Real Estate Scams And How To Prevent Them
Just like any other industry, the real estate industry and the property market have their own fair share of scammers defrauding potential property buyers and renters and robbing them of their hard-earned money. Because real estate transactions usually involve the exchange of huge sums of money, people use false information and misrepresentations to take advantage of others in real estate transactions. These fraudsters are creative, cunning, and non-discriminating and they are even getting more complex in how they target people. It is very important to you as a buyer to be able to identify these scams and avoid them at all costs. We will go through some of these real estate scams, how you can identify them and avoid them. Real estate scams are way too many and not all of them are discussed in this article. We will discuss the most common ones to keep you informed and put you on alert when dealing with other people concerning real estate transactions.
Common Real Estate Scams
1. Rental listing scam
There are many instances where people pay rent for short or long term stay and they get to the place only to find out the property in question does not exist or it is being occupied by the rightful owner or tenant. This is frighteningly common when it comes to rental property scams. With this type of fraud, the scammer puts up rent property listings that are fictitious and doesn’t exist or they take pictures of other people’s properties and they list it elsewhere as their own. They have no interest in the home and they also have no right to rent it out. They either identify themselves as the property owner or the agent contracted to rent out the property. They may require you to make an initial deposit or transfer an amount of money to them to hold as a deposit, usually promising to return it if you decide not to rent. Once they receive the money, that will be the end. You will not hear from them again or when it is time to claim your rented property, you will then realize it belongs to another person or doesn’t even exist. A reputable landlord will never take money from you just to see the property.
2. Payment/wire fraud
Electronic transactions have become part of our daily life and it’s widely used due to its ease and convenience. Buyers and sellers don’t need to carry huge sums of money around making it favorable for both parties. Real estate payment transactions are often very huge making them attractive for scammers. When buying a property, it is not uncommon for the buyer to wire payment to the seller’s bank. Here’s how wired fraud works. A person claiming to be your real estate agent or bank call, texts, or emails you with instructions on where to send your money. It might look legitimate to you because it came right at the time you were about to make significant payments on that specific date to close the sale. Unknowingly to you, the fraudsters may have hacked into your email or that of your agents. The scammer may have set up fake email addresses, banking details, phone numbers, and anything else they need to appear genuine. On your part, you follow the instructions and wire the transfer to the account provided, and before you realize that you have been scammed, the fraudsters are nowhere to be found.
3. The invisible home
When agents have properties in the market but they can’t divulge the whole details about the property for one reason or another like an address or other verifiable details, it might probably be a scam. Most of the time, they have all the fancy details that a typical buyer wants to hear like the furnishing and amenities but they don’t really have anything that you can cross-reference with. When there is a typical seller’s market, buyers become desperate and they might consider the idea of putting down an offer on a property like this and that is when the scam comes in. The agent may demand some sort of deposit as a show of good faith and seriousness and once you do, that will be the end of it.
4. Mortgage relief scam
There are scammers who target people having trouble paying their mortgage. When you buy your home using mortgage financing and you are faced with difficulty paying back the mortgage, your home may be up for foreclosure and you might lose your home. In the event of this unfortunate circumstance, people become desperate to save their homes and that is also an avenue for scammers to take advantage of the situation. They will contact you and identify themselves as working with a government or financial institution and then promise a quick fix for your mortgage problem. They promise to reduce a homeowner’s mortgage payment for a large upfront payment. Once the payment is done, the fraudster disappears leaving the homeowner in a worse financial situation than before.
5. Defect cover-up
This is when property sellers intentionally try to cover up or fail to disclose major defects about the property to the buyer. The defects may be in relation to molds, pest infections, water damage, and others. Scammers in many of these instances may discourage or deny you the ability to conduct a home inspection.
How Do You Know If You Are Getting Scammed?
1. When there are last-minute changes to where the funds are being transferred or the payee. Legitimate real estate transactions usually do not change payment and bank details at the last minute because accredited real estate professionals have the payment banks that they deal with on daily basis. They will therefore not change their mind all of a sudden when a payment is about to be made. When payment and bank details change at the last minute, it’s time to start raising eyebrows and ask questions.
2. If the person won’t allow you to talk to your lawyer prior to closing the deal. Anytime a real estate agent or property seller has an issue with you verifying information and seeking advice from your lawyer, there is something probably wrong with the whole deal. Question the whole deal and look the other way.
3. If the person only wants to communicate with you via email. No serious company, agent, or property owner will prefer communicating with you only by email. They will prefer to talk to you on phone and in person. When engaging with someone who strictly prefers email communication, there is a high possibility you are dealing with a fraudster
4. Rush deals where the seller is in a rush to close the deal. Buying a property entails a lot that you need to understand and you have every right to take your time to review every detail before you make a commitment. You shouldn’t feel pressured throughout the entire process to make rushed decisions, especially when it comes to sending huge amounts of money. If the person you are dealing with encourages you to do things in a rush without taking a careful look, you have to think twice about the transaction.
5. Request for a deposit before the property visit. No serious property owner or agent will demand payment upfront before scheduling a property visit. When there is pressure on you to make such a payment, it’s time to reconsider dealing with such people.
6. Unwillingness to provide paperwork. You have to be very suspicious if a supposed agent or property owner is reluctant to show the property’s paperwork. As a matter of fact, it should be one of the important things that should be provided for you to ascertain the legitimacy of the property.
How to Avoid Getting Scammed
1. The best defense against fraudsters is common sense. If a deal sounds too good to be true, it probably is until you can prove otherwise. It’s best to trust your instinct when something doesn’t feel right and do your due diligence. Even when you are dealing with a friend or family member and you sense an unusual activity, it’s best to lay back, ask questions and do your background check to be sure.
2. You cannot trust a sudden change in wiring information and never agree to send money to someone you haven’t met in person. Whenever you receive contrary information to transfer money to another account or forward sensitive information, always call your real estate agent on the usual number he calls you on or meet your real estate agent in person to verify that the transfer information is correct. Double-check email addresses when communicating with anyone involved in the transaction to make sure that it is the same email address you have been communicating with.
3. Use accredited and licensed real estate professionals when doing real estate transactions who will protect you and your hard-earned money. This means you have to do some research and do everything you can to know that you are dealing with a legitimate real estate company, realtor, real estate agent, property manager and mortgage lender, or the homeowner directly. When looking for long-term rentals, use established and well-known rental management, company, or agents to avoid renting properties that do not exist or actually belongs to another person.
4. Always search for properties that have been listed by well-known agencies and companies and websites like Devtraco Limited. Only deal with trusted and well-known institutions because real estate investment is one of the biggest emotional and financial decisions that you are ever going to make. If you have doubt about a property’s existence, always insist on inspecting the property yourself or let someone inspect it on your behalf if you can’t do it yourself.
5. If someone is trying to sell a property to you and you can’t get all the details to verify, they are scamming you. A legitimate seller or renter will make available all the necessary details you need to conduct your own investigations and make an informed decision.
6. Never sign a document unless you have thoroughly read it and you understand it. If you read a document and you have doubts, ask for clarification. If possible, take the documents to your lawyer to go through, explain things to you and give you advice on how to proceed.
7. Never sign blank documents that could later be filled in with false information. make sure you scan through all pages in every document to determine if there are no blank spaces in the documents that can be filled in later on by another person.
8. When asked to sign any documents, always get original copies. Having original copies of contracts and documents can be used to back your claims in the event of future issues.
9. You don’t need to pay a deposit just to see the home. Insist in visiting and inspecting the property. If the person keeps postponing or tells you that he is out of the country and cannot schedule a property viewing, don’t continue with the transaction. The bottom line, when you proceed to make a payment, you will lose your money.
10. If you are having difficulty repaying your mortgage and your property is facing foreclosure, talk to your mortgage lender or bank about restructuring the loan. Don’t accommodate people who promise a quick fix.
What To Do When You Get Scammed
When you get into an unfortunate situation and you suspect you have been scammed, alert the appropriate authorities as soon as possible. You can alert your bank, local authorities like the police, and the Criminal Investigation Department (CID). You shouldn’t wait till the issue gets out of hand before you report. Timing is very important in situations like this because early detection and reporting can help stop the fraudsters from withdrawing the funds and retrieve your money.
Real estate scams are very real and fraudsters are getting sophisticated in targeting and scamming individuals. As a party in any real estate transaction, you have to be cautious, ask questions, seek advice and at any sign of suspicious activity, pull back or do your due diligence. The above-discussed points are some of the scams and how to prevent them. Not all real estate related scams are discussed in this post. We will discuss more on other real estate fraud in future posts.
As a trusted real estate developer with over 25 years of industry experience and reputation, you can contact us for your housing needs in Accra. Book a viewing of any of our properties and enjoy Devtraco Living.