Know All These Payment Frauds to Be Smart Real Estate

When buying or renting a property, or refinancing your mortgage, the last thing you should be concerned about is being duped. Regrettably, crooks are becoming increasingly inventive in their methods of targeting customers. According to data from the Federal Bureau of Investigation's Internet Crime Complaint Center, more than 13,600 victims reported real estate or rental fraud in 2020 alone.

Here are five frequent real estate and mortgage scams to be aware of, as well as recommendations on how to avoid being the next victim of a con artist.

1. Wire fraud in escrow

What it appears to be: Someone claiming to be from the title or escrow firm sends you an email, phone call, or text with instructions on how to wire your escrow payments. Fraudsters create bogus websites that seem just like the title or financing firm you're dealing with, giving the impression that it's a genuine deal. Scammers utilize spoofing techniques to make phone numbers, websites, and email addresses look legitimate, but one number or letter is incorrect an easy mistake to make at first sight, according to Melinda Opperman, chief relationship officer at Credit.org, a nonprofit credit counseling firm.

So, you follow the wiring instructions and believe everything is OK when you’ve just been the next escrow scam victim. Who are the con artists? They've taken the money out of an offshore account and are sailing off into the sunset with your hard-earned cash. Meanwhile, you're stuck with a limited number of choices for recovering it.

Scammers utilize the spoofing technique sing money to a third party, go back to your lender's original documentation, and contact the phone numbers mentioned there to double-check the wire instructions you got. Never transfer money online or click on email or text links without first validating wiring instructions with a real person on the phone from a number you've phoned and confirmed, according to Opperman.

According to Odeta Kushi, deputy chief economist at First American Financial Corporation, be suspicious of any email or text asking for a revision to wire instructions you currently have. Always double-check the escrow account number before sending money and call your settlement agent to ensure the cash transfer right away, Kushi advises.

According to Odeta Kushi, deputy chief economist at First American Financial Corporation, be suspicious of any email or text asking for a revision to wire instructions you currently have. Always double-check the escrow account number before sending money and call your settlement agent to ensure the cash transfer right away, Kushi advises.

Read More: Beware Landlords, Don't Fall for These Rental Scams

2. Loan reselling

What it appears to be: Loan flipping occurs when a predatory lender convinces a homeowner to refinance their mortgage regularly, frequently borrowing more money each time. According to Opperman, the fraudster charges exorbitant fees and points with each transaction, and homeowners are stuck with larger loan payments they can't afford after being deceived into borrowing most of their home's value.

According to Opperman, seniors with memory impairment are especially vulnerable to these scams since they have large home equity and may not know they are being taken advantage of. Predatory lenders persuade homeowners that they may obtain a better loan product or utilize a cash-out refinance to pay for home upgrades that will make their houses more accessible as they age in place.

How to defend yourself: Elderly homeowners with cognitive difficulties should engage a trustworthy relative or friend in any major financial discussions, particularly those involving mortgage choices. If you've just completed a mortgage refinance, it's typically not a good idea to undertake another transaction straight away, according to Opperman.

If predatory lenders aggressively seek you out and you haven't asked their assistance, it's another red flag that something isn't right. Work solely with well-known banks or lenders and challenge any fees and penalties that are provided to you, advises Opperman. Lenders are required to give loan estimates and closing disclosures that identify all fees and third-party charges; if you're refinancing your mortgage, thoroughly analyze these papers or have a trusted adviser do so.

3. Foreclosure assistance

What it looks like: Homeowners who have financial difficulties and fall behind on their mortgage payments may feel frantic to save their houses. Scammers, who have access to public information of properties in PR foreclosure, rush in with promises of foreclosure relief to take advantage of homeowners' vulnerabilities, according to Opperman.

"Scammers will promise that they can assist homeowners to save their houses and lower their mortgage payments in exchange for a huge, upfront charge," Opperman adds, "but they frequently leave our customers in worse financial situation."

According to the Federal Trade Commission, some scammers pretend to be linked with the government or government housing aid programs and can bilk homeowners out of hundreds or even thousands of dollars in fees (FTC).

Foreclosure relief schemes are on the rise in the aftermath of the pandemic's financial troubles. While the government has attempted to address those difficulties, and many banks have taken further efforts to assist troubled borrowers, criminals are still exploiting anxiety, promising to negotiate with your lender for a fee, or asking you to pay them directly while they seek to resolve your situation.

How to defend yourself: Working directly with your loan servicer to amend your existing loan, request forbearance, or negotiate some other agreement is the best approach to avoid foreclosure.

Homeowners can first seek the assistance of a HUD-accredited housing counselor to determine their alternatives, then involve their counselor in a three-way conversation with their lender to discover answers, according to Opperman.

"A fraudster will instruct you not to communicate to your lender, which is a massive red flag," explains Opperman. "It's tough to talk to your lender when you're going to default or become late because you're afraid of losing your home, but you have to open the lines of communication of contact with your lender."

Read More: Know Your Rights as a Landlord Under the Model Tenancy Act

4. Rental swindles

What it appears to be: Scammers use photographs from other listings to publish home rental advertisements on Craigslist or social media to entice naive tenants. The fraudsters, who have no link to the property or its owner, will demand an advance payment to allow you to view it or retain it as a deposit. In truth, they're just searching for a fast buck through shady ways.

Rental scams are all too prevalent. According to a 2018 Apartment List survey, an estimated 5.2 million tenants in the United States lost money due to rental fraud. One-third of those polled had lost more than $1,000, most frequently after paying a security deposit or rent on a fictitious rental property.

There are also newer schemes that target the most vulnerable renters: those who are concerned about the expiration of the pandemic eviction moratorium. Scammers are targeting tenants with offers to help them acquire money for their rent, according to the FTC. The proposals either want money up in advance or personal identity details.

How to defend yourself: Be wary of anybody who requests a cash deposit to view a home, advises Nicole Durosko of Warburg Realty in New York City. Before discussing rental conditions or viewing a house in person, make sure you're working with the genuine property owner. You may seek up the current property owner's name and contact information on the local property appraiser's website.

"Avoid completing transactions over the phone or email," Durosko advises. "It's better to check property ownership in person, sign any relevant papers, and [make] payment."

Dusko recommends using a check (rather than cash) to make a payment to receive an automated receipt. Finally, if someone claims to be representing the owner, always insist on interacting with them before signing a contract or making a payment. If someone claims to be a real estate agent, Durosko advises asking to see their license and photographing it so you can authenticate the information online through your state's division of real estate license.

If you're afraid about having to pay back rent after the moratorium is removed, don't worry Be aware of anyone who asks for your personal information and makes a dubious offer. Instead, check out HUD's list of state-by-state housing services to see whether you are eligible for emergency assistance.

5. Moving swindles

What it looks like: You've found a new place to live, but now you have to deal with moving your belongings there. You fill out a form for a moving business estimate, detailing all of your goods, and you receive a quote for $4,000 to ship everything from your present house in Wisconsin to your new home in Kansas. When the firm arrives, someone informs you that the total cost will be $10,000. While you're outraged about the overpayment, consider this: the firm might have received your deposit and then failed to show up.

This occurs all the time: In 2019, the Better Business Bureau received over 13,000 complaints and unfavorable reviews concerning moving firms. Moving scams have become so prevalent that two organizations, Mayflower and United Van Lines, have created Move Rescue, an attempt to safeguard customers who are moving and assist those who have been duped.

How to defend yourself: Moving is expensive, therefore it may be tempting to choose the cheapest offer to transfer your possessions. However, this is not an area where you can just shop purely on price. Inquire about the moving company's license number and whether any complaints have been filed with the Federal Motor Carrier Safety Administration (a division of the U.S. Department of Transportation).

The Better Business Bureau also advises acquiring three in-person or virtual quotations from various organizations; if a company only provides you a quote over the phone, that's a red flag. Finally, avoid donating huge sums of money in advance. While it is customary to provide a modest deposit to reserve the movers, reliable businesses will not seek full payment until the service is finished.

How to Report Scams in Real Estate

Many victims of real estate and rental scams are too humiliated to register complaints, making it more difficult to apprehend the fraudsters who frequently prey on unsuspecting homeowners, purchasers, and renters, according to Opperman.

If you suspect you are being targeted in a home-related fraud, you must contact the appropriate authorities. The FTC is the greatest place to start. When you submit an online report to the agency, it is placed into a database that is accessible to local, state, and federal law enforcement authorities.

You can also make a complaint with the Better Business Bureau's Scam Tracker, which will alert people like you to suspected fraud activities. Consider calling your state's consumer protection agency as well if you want a higher chance of interacting with a person to hear your tale.

If you have previously been a victim of a scam, you will almost certainly need to do more than just submit a complaint, especially if the fraud included you handing up your personal information. IdentityTheft.gov is the federal government's online resource for anyone concerned that a criminal is acting on their behalf.

Remember that your house isn't the only place where scammers might prey.

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