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Buying or renting a property is a big decision; the last thing you want about it is to be scammed. However, we all know the unfortunate reality. Scams are very common nowadays, especially in the digital era. Although online platforms have made renting and buying processes easier, this transition has also boosted fake real estate listings. Because of these false listings, you can experience emotional distress, legal complications, and financial losses. If you are considering renting or purchasing a property, it is crucial to know how you can spot false real estate listings.
Types of Real Estate Fraud
You may encounter real estate fraud in multiple forms. Here are some of the most common ones discussed below.
Mortgage Fraud
Mortgage fraud refers to misrepresentation or deception of information to get a mortgage loan. It is among the most common real estate scams that target lenders. This fraud aims to manipulate the mortgage approval process for illegal purposes. There are two key categories of mortgage fraud, including:
- Fraud for Occupancy: In this type of scenario, the borrower misrepresents their financial condition. It is so that they can obtain a property that they would not otherwise be able to afford. They may intend to clear payments but might struggle because of the inflated mortgage they acquired through fraud.
- Fraud for Profit: This includes intentional deception of lenders to secure a loan with no intention of paying back. The offender may walk away with the loan money. They may also use it to immediately flip the property for a profit before the fraud is revealed.
Title Fraud
“Title fraud is also commonly known as property theft or deed fraud. It is a unique type of real estate fraud that focuses on legal ownership of a property. Offenders target to steal the title from the real owner and then use that stolen title for their own benefit.
Fraudsters often do title fraud by forging documents like transfer or deeds of ownership applications. It helps them to make the property seem as if they own it which they can then mortgage or sell. The fraudster may also imitate the property owner, typically aiming for properties whose owners are deceased or abroad.” Daniel Cabrera, Owner and Founder of Sell My House Fast SA TX
Rental Fraud
Rental scams have become a common form of real estate fraud. Here are some of the most prevalent types of rental fraud.
- Fake Listings: Scammers post appealing rental properties that are already rented or do not exist. They attract potential tenants with competitive rates. Then, they disappear once they receive the deposit fund.
- Overpayment Scams: The scammers act as tenants and send a check over the agreed rental amount. They then ask for the extra to be returned, only for the original check to bounce.
- Duplicate Listings: Fraudsters imitate legitimate listings, change the contact details, and advertise them as their own. They typically claim to be out of town and request payment before showing the property.
REIT Fraud
REIT fraud includes deception related to Real Estate Trusts (REITs). These are businesses that own, function, or finance income-generating real estate properties. Fraudsters use REITs to trick investors into putting funds into risky ventures disguised as lucrative and safe investments.
Here are some of the common forms of REIT fraud:
- Non-Traded REIT Fraud: This includes selling non-traded REITs. They are not publicly traded and, therefore, lack liquidity, which makes them risky investments.
- Dividend Fraud: In this scenario, the fraudsters guarantee high dividends that are unsustainable. They may pay initial dividends from the capital instead of from the profits. It creates a false sense of security among investors.
- Misinterpretation of Assets: This includes inflating the value of the properties held by the REIT. It also involves properties that the REIT does not own. Because of this misinterpretation, there can be inflated share losses and prices for investors when the truth comes out.
Ways to Spot and Avoid Fake Real Estate Listings
After learning about the different types of listing fraud, let’s discuss the key ways to spot and avoid fake real estate listings.
Avoid Deals That Are Too Good to Be True
One major indicator that a real estate listing could be fake is any deal that looks unrealistic. There is a famous saying, “When the deal is too good, think twice”. If you see a property that is priced incredibly below the market value, it may be a trap.
The fraudsters use such scenarios to attract renters or buyers looking for good deals. When you witness such deals, do proper research and reconsider every factor. You may find any lacking or scam activity.
Investigate Property Descriptions Carefully
“When you see a real estate listing, make sure to take some time to go through the description. See if there is any vague or incomplete description in the listing that may show false information. Legitimate listings will always have complete and clear descriptions.
For instance, a listing that does not give details regarding the property dimensions or available amenities may be a scam. It is so because the offenders will try their best to avoid getting caught.” Daniel Cabrera, Owner and Founder of Fire Damage House Buyer
Confirm the Image Authenticity
“Quite often, scammers do not post real pictures of the property. Rather, they will use images from other properties or stock photos. Always confirm the authenticity of the pictures on the listings to avoid being scammed.
You can perform a quick reverse image search online, which will help you identify if the images are from somewhere else. Moreover, you should be aware of any mismatch between the property’s description and the photos.” John Gill, Operations Director at Easy Concrete Supply
Look for Any Technical Anomalies
Another way you can spot and avoid fake real estate listings is by checking technical anomalies. If, for instance, a URL is not leading to a reliable real estate platform, this may indicate a scam.
A site with no SSL certificate may also be a sign of fraud. You can check the URL to know if the website is SSL encrypted. The URL should always start with HTTPS. There are also more details to detect the technical anomalies. Make sure to do your research and work on them.
Be Aware of Unusual Payment Methods and Verify Documents
Be wary if you are requested to make payments using any unusual payment methods. These may be through gift cards or cryptocurrencies. Moreover, you should also be cautious when asked to make a deposit before you see the property in person. Do not make any payments before you clarify all the contract details.
In addition, check documents to know if a real estate listing is genuine. It is also crucial for you to perform personal inspections to ensure the property matches the details described in the listing.
Conclusion
Protect yourself from any real estate fraud with education, collaboration, and vigilance. By understanding the different types of fraud, identifying warning signs, and engaging with licensed professionals, you can secure yourself from any financial harm. Moreover, it also preserves the integrity of the real estate market. You can also use various reputable real estate platforms with valuable resources and tools to avoid fraud.
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