Cybersecurity incidents may have a dramatic and profound impact on the lives of individuals and businesses. Many times, business owners and individuals are left trying to pick up the pieces after scammers are long gone with their money. The real estate industry is full of big money and substantial opportunities. However, criminals prey on the uninformed, and use creative ways to steal a lot of money through real estate scams targeting buyers, sellers, or realtors.
Real estate investment scams and home buying scams are some of the most notorious fraudulent practices on the market today. Three real estate scams to avoid include:
- Down Payment Stolen Before Mortgage Closing Date
Scammers can fool people into thinking they are their real estate agents and trick them into sending down payment monies that will be unretrievable. The hacker enters your realtor’s email account and sends instructions on where to wire your closing funds. You follow these instructions. Then, the money vanishes into an untraceable abyss overseas.
To prevent this particular scam, eliminate email correspondence for sensitive issues and information. Or, use encrypted email or some setup that requires more sophisticated login credentials to gain access to the communication. Also, you can request a phone call for money-wiring instructions. And be sure to make this request over the phone. Emailed money instructions should always be confirmed by phone—with both your realtor and the bank receiving the money. Then, get verification of the transfer as soon as possible.
- Real Estate Bait and Switch Scheme
The “bait and switch” scam occurs when a potential buyer offers an “above market value” price to the home seller. The seller then excitedly signs on the dotted line. However, the unscrupulous scammer has no intention to purchase the house at this price. Once the seller has signed the contract, the seller is committed to that buyer for a specified time. When that period ends, the scammer requests to extend the contract to work out closing details. Then, the seller agrees to the extension, all the while paying taxes, utilities, insurance, and maintenance costs.
Then, the bait and switch: the scammer comes back to the seller saying the price no longer works and asks for a reduction to below market value. They threaten to cancel if their demands are not met. The stressed-out seller, plagued by the passage of time and ongoing costs, agrees to the reduction.
Avoid the bait and switch scheme by confirming proof of funds at the time of executing the contract. Refuse to grant unreasonable extensions or reductions. Set expectations for potential buyers early on. If an extension or modification is based on condition, request that an inspector or general contractor verify the claims.
- Arc Fault Breaker Swap Out Scam
This is a fraudulent practice commonly seen in the flipping industry. New building codes require that electrical boxes contain arc fault breakers to prevent electrical fires. While they are safer than traditional breakers, the arc fault breakers can add significant cost to the renovation. Once the issuance of a use and occupancy permit is completed, some flippers return to the home and replace the costly arc fault breakers with the less expensive traditional breakers.
These are just a few of many real estate scams. Be on the lookout for unscrupulous fraudsters and take steps to mitigate scams. Hire an internet fraud or real estate litigation attorney to hold these criminals accountable.