How To Avoid Real Estate Scams

Real estate is rife with scammers preying on those needing to sell or in financial distress. Don’t let yourself become a victim.


The FBI recently reported that there were more than 11,300 victims of fraud involving real estate, rentals, or timeshare properties in the US and the damage caused was over $149 million in losses. We’ll give a short overview of some of the most common real estate scams but you should read further to learn how to avoid them.

Common Real Estate Scams


Wire Fraud Scam

Homebuyers are targeted as they begin the process of buying a home. Criminals will hack into an email and or other forms of communication. The goal is to gain access to bank accounts, social security numbers, or other sensitive information. One of the most common tactics is for the scammer to pose as your real estate agent. Their goal is to trick you into wiring funds for closing to a fraudulent account.



Loan-Flipping Scam

Loan-flippers are predatory lenders that convince homeowners to repeatedly refinance their home. They make money by charging high fees and points on every transaction. The promise to the homeowner is a reduction in their term or monthly payment, but will end up with high payments they can’t afford and a drain on their home's equity.


Foreclosure Relief

Foreclosure scams are on the rise due to the hardships many homeowners face due to the COVID-19 pandemic. Scammers have access to public records and can tell if you have entered into pre-foreclosure due to missed mortgage payments. They claim they can help reduce mortgage payments but will charge large upfront fees often leaving homeowners in worse shape than before.


Equity-Stripping Scam

This scam also targets those facing foreclosure. A scammer will promise to pay off your delinquent mortgage by purchasing your home. You get to stay in the home as a renter. You will even have the option to buy back the house when you are financially stable again. Unfortunately, what really happens is the scammer will cash out the existing equity of the home and then disappear.


Home Inspection Scam

Inspections are critical to the real estate process, and scammers know this. They’ve figured out how to insert themselves in the process to make a little extra cash. In essence, an unqualified provider will perform an inspection but hide potential problems with the home. They may not even notice them, because they are just making a little extra money without any qualifications.


Rental Scam

This scam doesn’t really affect homeowners, but we threw it in here in case you decide to sell your home and need to rent. Scammers will list properties online that don’t really exist to trick borrowers into sending them money. Many times they are using Craigslist or social media to lure renters. The pictures may be grabbed from other properties. They will have no connection to the property and will ask for upfront money before you can see the property.


Moving Scams

You need a moving company so you go online to find one. While online, you fill out a form for a moving company estimate. Shortly they send you an estimate. Maybe the estimate is for $5,000 to ship your property from your current home in California to your new property in Arizona. The company shows up and the price is now $10,000. Or they never show up and pocket your deposit.


Title or Deed Scam

This scam can be particularly dangerous. Title or deed fraud involves the involuntary transfer of ownership without the current homeowner being aware of the transfer. The scammer will try to transfer the property ownership to another person or use the title to borrow money using the property as collateral. What makes this fraud so damaging is that you could lose your home in the process.


Mortgage Fraud Scams

Scammers often take advantage of the confusion that happens when you are taking out a mortgage and the mountains of documents that need to b signed. They promise “no string attached” loans, often with low interest rates and no closing costs. But it is a simple bait and switch. Once the loan is finalized you discover higher interest rates and undisclosed fees.

The Hidden Secrets Behind the “We Buy Houses” Signs

One real estate tactic pulls thousands of dollars out of the pocket of sellers.

The process is called wholesaling. While completely legal, many wholesalers employ unscrupulous tactics to pressure homeowners to sell their home well under the value of the home.

There’s a good chance you’ve never heard of a wholesaler when it comes to real estate. In fact, the term itself is a little confusing. Outside of real estate, wholesaling suggests purchasing goods in bulk and then distributing and re-selling those goods for a profit.

Wholesaling in real estate is a little different. The concept still applies. An individual promises to find houses at a discount and resells those houses to investors. It can be a legitimate business, but the tactics some wholesalers use can be dishonest at best.

The vast majority of wholesalers have no intention of buying your house!

Here’s their plan:

They get your house under contract at a much lower price, then sell or assign that contract to a true investor. The investor is really the one who is buying your house. The wholesaler is just the middleman. Let’s put some real numbers to it, so you can see it in action.

Your house is worth $400,000 in the traditional market, but you need to get out now. You know the house needs a substantial amount of work and $400k would only be the value if it was in pristine condition.

The wholesaler will look at your home and cut the value to 70%. Then they will deduct what they think are the repair costs.

So the offer they give you on the home now becomes:

  • $400,000 x 70% = $280,000 - $50K (Repair Costs).
  • For a total offer to you of $230,000.

You need to move, so you take the offer.

Then they turn around and offer your contract to an investor pool for $250k. The investor takes the contract, and after the home closes, the wholesaler will pocket $20K.

You basically just left 20K on the table that was taken from your pocket. You could have used that money to pay off debts or help move into your new residence.

What makes this a problem is that unscrupulous wholesalers will go after people who don’t know the value of their property and usually greatly inflate the repair costs. This allows them to create a margin in the price where they can profit.

The other problem is that many will employ high-pressure tactics scaring you into a contract. They will paint an untrue picture of your situation or your property. You will feel backed into a corner with no other options. There will be little to no transparency in how the process works, and you will be under the impression that you are talking to the investor who is buying your property.