Without the right information, home buyers can become vulnerable to real estate scams and frauds when buying a house. The home buying process can bring up a wide range of emotions for prospective buyers, and this makes the housing market a prime target for real estate scams. If you’re in the market for a new home, it’s important to use a professional Realtor who can walk you through the home buying process. But even with the best advice, there are definitely red flags every buyer should be aware of.
The following are some of the most common (and costly) real estate scams of 2022.
The Bait-And-Switch Loan Rate Scam
The bait-and-switch loan rate scam is a tactic used by unscrupulous mortgage lenders to lock borrowers into loans they otherwise wouldn’t choose.
Here’s how it works:
A lender will conditionally offer a homebuyer pre-approval for a loan pending a full review of their credit. However, what they don’t mention is the fine print stated in the terms of service: the homebuyer’s deposit required to start the application process will become non-refundable should they choose to back out after a specific date.
The lender then reviews the buyer’s application and will approve them for a loan, but at a higher rate than initially quoted. Many people don’t read the terms of service unless expressly told to do so (and an honest mortgage broker would encourage their clients in this direction).
Once past the cancellation date, the buyer feels pressured to accept this new rate to avoid losing their deposit.
How to Avoid a Bait-And-Switch Loan Rate Scam
Use a trusted, proven lender. Your real estate agent should have relationships with reputable lenders, which is another reason to use an experienced, well-established Realtor. At Weatherford Realty Group, we have an extensive network of relationships with lenders we trust. Our satisfied clients are a testament to the value we place on providing excellent home lending resources.
Florida’s Attorney General website includes information and reporting instructions:
If a homeowner believes he or she has been taken advantage of by a disreputable company, he or she should call the Florida Attorney General’s fraud hotline at 1-866-9-NO-SCAM or file a complaint online at myfloridalegal.com.
Wire Transfer Real Estate Scam
The deposit or closing wire transfer scam has been around for years. It is still prevalent in real estate, where buyers and sellers are often required to use wire transfers for large transactions.
What is a Wire Transfer Real Estate Scam?
Hackers are constantly looking for easy ways to steal money from unsuspecting victims. One of the most common scams involves hacking into mortgage brokers’ email accounts which can lead to huge financial losses.
In one potential scenario, the hacker would break into a mortgage brokers main email account and begin to monitor the email activity. All they need is a basic understanding of the real estate transaction process to send an email to a buyer instructing them to complete a wire transfer as the next step toward the purchase of the property they are interested in.
The email would appear to be coming from the mortgage brokerage. Unless the home buyer makes a phone call to the mortgage company to verify, the buyer might move forward with the wire transfer and potentially lose this money. Once sent, wire transfers are difficult to recover.
Red Flags for Wire Transfer Real Estate Scams
This is just one example of how a wire transfer scam could take place. You can add a layer of safety by calling for verification if funds are ever requested through an email. It’s good habit to get into and would be beneficial in numerous purchase situations (in addition to real estate).
Another tip is to always call a number you already have on hand (or look up through Google Business). Don’t use a phone number listed on the email in question.
Undisclosed Structural Damage or Disrepair
This may not seem like an actual scam to some, but it should be included.
The cost of repairing structural damage (or other hidden damage) can be high, especially if it’s not discovered until there is a major incident. Undisclosed damage may not be visible to the naked eye and can only be detected by a detailed inspection of the home.
So how is this a potential scam?
Scenario 1: An unscrupulous seller could pretend they “didn’t know”, or “didn’t remember” to disclose certain property information. It could be a recent roof leak they fixed on their own or a plumbing patchwork job that might be a temporary solution for a larger issue. In this scenario the seller is hoping the home passes inspection without these unmentioned items being detected.
Scenario 2: An unscrupulous real estate agent could team up with a home inspector who is prone to overlook items, either intentionally or unintentionally, in an effort to finalize the real estate deal quickly. Doing so sidesteps the negotiations the buyer and seller would be involved in if the damage or disrepair had been disclosed.
How to Avoid Undisclosed Damage Scams
The best way to avoid undisclosed damage or disrepair scams is to be aware of the possibility. Use a home inspector with a solid reputation and positive reviews. If you’re a home buyer, the home inspection is one of the most important parts of the real estate deal. This is where you decide if the numbers make sense, and in order for you to calculate that properly, you need to be aware of all damage and disrepair.
Once you have this information, your real estate agent can help you negotiate for the needed repairs. If a number isn’t agreed upon, the buyer should have the right to back out of the deal.
Finding undisclosed damage months (or years) after the property is purchased makes it much more difficult to pinpoint the timeline of the damage, and the new homeowner is often stuck with the repair bill
How to Avoid Undisclosed Damage Scams
These scenarios are just three of the most common (and most costly) real estate scams to be aware of if you’re looking at homes for sale in SW Florida.
Weatherford Real Estate Group has a reputation built on the trust of our clients. We have over two decades of experience serving buyers and sellers looking for homes for sale in Labelle, Florida, Fort Myers, Florida, Cape Coral, Florida and the entire SW Florida area. If you’re buying or selling, we’d love to work with you.
Questions or comments? Call us today, or take a look at our new MLS listings to find available properties in Lee County, Hendry County and Collier County
Stephanie Sposato
Stephanie Sposato is a Labelle, Florida resident, real estate and business investor, and owner / broker with Weatherford Realty Group. Stephanie is an award-winning Realtor with over two decades of experience working with investors, first time home buyers and developers in SW Florida.
