Have you fallen victim to real estate scams? Buying a house or renting a new property can be stressful for anyone, and there are so many red flags when buying a house. Unfortunately, there are also a lot of opportunities for criminals to commit real estate scams both online and in real life. Before you trust a stranger, take time to educate yourself on these common Craigslist real estate scams and rental fraud. If you come across any of the scams mentioned on this list, please report them to the Better Business Bureau Scam Tracker. You may be shocked to see just how many people are being scammed on a daily basis in your zip code.
Real Estate Scams to Watch Out For
10. “We Buy Houses” Signs and Postcards Take Advantage of Desperate Families
You may have seen those signs around your neighborhood saying “We Buy Houses”. This is also a common Craigslist real estate scam, so you may have seen these posts online. Sometimes, they are even very amateur-looking, handwritten with a sharpie. There are also postcards that get mailed out saying the same thing.
If the buyer actually pays you cash before you sign over the deed, this isn’t exactly a scam. However, if you fall for this, you’re going to lose a lot of money on the value of what your home is actually worth. These signs are usually hung in low-income areas. Or, they post on Craigslist zip codes of poor areas. They are aiming to take advantage of desperate people during hard times. You may be able to use that money to get out of debt, but it means that you lose out on tens of thousands of dollars if you sold through a real estate agent.
According to the Attorney General, these signs often lead to a scam that works like this: You respond to the post cards or a handwritten sign, and the buyer convinces you to sign over control of your home to them before you receive the payment. They promise to give you the cash to pay off your mortgage, but then it never actually happens. Since they are now the owner, they rent your house out to a new tenant. You’re evicted, and forced to still continue paying the mortgage. It’s awful. Please, don’t ever fall for this, and always go to a real estate agent to sell your home.
9. Online Rental Schemes Will Take Your Deposit and Run
One of the most common modern real estate scams is an online rental scheme. These people will post an ad on Craigslist or Facebook Marketplace, claiming that they are putting their property up for rent. Instead of seeing the property in person, they claim that it is in high demand, and ask for the deposit to be sent to them through Venmo or PayPal if you’re truly “serious” about getting the property. Because of the pandemic, a lot of people are falling for this, because they believe that the other person is simply taking precautions. Never wire or send money to someone without seeing the house first and getting a rental contract!
Thankfully, it’s easy to spot these scams before you even communicate with the person who listed it. First of all, if the price seems too good to be true, it usually is. Secondly, you can cross-check the property on places like Realtor.com and Zillow. I’ve seen several rental scams copy photos of empty houses off of real estate listings. The idea is that even if you drive past the property to look inside, you’ll see that the house is empty, and assume the rental listing is real. Always call the real estate agent to confirm if the property is actually up for rent.
8. The Empty House Scam Is Almost Impossible to Spot
In the online deposit scam, we mentioned how many of these people use empty houses as a front to trick people. However, some people go one step further with empty house scams. I’ve heard stories of people who actually showed up to a house, and met someone in person who claimed to be the landlord. They signed a too-good-to-be-true lease, and handed over the first month’s rent and deposit in cash or money order. This fake landlord even gave them a key to the house, and they started moving their stuff in…Only to come face-to-face with the real home owner or real estate agent later. This is a real estate scam that is so much more difficult to figure out ahead of time. The only thing you can do to prevent this from happening is to work with a reputable leasing agent.
The biggest thing that tricks people in this scenario is that the scammer had the keys to the house. Unfortunately, a lot of people who sell their home make the mistake of leaving an extra key under the doormat, or in one of those fake rocks. The scammer can easily make multiple copies of the house key at the hardware store. According to the Better Business Bureau, empty houses are used by scam artists all the time. They recommend installing a security system, or asking a friend to check on the house frequently while you’re gone.
7. Some Rent-to-Own Scams Trick You Into Paying For Repairs
Anyone with a not-so-great credit history has thought about a rent-to-own deal. This is when you rent a house from a landlord with the promise that if you pay enough rent to equal the value of the home, you get to keep it. However, if it seems too good to be true, it probably is. Some of the most common scams are when the seller sets the price of the house higher than its market value. They often put a clause in the lease saying that the tenants are responsible for repairs, since it’s going to be “their” house some day. This way, the landlord tricks their tenants into thousands of dollars of repairs that would normally be their responsibility.
Normally, when you buy a house, a real estate agent will help you pay at or below market value. This guarantees that you have some sort of equity. Then, you pay for an inspection to make sure there isn’t anything wrong. If there is, they usually negotiate with the seller to either give them a discount on the purchase price, or fix the problem before the buyer moves in.
6. Other Rent-to-Own Scams Purposely Drive You Insane
Even if a rent-to-buy situation isn’t technically a scam, many people back out because the landlord/seller makes their life a living hell. My friends got into a rent-to-own contract with an elderly friend from church. As young newlyweds, they weren’t ready to buy a house. So they were happy to overpay at $2,000 a month on a $1,500 property. The idea was that the extra $500 would go towards buying the house. At first, they felt lucky to find a 2-bedroom house with a backyard for their son. However, at church every Sunday, the landlady always bragged to the other church-goers that she “gave them her house”, always belittling them in front of a crowd.
The landlady frequently drove past the home to spy. My friends received non-stop phone calls and unannounced visits where she nagged them about landscaping, and anything she perceived they were doing wrong. She was in violation of their tenant rights, but they were afraid to stand up for themselves, since she was part of their tight-knit church community. My friends realized that they couldn’t stand dealing with this woman for years. They improved their credit score, and begged their parents for a down payment on a new house. When they told the landlady that they wanted to break the rent-to-buy agreement, she was so angry, that she only gave them 24 hours to get out.
In the end, my friends over-paid thousands of dollars in rent that they’re never getting back. They would have been better off paying $1,000 a month at an apartment complex that would not invade their privacy. Sometimes, hindsight is 20/20. But maybe for some of you out there, the story will help you.
5. Mortgage Refinance Fraud
According to the FBI’s white collar division, mortgage fraud and financial institution fraud are more common than you think. Mortgage refinance fraud works like this: A company contacts you either through the mail or over the phone. They promise to do the work to refinance your mortgage or negotiate on your behalf to get you a better interest rate exchange for an up-front fee.
You pay them the fee, and then you never hear from them again, and your mortgage continues to go unpaid. If you want to refinance your mortgage, always contract the bank or mortgage company directly. Also contact banks directly to see if they can give you a better deal than your current bank. It takes a few phone calls, but it’s worth doing this on your own, and not getting scammed out of your money.
4. Equity Stripping Scams Promise to Help You With Your Foreclosure, But Leaves You Homeless
This next real estate scam is sometimes called “equity-stripping”. Considering how many people are now behind on their mortgages due to the Covid-19 pandemic, they may fall for this scam out of desperation. This happens when a homeowner is behind on their mortgage. A company comes along and offers to buy your house for you, and bail you out of your mortgage. They promise to keep you as a tenant in your own house, and they give you the option to buy back your house at a later date, if you come up with the money.
In theory, this business model sounds like a win-win situation, so it’s easy to see why people would fall for this. However, what actually happens is that this real estate scam company takes what is left of the equity on your house, and then they are never to be seen again. Meanwhile, you get kicked out of your house, you’re still in foreclosure, and you have nothing left to show for the sale of the house.
3. Moving Fraudsters Upcharge You For Your Stuff
According to Freddie Mac, a common real estate scam comes from the moving company. They will quote you an estimate of how much the move will cost. You give them the money up-front, and then they pack everything on the truck. However, once you arrive at your new home, they claim that the first payment was just a “deposit”. Now they’re expecting more money to unlock the truck and unload your stuff into your new house. These scam artists are great at gaslighting. They make you feel like the idiot, as if you didn’t read the contract correctly. Remember that whatever the cost on the moving contract says is the true number for the whole job, and you should be told about all of the fees up-front.
Always remember to read the contract in full before you sign it. This way, you will feel confident knowing what services were included, like unloading the truck. As awful as this might sound, you may need to call the police in order to help you get your stuff back if you find yourself in a situation like this. You should also report them to the Better Business Bureau. Always be sure to read reviews online before hiring a moving company. Make sure there are more than 50 reviews, and look at multiple sources.
2. Rental Truck Companies Can’t Always Be Trusted, Either
So far, a lot of these real estate scams are coming from small businesses that you might find locally. However, that doesn’t mean that big-name brands are immune from scamming their customers. Even companies like Uhaul are franchises. This means that individual business owners can license the Uhaul name. They away with ripping people off by charging additional fees. There are plenty of instances floating around the Internet of people getting ripped off by the company. I actually know about this through personal experience.
A couple years ago, my family sold their beach house, which was 75 miles away from our main house. We only needed to borrow a Uhaul for a few hours. The signs on the truck claim to only cost $19 per day. But we were told that it would cost $100, because of the mileage and other fees. This was more than the advertised price, but we accepted the fees and paid for the contract ahead of time. But once we showed up on the moving day we were told that it would cost an additional $500. My father fought for an hour with the person until we got our truck for the price we were promised. If you ever run into an issue like this at a franchise, contact the customer service hotline right away.
1. A Home Equity Conversion Mortgage (HECM) Is Meant to Help the Elderly, But Often Leads to Them Getting Scammed
The Federal Housing Administration set up a program called the Home Equity Conversion Mortgage or (HECM) for people aged 62 and up. This is designed for seniors to borrow against the equity of their homes, assuming that their house is already paid off, or has very little balance left on the mortgage. Home owners can contact a loan counselor at HUD on their own, if they want to do this process. However, this often opens up the elderly to be scammed by individuals who claim to want to help them.
The way these real estate scams work is that a younger friend or family member offers to help an elderly person who is financially struggling. They usually meet these people at church, or the local community. The scammer tells the victim all about the HECM, and offer to do all of the “complicated” paperwork for them. In exchange, they give the elderly person a monthly payment, or a lump sum that is actually less than what the property is actually worth. Typically, no one finds out that the person has been scammed until they have passed away. By the time, the scam artist is already long-gone.
You just read all about real estate scams. Here are some other articles on InspiringHome you may be interested in:
Important Questions to Ask Before Buying a New Home
23 Home Security Hacks to Keep Your House Safe
