Staying Safe When Buying and Selling: Real Estate

1. Email Compromise—The Biggest Culprit
2. Other Real Estate Scams
3. Warning Signs of a Real Estate Scam
4. How to Beat Real Estate Scams
5. How to Recover From a Real Estate Scam

2021 was a groundbreaking year in real estate—according to a study by the National Association of Realtors, homes sold at a record pace between June 2020 and July 2021. In addition, the Federal Housing Finance Agency's House Price Index reported in November that U.S. house prices rose 18.5% from the third quarter of 2020 to the third quarter of 2021. This means happy sellers, lots of desperate buyers, and very busy real estate agents. But unfortunately, it also makes for very fertile ground for scammers.

Real estate is big money, making it a magnet for scammers. Scammers target home buyers and renters in the most common real estate scams.

Email Compromise—The Biggest Culprit

In 2020 the FBI's Internet Crimes Complaint Center (IC3) reported that real estate wire fraud is the 7th largest fraud type, with more than $213 million lost. Business Email Compromise (BEC)  and E-mail Account Compromise (EAC) is the most prevalent where scammers compromise email accounts and attempt to intercept wire transfer payments.

Real Estate transactions are confusing for many people and are made more complex by the number of players. In any transaction, you have more than half a dozen parties requesting your personal information, including:

• Financial institutions
• Real estate agents
• Lawyers
• Escrow agents

It's hard to keep track of everyone involved.

Scammers know that if they can infiltrate the email accounts of any of the critical parties, they can attempt to intercept wire transfers and steal money. Anyone that sends or receives money is a target.

Generally, scammers access compromised email accounts well before any transaction takes place, and they monitor them for any activity that looks like a wire transfer. When they pick up an activity that interests them, they will create a spoof email address requesting that funds be transferred to their account.

If they get their timing right, they have made off with their money by the time the purchaser realizes what has happened. 

Other Real Estate Scams

Real estate draws scammers like a magnet, and they can be creative when coming up with new scams. Here are some of the most common types of real estate scams out there.

Real Estate Wire Fraud

In real estate wire fraud, you find a home you want to buy, sign the contract, and wait for the closing process to begin. You are then contacted via email and asked for a down payment or earnest deposit; so you pay it.

A few days later, you are contacted again by the real mortgage company, and you discover you were scammed.

Loan Flipping Scams

In a loan flipping scam, you are contacted by a scammer about your existing home loan. They claim you're eligible to refinance your current loan and will save a lot of money by doing so. However, the scammer is lying to you and will use high-pressure sale tactics to keep you from reading the fine print.

Once you sign the paperwork, you discover that the new loan has a longer-term, higher interest rate, or you are charged high fees and points to close.

Moving Scams

Scammers have also found a way to scam people when they are moving by setting up fake moving companies. You find one of these companies online while comparing prices. They offer better rates than the other companies, so you pay the deposit. However, the moving company doesn't exist, and no truck shows up on moving day.

Rental Scams

Rental scams involve a scammer listing a fake rental property on a site like Craigslist. Once you show interest in the property, the scammer will immediately ask you for a deposit but will conveniently be unable to show you the apartment or house in person. Once you make the deposit, the scammer takes off with your money.

Warning Signs of a Real Estate Scam

When you are thinking of buying a house, renting an apartment, or moving, here are some of the red flags to look out for so you can steer clear of real estate scams:

• Grammar errors and misspellings in the email, letter, or website.
• Online reviews about the company are either negative or overly positive and seem fake.
• Parts of the email or website seem broken or formatted incorrectly.
• You are asked to pay via questionable methods like MoneyGram, Venmo, PayPal, or Cash App.
• The email you received isn't coming from the corporate email domain you expect.
• The loan officer, landlord, realtor, or mortgage company is pushy and tries to get you to make the transaction without reading the fine print or asking questions.

How to Beat Real Estate Scams

Despite the professional bodies like the National Association of Realtors, the American Escrow Association, and the American Land Title Association banding together to form stopwirefraud.org to raise awareness and reduce the impact of real estate scams, the number is still exploding.

Buying a new house, renting a new apartment, or moving all of your things cross country can be very exciting but also very stressful. Worrying about whether you are getting scammed only adds to the stress. To help you navigate the process, here are some tips to help you avoid getting scammed:

• Before hiring a moving company, get multiple quotes, read customer reviews, and read the contract closely.
• Pay close attention to emails you receive and make sure they come from the right web domain and have no grammar errors, misspellings, or other mistakes.
• Never deposit money before seeing a house or apartment.
• Don't rush the home buying or rental process.
• Have a third party like a lawyer or real estate agent review any legal documents before transferring money.
• When dealing with loans, verify the loan officer online with the Nationwide Mortgage Licensing System & Registry's database.
• Refuse to send payments via Cash App, Venmo, or other cash transfer apps.
• Don't click any links in an email you don't trust.
• Always deal face-to-face and locally when renting or buying.

In addition, you should always do some research into the people handling your transaction, including your:

• Mortgage Escrow Agent
• Real Estate Agent
• Real Estate Appraiser

 Mortgage Escrow Checklist

Print our handy checklist to keep yourself safe when finalizing a real estate transaction.

Download Checklist (947 KB PDF)

How to Recover From a Real Estate Scam

If you have fallen victim to one of these real estate scams, you can do a few things to ensure you don't lose any more money, the scammers get caught, and there are fewer victims in the future. You can start by reporting the scam.

Report the Scam

Depending on the type of real estate scam you are dealing with, there are a few places to report it. To catch the scammers, you need to report them to the authorities. Here are some places to start:

• The FBI Internet Crime Complaint Center (IC3)
• The Federal Trade Commission (FTC)
• Your state Attorney General

While not the authorities, you can also report the scam to these places to get the news out about the fraud:

• The Better Business Bureau (BBB)
• The Federal Motor Carrier Safety Administration if it was a moving scam
• Craigslist, Facebook Marketplace, or the website you saw the scam listing

Contact Your Bank

A wire transfer can take some time, so you may have a chance to call the bank and cancel it before it happens. Or the bank may be able to reverse the transaction. It will only take a few minutes and is worth the try.

If you paid with a credit or debit card, the card company may offer protection against fraud and get your money back. If the scammer has your account details, you will also want to freeze your account or disable your card.

Protect Your Identity

If you reveal personal information like your Social Security number during a fake loan process or other ruse meant to steal your data, you will want to either place a fraud alert or freeze your credit.