Real estate scams can occur during the rental, mortgage application, and foreclosure processes. Over the years, scam artists have become extremely adept at devising believable cons designed to swindle even the most discerning consumers. The best way to avoid a real estate scam is to know the warning signs. Below are some common real estate scams to steer clear of.
- Application Fee Scam: An individual will advertise a home or apartment for rent at a very attractive rate and will require all interested applicants to fill out an application and pay a background check fee. Application fees are common practices and are designed to cover the out-of-pocket costs associated with running a credit check and criminal history scan. However, with the application fee scam, the landlord is intentionally collecting massive amounts of application fees from excited potential tenants without any intent of renting the property to them. Instead of running the background check and initiating the lease-signing process, the landlord pockets the application fee and tells the applicants they are denied.
- Illegal Renter Scam: As a landlord, you want to rent your property to someone who is trustworthy, has a clean background, and is able to pay bills on time. An attractive prospective tenant expresses interest and fills out the application. Everything on the application looks great, and you allow the person to rent your property. However, you later find that the person lied on the application or that the person whose information appeared on the application is not the person who moved into your apartment. This creates potential property damage issues, as well as difficulty with evicting illegal renters.
- Fake Owner Scam: Many scam artists become aware of apartments and houses that are sitting empty, either because they are in foreclosure or are second homes. The scam artist finds a way to gain access to the apartment, such as through having the locks changed or finding a spare key. The scammer then lies and claims to be the owner or an agent of the owner and lists the home for rent. An unsuspecting tenant rents the home, pays rent to the scam artist, and is later evicted when the true owner finds out about the scam.
- Loan Fraud: A potential borrower inflates their income, job position, or assets, or even hides liabilities in order to receive low-interest or high-value loans that they would otherwise be unqualified for.
- Appraisal Scam: When trying to sell a property, the owner manipulates certain details in order to inflate the appraisal price. This could include comparing the property to nicer properties that have nothing in common with the appraised property, falsifying property characteristics such as inflating bedroom sizes, and exaggerating market values for the neighborhood.
- Foreclosure Assistance Scams: Recently, scam artists have been creating fake foreclosure assistance programs that purport to be backed by the state or federal government. The programs “promise” to assist homeowners with modifying their mortgage loans in order to save their homes from foreclosure. The scam artists charge fees for workshops and seminars and processing applications. You may find yourself thousands of dollars in the hole, and your house is still stuck in foreclosure.
- Loan Auditing Scams: The scam artist will provide auditing services for a fee. They claim to evaluate loans for ways to reduce interest rates and then negotiate with banks. However, after paying a fee upfront, you never hear from the scammer again.
If you believe you are the victim of a real estate scam, either through the rental, mortgage, or foreclosure process, you need to seek the counsel of a property lawyer immediately. Cease all communication with the scam artist and allow your real estate lawyer to investigate your claims and pursue damages.