Consumer hoaxes and scams – what to do if it happens to you
When you are in the middle of purchasing or selling a home, it is difficult to be prepared for every type of scenario that might pop up, which is why we always recommend working with a real estate agent to help guide you through anything unusual along the way.
Their market expertise particularly will come in handy if anything comes up that is truly unexpected – like, for example, an illegitimate company that poses as your own closing company in order to receive your final wired transaction funds instead of where they are supposed to go to close the sale.
In a case like this one, we at Solutions always recommend only speaking with your closing transaction coordinator and confirming the wire amount and wire instructions with them directly before wiring funds, and then confirming the funds have been received.
Real estate scams – common or not?
We all think we will be able to spot a scammer a mile away, but scams these days now can go beyond the usual get rich quick and work from homes schemes.
Real estate scams and hoaxes are very real and very common, so being aware and taking the appropriate cautionary steps are necessary in this day and age so you don’t become a victim.
As hectic as finding a new home is, there is nothing like a bad scam to completely ruin a homebuyer’s experience.
With that being said, here are a few examples of some scams to be aware of and tips on how to avoid them.
Lender bait-and-switch is a very familiar scheme
What happens in this situation is that Buyers are offered a particular rate when they apply for a home loan, but are pressured to accept higher rates and charges to close the transaction. The Buyer, who fears losing the loan, ends up agreeing to the new terms.
How to Protect Yourself from a mortgage scam
You can protect yourself if you’re aware of the red flags and remain suspicious of any deal that seems too good to be true.
First, one of the telltale signs of a loan modification or mortgage scam is the request for an upfront fee. No legitimate program requires that you pay a fee prior to undergoing a loan modification and receiving assistance.
Additionally, those who solicit mortgage relief door-to-door, via flyers or on telephone poles, are likely to be involved in fraudulent services. And if you’re ever offered help that requires you to make payments to anyone other than your lender, or relinquish ownership of your property, beware.
The best thing to do when experiencing financial hardship is to contact your lender directly and ask for help; sometimes they’d rather take a smaller loss on a home by reducing your mortgage than a big one as a result of short sale or foreclosure.
If you can’t work out a deal with your lender, selling your home for a fraction of its original value is still a better option than losing it to a scam artist.
Check Fraud
The FBI says that check fraud in association with rental real estate and or sending an earnest money deposit check for a house transaction is also very common. Scammers will show interest in a property and send a check for the deposit amount to secure it, then back out of it at the last minute asking for a refund.
The issue here is that most people will have already deposited the check, giving immediate access to the funds since many banks don’t hold personal checks.
Later on it’s then discovered the check is counterfeit and at that point the account holder is then responsible for any fees and losses by the bank. Of course there are certain laws to protect people from being held responsible but it’s a headache nonetheless.
Here at Solutions, we recommend having the closing attorney hold the earnest money deposit check and ask that the Purchaser either mail or drop off the check in person and confirm receipt.
What to do when it happens to you?
Most scams violate federal laws and regulations, but a few are investigated by state or local authorities. In general, if a scam uses the national services, like the US mail postal service, that would be reported to the related national agency, like the USPS.
Scams involving businesses and scammers operating from a location within a state’s borders would often be reported to a state agency.
City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights.
To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.
Do as much research as possible.
Find out as much about a person or company as you can, and make sure you get an actual person on the phone or in person. If you feel you’ve been scammed, or are in the middle of one, be sure to report it to the federal government.
Conduct business with companies who have good and verifiable reputations. Don’t just rely on internet reviews. Never give your personal or financial information over the internet or through email, and always remember that if it sounds too good to be true, it probably is.
Whether buying or renting, if you’re in the market for a new home it’s important to become familiar with what scams and hoaxes are out there before making any final decisions.
Finding a reliable real estate agent is a great way to help guide you out of a sticky situation or help you to avoid one altogether.
