Yahoo Finance How to Avoid a Real Estate Scam
You'd be foolish to think you couldn't be fooled in a real estate transaction. While the majority of sellers, buyers and renters are presumably honest, there can be additional players with skin in the game, from landlords and real estate agents to title agency workers and bankers.
As Sacramento real estate broker Alexis Moore observes: "The crooks don't always have on orange jump suits. Many are former real estate professionals who are using the system."
So how do you know if you're about to be scammed? You can't, but there are warning signs and steps you can take to protect yourself. Even if you are working with honest people, these are smart ways to approach buying, renting or selling any home.
Don't rush. Sometimes, you really do stumble into a great deal, and, yes, you want to act quickly before someone else stumbles on -- and snags -- this great deal. But rushing means you have little time to question what you're doing.
Joe Rand, managing partner for Better Homes and Gardens Rand Realty, which sells and rents home in New York and New Jersey, says that about once a week, he hears of a renter who saw a house but didn't actually go inside.
"The person will tell the renter that they've relocated, they need to rent [the property] quickly, here's a photo. Just go look at the place, but I can't show you the inside," Rand says. The renter will send the "landlord" deposit money and show up at one of his business's many offices, asking for the keys. Of course, that's when the renter learns he was working with a con artist who had simply taken a photo of an apartment and let the victim's imagination fill in the blanks.
It may seem crazy to rent property without touring the interior, but as Rand explains: "What does every scam depend on? Somebody thinking this is an amazing deal, and they have to jump on it."
Vet the person you're working with. Just because someone has a LinkedIn page doesn't make him or her a swell human being. For instance, earlier this month, at least 14 unsuspecting homebuyers in towns around Monroe County, New York, paid down payments to a real estate agent whose license had reportedly expired. The homeowners wrote him checks, but instead of putting their funds in escrow, the agent allegedly pocketed the money. At the time of this writing, the accused agent, John Valerio, is cooling his heels in the county clink.
But one can hardly blame the victims. Valerio, after all, apparently was, until very recently, a licensed real estate agent. He doesn't have much of an online presence, but his LinkedIn profile states that his company, Lamplighter Realty Inc., has been in business since 1971. What's more, his business is listed in the Yellow Pages.
This scenario may happen more than we'd like to believe. Moore says she recently reported an unlicensed colleague who was still selling homes. Your safest bet is likely to walk into a bustling, reputable real estate office to meet with a new agent, but if you meet an agent randomly who has little more than a business card and a charming demeanor, ask to see an agent's license to ensure it's current, Moore suggests.
"We all carry a plastic card like a credit card in California, and it says the person's name and their title, like broker or sales agent," she adds.
If you're really concerned, check online to see if anything concerning pops up. To find someone you trust, ask for a referral from a close friend or family member.
Question, question, question. Charles Gallagher of Gallagher & Associates in St. Petersburg, Florida, says his law firm has represented several victims of real estate fraud. Some sellers, he says, will try to sell homes they know have problems -- like sinkholes in the basement or toxic mold in the attic -- but will try to pass them off as perfectly habitable.
"These sellers will lie on the property disclosure statement and represent that the home is free of defects," Gallagher says. "Oftentimes, the inspectors and Realtors are also complicit."
It's dispiriting, but that's why Gallagher says it's important to ask probing questions about the property, like: What type of insurance claims have you made on the house? Or simply: Why are you selling the home?
"When there isn't a very good reason for the sale, that can be a red flag," Gallagher says.
But maybe, you might think, a con artist would invent a great reason for the sale, and it's true that a professional con artist likely would. According to Gallagher, most home sellers who are trying to scam you don't have a lot of practice, and they may tell the truth or stumble on their answers.
"You usually aren't dealing with homeowners who have been grifters their whole lives," Gallagher says.
Understand the details. You think you do. But be honest with yourself. Do you really know what you're getting into?
Plenty of real estate transactions are pretty straightforward, especially if you've done your homework, understand the type of mortgage you're getting and have a good real estate agent guiding you through the process. But the more complex a transaction is, or the more murky everything seems, the more you need to slow down and educate yourself or find trusted friends and associates who can help you understand what you're buying, selling or renting.
Deborah Porter, a marketer in Las Vegas, says she wishes she'd known more about a property she tried to lease to own when she moved to the city in 2003. Turns out, the person touting the deal didn't actually own the property. She ended up having to sue to get her $10,000 deposit back.
Since being duped, Porter says she has learned how to look up property information and find it through a title company, which can always tell you who legitimately owns real estate. She has also read up on her local real estate market.
"False ownership is an epidemic here in Las Vegas because so many owners are underwater and have either abandoned their property or it's gone back to an inattentive bank. Scammers renting and selling homes that they don't own is rampant," Porter says. "It's almost imperative that you ask to see proof of mortgage statement before turning over any money."
Listen to your gut. You think you will, but you might not, especially if you really, really love the property.
All of Gallagher's clients who fell victim to scams end up saying some version of either, "I had a bad feeling about them but ignored it," or, "In hindsight, I should have known ... "
Which is why Gallagher says: "If you think something seems shady, it probably is."
Becky Walzak, president of rjbWalzak Consulting, a risk management company in Deerfield Beach, Florida, seconds that advice.
Some loan officers and real estate agents occasionally encourage the homebuyer to lie to look better on a loan application. That may get you the house or rental, but it also means you're now a co-scammer, which could get you in trouble with a lender later if your lie-to-loan scheme is uncovered.
"If you're uncomfortable with a transaction, you need to walk away," Walzak says.
This is especially true with rentals, according to Rand.
"The reason you see a lot of scams with rentals is that it's the only real estate transaction usually done without an attorney," he says.
But with houses, it's much less likely, Rand says. "Banks are going to make sure you don't buy something you don't actually own. In fact, they're checking you out to make sure you aren't scamming them," he says.
More From US News & World Report
