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5 Real Estate Scams That Even Smart People Fall for

5 Real Estate Scams That Even Smart People Fall for

Real estate fraud is a serious national issue. In fact, the total cost of mortgage fraud in the United States is roughly $13 trillion. Mortgage fraud is just one of many real estate scams.

Many people choose the real estate industry to invest their hard-earned income. Beware of scammers whether you are buying, selling, or renting a property.

Read on to learn more about common scams in the real estate world. Explore 5 real estate scams that even the smartest investors fall for.

1) Beware of Hackers

Hackers have identified the real estate industry as an area of mass vulnerability. Networks and e-mail addresses for real estate agents are not known for security.

Here is how this particular scam goes down. You receive an e-mail from a hacker posing as your real estate agent or title insurance company.

The e-mail instructs you to wire transfer a down payment and provides detailed instructions on how to do so. This scam could cost you hundreds of thousands.

To be safe, you should confirm all wire transfer requests with your real estate team. Go over the instructions in person or on the phone to verify authenticity.

2) Mortgage Fraud

This is one of the most common forms of fraud in real estate. This occurs when a mortgage applicant misrepresents their personal information.

For example, a person may exaggerate his or her annual earnings. Another fraud tactic is to hide liabilities from the lender.

Why would a mortgage applicant lie to a lender? The simple answer is to meet the criteria for a mortgage.

Greater earnings and fewer liabilities create a more favorable debt-to-income ratio. The lender may offer a lower mortgage rate or approve a higher loan amount.

3) Appraisal Fraud

This type is similar to mortgage fraud because it involves misrepresentation of information. In this case, the buyer improperly inflates the value of the home through the appraisal process.

This exaggeration of the home value is done by comparing to properties that are worth more than the home for sale. Often, this occurs when the buyers misrepresent the home characteristics. The buyer may inflate the home's square footage or include features that do not exist in the home.

4) Bait and Switch

In this type of fraud, a prospective buyer makes an offer with no intention to follow through. The seller is baited with an offer that is above market value.

The buyer then starts a series of delay tactics. The buyer's objective is to push out closing so far that the seller becomes desperate. At this point, the buyer pulls the original offer and attempts to drive the price down.

5) Rental Scams

There are a number of different rental scams. One of the most common is to dupe prospective tenants out of an application or background check fee.

In this situation, a scammer advertises that a property is looking for renters. The scammer then advises prospective renters that their application was denied and pockets the collected fee.

Real Estate Scams - Wrapping It Up

Buying, selling, or renting a property is a highly emotional time. Unfortunately, there are bad people out there that make a living by capitalizing off of these emotions.

Beware of these scams and do your due diligence to confirm the authenticity of all payments. If you enjoyed this article about real estate scams, check out our blog for other great pieces.


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