avoid becoming a scammer’s next victim.
Escrow wire fraud
What it looks like: You get an email, phone call or text from someone purporting to be from the title or escrow company with instructions on where to wire your escrow funds. Fraudsters set up fake websites that appear similar to the title or lending company you’re working with, making it seem like the real deal. Scammers use spoofing tactics to make phone numbers, websites and email addresses appear familiar, but one number or letter is off — an easy thing to miss at first glance, Opperman says.
How to protect yourself: Before you send money to a third party, go back to the original documents you received from your lender and call the phone numbers listed there to verify the wiring instructions you received. Never click on email or text links, or send money online, without verifying wire instructions with a live person on the phone from a number that you’ve called and verified, Opperman says.
What it looks like: Loan flipping is when a predatory lender persuades a homeowner to refinance a mortgage repeatedly, often borrowing more money each time. The scammer charges high fees and points with each transaction, and homeowners get stuck with higher loan payments they can’t afford after being duped into borrowing most of their home’s equity, Opperman says.
How to protect yourself: Elderly homeowners who have cognitive issues should involve a trusted relative or friend in any key financial discussion, especially about tapping home equity.
If predatory lenders are actively seeking you out and you haven’t requested their help, that’s another warning sign . Work only with known banks or lenders, and question all fees and penalties presented to you, Opperman says. Lenders are required to provide loan estimates and closing disclosures that list all fees and third-party costs. Review these documents carefully or have a trusted adviser do this if you are refinancing your mortgage.
What it looks like: People who fall on hard times and get behind on their mortgage payments can become desperate to save their homes. That’s when scammers, who have access to public records of homes in pre-foreclosure, swoop in with offers of foreclosure relief to capitalize on homeowners’ vulnerability, Opperman says.
How to protect yourself: The best way to avoid foreclosure is to work directly with your loan servicer to modify your existing loan, request forbearance, or make some other arrangement. Homeowners can first enlist the help of a HUD-accredited housing counselor to see what options they have, then include their counselor on a three-way call to their lender to find solutions, Opperman says.
What it looks like: Scammers post property rental ads on Craigslist or social media pages to lure in unsuspecting renters, sometimes using photos from other listings. The scammers, who have no connection to the property or its owner, will ask for an upfront payment to let you see the property or hold it as a deposit. In reality, they’re just looking to get quick cash through nefarious means.
How to protect yourself: Be suspicious of anyone who asks for a cash deposit upfront to see a property, says Nicole Durosko of Warburg Realty in New York City. Ensure you’re dealing with the real property owner before negotiating rental terms or seeing a property in person. You can search the local property appraiser’s website to find out who the current property owner is and look for contact information online.
“Avoid doing transactions via email or on the phone,” Durosko says.
Use a check (never cash) to make a payment so you have an automatic receipt of it, Durosko advises. Finally, always insist on speaking with the property owner before signing a contract or making a payment if people say they’re representing the owner. If someone claims to be a real estate agent, ask to see a license and take a picture of it so you can confirm the information online through your state’s division of real estate licensing, Durosko says.