Real Estate Scams and How To Avoid Them

Your home should always provide a safe, secure, and risk-free place to live. Unfortunately, this isn’t always the case, with real estate scams on the rise. Property scammers are adopting increasingly sophisticated methods to target their victims, deploying highly credible strategies.

The problem has been amplified by the ongoing cost-of-living crisis, which has forced renters and buyers to make quick and often ill-informed decisions in the fear of missing out on affordable housing.

Because everyone deserves to feel safe in their home, we've compiled a list of the most common rental and real estate scams and how to avoid them.

Key Insights

• Real estate scams thrive in a fast-moving property market where consumers feel pressured into making quick decisions.
• The IC3 reported over 9,500 real estate complaint cases in 2023, with total losses exceeding $145 million.
• Keeping up to date with customer reviews and scam alerts can help wise consumers avoid potential real estate scams and sharp practices.

Red Flags of Real Estate Scams

There are a number of red flags that indicate you might be about to fall foul of a real estate scam. These will typically exploit the perception of scarcity and demand rapid action. The best course of action for the wise consumer is to slow down and reconsider your options if you are presented with any of the following scenarios:

• Requests for wire transfers to be made to unknown sources or foreign accounts.
• Claims that properties cannot be viewed due to issues like the owners being overseas.
• Demands for deposits or rent payments without first allowing the tenant to view the property. 
• Properties with duplicate online listings or posts featuring suspicious-looking email addresses posing as brokers.
• Excessive urgency to close the deal.

But it's not just buyers and tenants at risk of being scammed. Sellers and landlords can also be victims of real estate scams. Typical red flags this cohort should look out for to avoid scams include:

• Tenants asking to rent a property without first viewing the property.
• Potential renters claiming they are out-of-town and promising to forward payments for deposits and rent using a cashier's check.
• Individuals making overpayments and then demanding a refund.

Real Estate Scams to Look Out For 

Real estate fraud comes in many guises. However, the following scams are amongst the most frequent examples.

Rental listing scams

Property scammers often create fake ads for properties on popular property listing websites. They lure potential tenants in with compelling photos and descriptions, often copying legitimate listings from other sites. 

A recent consumer review on PissedConsumer describes how a tenant almost fell victim to one of Zillow scams. The consumer shared that ‘the unit was described as having 1100 square feet”. However, soon the reviewer realized they were being scammed when the property broker started sending contradictory information relating to the size and location of the property. 

She sent me fraudulent pictures of construction of three high-rise buildings going up across the street and one behind the house. These construction sites do not exist.

When questioned, the property broker quickly tried to dissuade the tenant from renting the apartment before informing them that it had already been rented out. Luckily, the tenant hadn't sent any payments. 

Escrow wire fraud

This type of fraud occurs when scammers posing as fake property brokers hack into legitimate email communications about real estate transactions and send official-looking messages to property buyers with instructions to wire funds to a fraudulent bank account.

This post on NBC Los Angeles highlights how easy it is to fall victim to this sophisticated type of fraud, particularly in a tight and quickly-moving property market. Having been outbid on properties three times before, the home buyer felt the need to move fast.

It was very difficult, it was challenging, it was a seller’s market and we were a buyer, not much inventory to choose from.

The scam completely blindsided the buyer. After transferring $160,000 as per the instructions on the fake email, he believed the escrow process had gone smoothly. Then, his real broker contacted him, asking for the payment to be made.

Loan flipping and predatory lenders

Loan flipping refers to a predatory practice where lenders persuade borrowers to repeatedly refinance a loan. Often targeting elderly or financially vulnerable individuals, which is why it’s often referred to as senior scam. Each refinancing round generates fees, interest, and other costs that benefit the lender while increasing the borrower's debt. These predatory lenders will often use high-pressure tactics to exploit the borrower's lack of understanding and put them at risk of entering a cycle of debt that puts them at risk of losing their homes.

Deposit scams

Deposit scams ask prospective tenants to pay upfront deposits or fees to secure properties that are potentially not available or even real. Scammers often create a sense of urgency, claiming high demand for the property to pressure victims into making quick transactions. 

In this recent review on PissedConsumer, a user reports that they paid a $500 deposit and $500 upfront rent for a property they found online. When they contacted the broker to confirm their move-in date, they were informed that the listing was incorrect and the rent would be increased.

Now when we call to tell them we will be there on 3rd they increased rent to $700 claiming it was a typo (on 4 rental sites) where listing was on for over 100 days and at the time we were speaking. Then they changed all prices to match their lie.

Adding insult to injury, the reviewer was told the deposit was non-refundable despite this information not being available on the site.

Hidden property damage

Hidden property damage scams occur when sellers or landlords conceal major issues with their properties, such as structural damage, mold, or faulty electrics. Scammers may conceal problems with cosmetic fixes or simply just misrepresent the property's condition. These undisclosed issues often only become apparent after the buyer or tenant takes over the property and finds themselves having to pay for costly repairs or renovations.

This recent review of the rental service Invitation Homes on PissedConsumer highlights a number of issues that should have been disclosed and resolved before the property was rented out. These include problems with the windows, air conditioning, roof, mold, and much more. Horrifyingly, the tenant also reports ongoing problems with rats.

Another significant problem is the rodents that are running around in the attic and within the walls, which has been happening since before I moved in.

Mortgage and foreclosure relief scams

Posing as government officials, attorneys, or specialized foreclosure relief companies, these scammers cynically target homeowners struggling with their mortgage payments. Mortgage and foreclosure relief scams often charge high fees for services that may never materialize. Before engaging with a foreclosure relief company, homeowners are advised to check out their trustworthy reviews, and consult with certified housing counselors to avoid unnecessary fees and pressure tactics.

Deed fraud

Deed fraud or title fraud involves a scammer illegally transferring ownership of a property. This is done by forging the owner's signature on documents and making it appear as if they have legal rights to the property. This enables them to fraudulently take out loans against the property or illegally sell it to unsuspecting buyers.

Steps to Take if You’re a Victim of a Real Estate Scam

Guidance from the FBI advises victims of real estate fraud to follow these steps:

• You should file a report with your local police and the FBI’s Internet Crime Complaint Center (IC3), which records official reports of real estate fraud.
• Notify your bank, credit card providers, and any other financial service provider involved in the fraudulent transaction immediately to potentially reverse any payments and halt future transactions.
• If identity theft has been involved in the scam, you may need to set up fraud alerts with the various credit reporting agencies to protect your credit ratings and financial reputation.
• Keep all records and receipts of your communications and transactions connected to your fake real estate experience for future reference and to assist in potential legal proceedings.

Fight Back Against Property Fraud

If you've been a victim of real estate fraud, you can write a review highlighting your consumer issues on PissedConsumer. Your consumer insights and online reviews will help others avoid being scammed by fake property deals, home buying scams, and other types of real estate fraud, ensuring more people can stay "as safe as houses" in their homes.