For most people, real estate accounts for larger sums of money paid out on a monthly basis than all other expenses and liabilities. Adding in the four and five-digit lump sums paid as mortgage down payments and rental deposits and it is easy to see why criminals and unscrupulous businesses often target real estate transactions.

If you or a loved one are in the process of managing a real estate transaction, whether it be a sale or a rental, be vigilant and avoid the following four most frequently encountered real estate scams.

1. Escrow Imposters

The Way it Works

There are several versions of this crime. The most common involves a third party impersonating a legitimate law firm, title company or other professional organization involved with a real estate transaction. For example, you may be working with John Doe Title Company. In this case, a scammer may contact you with an email from John Dao Title Company and request that you wire money to a specific account number. Some people may not notice the subtle difference in spelling and wire the money to the scammer’s account.

Another version of this crime involves hacker skills on the part of the perpetrator. In this case, the criminals hack into the email system of the transaction advisor and know what stage the transaction is in. Once the transaction reaches the stage when a payment is due from the buyer, the hacker sends an email to the buyer, using the lawyer or title company’s exact email address, with the wrong bank account details. In this case, it is often impossible for the buyer to detect fraud because the email address is exactly the same as the legitimate email address.

What to do

Carefully check emailed instructions for correct spelling and never rush when making wire transfers. Before sending money, always call the other party and confirm the wire instructions by phone or in person with the real estate attorney, title company or other trusted entity managing your real estate transaction. If they are being impersonated, they won’t confirm the email and you will know it is a fraud. In that case, you can report the fraud to the FBI’s Internet Crime Complaint Center (IC3). They won’t be able to reply to a single case, however, they will include the data as part of their internal efforts to combat fraud.

2. Rental Deposit Fraud

The Way it Works

Buyers making down payments for home purchases are not the only victims of scammers – potential rental tenants are often targeted by fraudsters who collect their deposit and disappear. This scam usually starts with an attractive apartment or house listed for rent on Craigslist or a similar free listing site. In many of these scams, the person making the listing will text the potential tenant to say that they can only show the property if a rental deposit is made. Once that deposit is made, the person who made the listing disappears – along with the listing.

Millions of people have already been scammed this way and the trend looks to continue.

What to do

Be wary of agreeing to pay someone whom you have never met. Insist on communicating in person or by phone – never conduct business purely by text or messenger since this is the way most rent deposit scammers communicate. Insist on at least speaking to them or preferably meeting them in person. Always wait until after signing a lease agreement before making a rental deposit on a property. Finally, don’t hesitate to stop speaking to a property owner if your instinct tells you that you are doing business with a fraudster.

“Be wary of agreeing to pay someone whom you have never met.”

3. Mortgage Fraud: Loan Flipping Scams

The Way it Works

Licensed mortgage brokers have a fiduciary responsibility to ensure that their clients, those who are responsible for paying the loan, benefit from the arrangement. However, unscrupulous mortgage brokers engage in a number of predatory loan practices that hurt the financial standing of their clients. One of these is loan flipping, the act of coercing a homeowner into refinancing their mortgage when doing so is not in their best interest. At first, the transaction will result in several thousands of dollars being loaned to the homeowner. Unfortunately, this initial infusion of cash is quickly reduced by high-interest rate payments and hidden fees. There may even be prepayment penalties that force the homeowner to incur fees if he or she chooses to pay off the loan early! In many scenarios, a monthly payment that is higher than the others is may be due in two to five years from the onset of the mortgage. These so-called balloon payments replace the original twenty or thirty-year terms typical of conventional banks with a mortgage that effectively has to be paid off in a few years’ time. If the homeowner does not have the money to pay the balloon payment, they can lose the house. Of course, the unscrupulous loan brokers are always willing to loop the homeowner back into another “flipped” mortgage where they are once again trapped by high fees, extortionate interest rates and crippling balloon payments.

What to do

People can avoid mortgage scams by recognizing the pattern many of these scammers use to lure homeowners. First, they will claim to offer mortgage relief or some other solution to the homeowner’s immediate problems. Secondly, they will require personal information (including social security numbers and other confidential data) to be included in a form. They will usually sell this data to other scammers further victimizing the homeowner. Then, they will likely ask you to pay a processing fee.

Avoid scammers by sticking to the major main street banks or trusted mortgage lenders in your business circle. Always look at the fine print and be wary of any deal that seems too good to be true.

The Importance of Legal Counsel

Working with an experienced real estate attorney will help reduce your chances of becoming a victim of real estate-related scams and real estate fraud. Hire an attorney early in the process when you buy, rent or remortgage a property. Your attorney can review any legally binding contracts, draft addenda to agreements and help identify areas of risk. Attempting to “go it alone” can be dangerous – hire an attorney to protect your best interests.

South Florida Law

At South Florida Law, we are committed to protecting our clients from transactional scams when they are engaged in a house purchase, rental agreement or mortgage refinance. We help individuals and businesses by advising them, reviewing documentation and representing them with their best interests in mind. In cases where it is necessary to navigate through obstacles in order to assist our clients, we have the big firm resources to dedicate the time and effort where it is needed. At the same time, we provide personalized service and attention to detail in your case at a price point that can only be achieved with a boutique firm of our size. Do you have plans to buy, rent or remortgage in Miami, the Keys, Broward or Palm Beach County? If so, you need an experienced Florida business attorney you can rely on. Call South Florida Law today on (954) 900-8885 or reach out to us via our contact form.