The last thing you should worry about is being scammed when you buy or rent a home or refinance your mortgage. Unfortunately, criminals are getting more creative in how they target consumers. In 2020 alone, more than 13,600 victims reported instances of real estate or rental fraud, according to data from the Federal Bureau of Investigation’s Internet Crime Complaint Center.
Here are five common real estate and mortgage scams to keep on your radar — and tips to avoid becoming a scammer’s next victim.
1. 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, explains Melinda Opperman, chief relationship officer at Credit.org, a nonprofit credit counseling agency.
So, you follow the wire instructions and assume all is well when, in fact, you’ve just become the latest victim of escrow fraud. The scammers? They’ve withdrawn the funds from an offshore account somewhere and are sailing into the sunset with your hard-earned money. Meanwhile, you have few options for retrieving it.
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.
Be wary of any email or text requesting a change to wiring instructions you already have, adds Odeta Kushi, deputy chief economist with First American Financial Corporation. Always confirm the escrow account number before wiring money, and call your settlement agent to verify the transfer of the funds immediately after you’re done, Kushi recommends.
2. Loan flipping
What it looks like: Loan flipping is when a predatory lender persuades a homeowner to refinance their 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.
Seniors with memory impairment are especially vulnerable to these scams because they have significant home equity and might not realize they’re being taken advantage of, Opperman says. Predatory lenders convince homeowners they can help them find a better loan product or use a cash-out refinance to pay for home renovations to make their homes more accessible as they age in place.
How to protect yourself: Elderly homeowners who have cognitive issues should involve a trusted relative or friend in any key financial discussion, especially about any decisions related to their mortgage. If you’ve recently completed a mortgage refinance, it’s usually not in your best interest to do another transaction right away, Opperman says.
If predatory lenders are actively seeking you out and you haven’t requested their help, that’s another warning sign that something is off. 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’re refinancing your mortgage.
3. Foreclosure relief
What it looks like: Homeowners 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 preforeclosure, swoop in with offers of foreclosure relief to capitalize on homeowners’ vulnerability, Opperman says.
“Scammers will claim that they can help homeowners save their homes and reduce their mortgage payments for a large, upfront fee,” Opperman says, “but they often leave our clients in worse financial shape.”
Some fraudsters claim they’re affiliated with the government or government housing assistance programs, and can swindle homeowners out of hundreds or even thousands of dollars in fees, according to the Federal Trade Commission (FTC).
In the wake of financial challenges caused by the pandemic, foreclosure relief scams are on the rise. While the government has worked to address those issues, and many banks have taken additional steps to help distressed borrowers, criminals are still capitalizing on fear, including offering to negotiate with your lender for a fee, or asking you to pay them directly while they work to sort out your situation.
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.
“A scammer will tell you not to talk to your lender, and that’s a huge red flag,” Opperman says. “It’s hard to speak to your lender when you’re in imminent default or become delinquent because you’re afraid it might speed up (losing your home), but you have to open the lines of communication with your lender.”
4. Rental scams
What it looks like: Scammers post property rental ads on Craigslist or social media 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.
Rental scams are alarmingly common. An estimated 5.2 million renters in the U.S. said they had lost money from rental fraud in a 2018 survey by ApartmentList. In that research, one in three had lost more than $1,000, likely after paying a security deposit or rent on a fake rental property.
There are also newer scams that are targeting the most vulnerable of renters: those worried about the end of the pandemic eviction moratorium. According to the FTC, scammers are targeting renters with offers to help them secure money for their rent. The offers either ask for upfront money or personal identification information.
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. “It’s best to be face-to-face to confirm the property ownership, sign any required documentation and [make a] payment.”
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 someone says they’re representing the owner. If someone claims to be a real estate agent, ask to see their 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.
If you’re worried about paying back rent after the moratorium is lifted, be wary of suspicious offers from anyone asking for your personal information. Instead, browse HUD’s list of state-by-state housing resources to find out if you qualify for emergency assistance.
5. Moving scams
What it looks like: You found a new place to call home — now, you have to deal with getting your stuff there. You fill out a form for a moving company estimate, outlining all your belongings, and you receive an estimate for $4,000 to ship them from your current home in Wisconsin to your new one in Kansas. When the company shows up, someone tells you that it’s actually going to be $10,000. While you’re upset about the overcharge, it could be even worse: The company could have taken your deposit and not bothered to show up at all.
This happens all the time: The Better Business Bureau received around 13,000 complaints and negative reviews about moving companies in 2019. The wave of moving scams is so bad that two companies — Mayflower and United Van Lines — launched MoveRescue, an effort to help protect those who are moving and provide help to those who have been scammed.
How to protect yourself: Moving is expensive, so it can be tempting to go with the most affordable offer to transport your belongings. This is an area, though, where you can’t simply shop based on the price. Ask the moving company for their license number, and see if any complaints have been lodged with the Federal Motor Carrier Safety Administration (a division of the U.S. Department of Transportation).
The BBB also recommends getting three in-person or virtual quotes from different companies; if a company simply gives you a quote over the phone, it’s a red flag. Lastly, avoid giving any large chunk of money in advance. While a small deposit is normal to reserve the movers, reputable companies will not require full payment until the job is actually completed.
How to report real estate scams
Many real estate and rental scam victims are too embarrassed to file complaints, making it harder to catch the scammers who repeatedly victimize unwitting homeowners, homebuyers and renters, Opperman says.
If you believe you’re being targeted in any scam related to your home, it’s important to take steps to notify the proper authorities. The best place to start is with the FTC. When you file a report with the agency online, it’s entered into a database that reaches local, state and federal law enforcement agencies.
You can also file a complaint with the BBB’s Scam Tracker, which will help notify others like you about potential fraud activities. If you want a better chance at connecting with an individual to hear your story, consider contacting your state’s consumer protection agency, as well.
If you have already fallen victim to a scam, you will likely need to do more than simply file a complaint, particularly if the scam has involved you handing over your private information. IdentityTheft.gov is the government’s online portal for anyone who is worried that a criminal is acting on their behalf.
Remember that your home isn’t the only target of scams, either. Be sure to be on the lookout for these scary money scams that target your financial accounts.