Looking for a home, whether you're buying or renting, is stressful at the best of times. Add Covid and the potential of becoming victim to a real estate scam into the equation, and that stress has just tripled. Fortunately, although real estate scams are on the rise, there are reliable ways to protect yourself against them. And remember: scammers thrive off panic and rushed decision, so if there's anything about a housing transaction that doesn't feel right, take a step back and ask a professional's opinion.
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1. Buying sight unseen? Surround yourself with professionals
Normally, tips for avoiding scams will tell you to never close a deal on a home you haven't visited personally. Attending a viewing still the best way to ensure that you don't fall victim to a scam of one kind or another, but it is a fact of Covid-era life that more and more people are prepared to buy a home sight unseen. In fact, Redfin has reported (opens in new tab) that 63 percent of buyers last year made an offer on a home without ever setting foot in it. Covid and the need to socially distance is partly the reason, but an extremely competitive market is another. A buyer may have a better chance of securing a home by submitting an offer as soon as a home has gone on the market.
If you do go down the sight unseen route, you should take all reasonable steps to protect yourself against moving into a property that doesn't match what you saw online, or worse, parting with your money for a home that never existed in the first place.
If you can't view the home, then a family member or friend in the area could prove very useful. Next, hire a buyer's agent who'll be able to check the property's legal owner. Finally, always hire a home inspector to carry out a full inspection of the home you intend to purchase. This will eliminate the possibility of buying somewhere with structural problems, mold that's been painted over, and other issues an unscrupulous seller may fail to disclose.
2. Be on the lookout for sudden, last-minute changes
Even if everything has gone smoothly until now, you need to be on the lookout for last-minute requests to wire your down payment or earnest money to a different bank account from the one that has been agreed. This is a very common scam and it's getting more sophisticated. Typically, scammers are able to intercept legitimate emails between a home buyer and one of the side involved in the home sale process, either a broker, a manger, or the escrow company.
If you receive an email asking you to wire the money asap, citing a 'busy schedule' or sudden change of a bank account, you need to flag it up to your broker/realtor straight away via a phone call. Also, look for telling spelling mistakes or small inconsistencies – even one letter spelled wrong in the company name or website name is usually the sign of a fraud.
3. Renting? Do not wire transfer any money, ever
If you're renting, it's even simpler than that: don't wire money until you're in the rental home, ever. The Federal Trade Commission (opens in new tab) website explains: 'This is the surest sign of a scam. There's never a good reason to wire money to pay a security deposit, application fee, first month's rent, or vacation rental fee. That's true even if they send you a contract first. Wiring money is the same as sending cash — once you send it, you have no way to get it back.'