Real estate scams have been proliferating all over the country, and even the most astute and vigilant among us can fall prey to the scammers. From young people, seeking their first rental in Manhattan, to older folks facing foreclosure—all are potential victims. Never assume that you are too smart or too experienced to fall into a trap: There’s always a new scam and a new twist on an old scam to ensnare the unwary. Here are some commonly occurring scams.
One of the oldest tricks in the book, which still exists because people continue to fall for it, is the fake listing. Often appearing on Craigslist, its genesis is often a legitimate ad, posted on another website by a legitimate broker. The scammer real estate agent copies the photos and text and enters the Craigslist listing under the scammer’s name. Sometimes, it’s only text, or text with a picture of a house that is just for sale. When you respond to the ad for this wonderful rental you are told that it no longer exists but the dishonest agent tells you that he or she will show you something else. Bait and switch! How to guard against this? If you think that you have seen the pictures and text elsewhere then you probably have. If the pictures look blurry, then they were probably copied from another site. What will the dishonest agent show to you in its place? Anything that the agent has in his or her inventory—not necessarily what you want and certainly not as good as what was advertised. If you are suspicious, then Google the phone number so that you can see if other people have already reported the scam. This scam can also be performed by a non-agent conman who represents himself as the landlord.
An agent advertises an open house for a wonderful apartment. You visit, you fall in love, and you give the agent a non-refundable deposit and money for a credit check, especially after the agent tells you that this wonderful deal won’t last so you must commit to it right now! Then the agent disappears, taking your fee with him. How to guard against this? Don’t ever give money to an agent without signing a lease and without first ascertaining who owns the property and that the agent is in fact authorized to represent the owner. You want a lease signed by the owner, not by the agent.
Dishonest agents sometimes “forget” to state that a rental is “no fee.” Then, the agent collects from you and from the landlord. A few months ago, I collected a rental fee from the tenants; later, I was told that the landlord would pay my fee. I immediately returned the tenants’ fee to them and collected from the landlord instead.
Be instantly suspicious if an advertised apartment for rent or sale is priced below comparable apartments in the area. Why is there a disparity? Does the building have a valid certificate of occupancy? Is there a toxic waste dump next door? Who actually owns the apartment? One interesting scam goes as follows: The owner of the apartment leases the apartment to John; John sublets the apartment to Robert. Very near the end of his sub-tenancy, Robert advertises the apartment at a very attractive rent and says that he is the owner. You (and several other people) sign leases with Robert and give Robert deposits; Robert vacates the apartment, taking all of the deposits with him. John returns to the apartment, knowing nothing about what Robert has done. How to prevent this? Check the ownership of the apartment and make sure that you are signing a lease with the owner, not with the tenant or sub-tenant. Also, remember that if you are signing a sublease for a co-op apartment then you cannot move in unless the co-op board has approved your sub-tenancy.
Deceptive advertising: Barbara wants to sell her apartment. She advertises it as a three-bedroom apartment but it is really two bedrooms plus a small windowed dining area or den. Don’t pay a three-bedroom price for what is known as a “two convertible to three” apartment. Check the building’s certificate of occupancy—is the apartment two bedrooms or is it three bedrooms? In other words, get what you are paying for.
Some prospective renters are foolish enough to rent apartments without actually seeing them. In response to your inquiry about an advertised apartment, the scammer who claims to be the landlord will give you the address and tell you to visit the building whose picture is in the ad but that he can’t give you access to the apartment at this time. Why not? He’s travelling, there is still another tenant inside the apartment, the apartment is being painted etc. However, he says that for you to secure the apartment (or even to see it in the future), you must wire him deposit money or give him your credit card number or bank account information. Of course, he must have your Social Security number as well. Or, he wants cash up front. Can you believe that anyone would be so foolish as to fall for this? But many people do.
You’re panicked: Your home is about to go into foreclosure. But the (fake) mortgage processing company is here to save the day in return for a five-figure fee with the promise that it will magically arrange to modify your loan so that you can keep your house. The company takes your money and disappears. This is called the Loan Modification Scheme. Better yet: A cold-calling “lawyer” offers an owner threatened with foreclosure the chance to participate in a mass lawsuit against a lender and promises to lower your mortgage payments or to free you from payments entirely—in exchange for up-front “legal fees,” or access to your bank account or credit card. You may be told to pay the money to the “lawyer” instead of to your mortgage holder. You pay the money and that’s the last you hear from the “lawyer.” Or, in the fake leaseback deal, you surrender the title or deed to your home because you have been promised that you can rent it or buy it back in the future.
A desperate owner, about to lose his home via foreclosure, offers to rent it to you. When the foreclosure occurs, you are evicted! So, before you rent a home, check it out for filing of a Notice of Default or Notice of Trustee Sale. Remember, foreclosures happen, even in the most affluent areas.
If you are buying a property or co-op stock shares, use an attorney! Never give contract deposit monies directly to a “seller” or to a “seller’s agent.” Deposit money belongs in the seller’s attorney’s escrow account.
This brings us to title fraud, which also involves identity theft. The scammer generates fake documents that make the scammer appear to be the owner, and then secures a new mortgage on the property. With this secured loan, the scammer (i.e., the fake owner/seller) takes the cash and leaves the real owner to pay the mortgage. Guard against this by buying title insurance.
One of my personal favorites is the many emails that I receive from foreigners who want to buy an expensive house that I have advertised on the internet. Sight unseen! Love at first sight! Will send me a check! English not too good, but money talks in all languages! They won’t speak with me on the phone—“time differences, you know” but they do send me lots of personal and financial information. If they do send a deposit check, then I know that it’s in the wrong amount (too much) and that they will request a refund of the overpayment via wire transfer so the recipient can’t be traced. Of course, the check is a forgery. These scams are often done directly with the sellers.
Driving around the neighborhood, you may see illegally posted signs (on telephone poles, for example) from “investors” offering to buy your property fast—all cash! Most likely, the “investor” will sign a contract with you and then assign it to a third party in exchange for a fee. Protect yourself by not including an assignment clause in your contract, by checking out the “investor’s” bank information—does he have an account? Is there enough money in it to cover the sale? Does his “bank” really exist? Make sure that you have collected, via certified check, a large, non-refundable contract deposit. If he won’t agree to these terms, then don’t do the deal.
Even if you are doing a legitimate deal with reputable attorneys and real estate agents, be aware that scammers have been known to hack into email accounts of parties to a deal in order to create a fraudulent wire transfer. The scammer sends an email stating that the wiring instructions have changed, so the duped buyer wires the money to the hacker’s account. Guard against this by checking with other parties to the deal to ascertain that the change in instruction is genuine.
Have you read enough? I could go on and on. If you find yourself in a questionable situation, trust your gut: If it’s too good to be true then it’s not what it purports to be. Be alert, be aware and never assume that you are smarter than the scammer!
By Vivian J. Oleen, Associate Broker, Sopher Realty
