Real-Estate Ripoffs: Have You Experienced Any of These?

Buying a house is serious adulting goals (you go, bestie!). But the complexity of the home-buying process — which most people navigate only a few times in their lives — presents numerous opportunities for real estate scammers. Fraudsters can employ a variety of tactics to rip you off or swindle you out of money (sometimes in the hundreds of thousands), personal information, or even the title to your home. 

These methods take advantage of the intricate and often unfamiliar procedures involved in purchasing a property. To stay one step ahead of them, it's crucial to do your research carefully, understand the real estate market, and seek professional advice whenever needed. 

Here are 7 common real estate ripoffs and scams to avoid falling prey to, along with tips on how to identify and prevent them. 

This happens when buyers pay more than the actual market value of the property. It can occur due to a lack of research on comparable property prices in the area, misleading information provided by sellers or agents, or high-pressure sales tactics that rush the buyer into making a hasty decision. 

To avoid paying more than what a property is worth, remember to do your due diligence in researching and comparing other properties in the area. This can include analyzing recent sales of similar properties, known as comparables or "comps," to get a sense of what the fair market value is. 

Sellers may not disclose — or might even actively hide — significant issues like foundational cracks, water damage, mold, or pest infestations. Remember that episode in Friends when Jack Geller says, "Let's hope [the buyers' check] clears before they discover the asbestos in the ceiling?" Yeah, it's kind of like that. 

These problems can be extremely costly to repair and might only become apparent after the purchase is complete. That's why you should always hire your own home inspector to do an unbiased assessment of the property. This way they can let you know ahead of time if there are significant issues that require a closer look. 

This scam involves being misled or deceived about the terms of a mortgage. Predatory lenders might offer loans with extremely high-interest rates, hidden fees, or balloon payments. Sometimes, the terms presented verbally differ from those in the written contract, leading to financial strain on the buyer.

Case in point: The housing bubble of 2008. During this time, lenders were approving loans for borrowers who were not financially qualified — often with terms that were not clearly understood or stated. This resulted in a catastrophic market crash after thousands of homeowners found themselves unable to pay their mortgages when their rates were adjusted, or when the initial "teaser" rates expired.

Title fraud includes situations where there are undisclosed liens against the property, disputes over the property’s ownership, or even outright forgery of title documents. This can lead to legal battles and, in worst-case scenarios, loss of the property. That's why it's so important to work with a reputable title company that can conduct a thorough title search to avoid any issues during the closing process. 

This search will reveal any existing liens or issues on the property. Consider also investing in title insurance or hiring a real estate attorney to give yourself an added layer of protection (and peace of mind) against any legal issues that may arise. 

Related: 6 Holiday Ripoffs That Would Turn Clark Griswold into Scrooge

This occurs when the actual condition of the property is significantly different from what is presented in advertisements, listings, or by the real estate agent. Misleading photos, exaggerated descriptions of amenities, or omission of key drawbacks all fall under this category.

To avoid falling prey to this, always ask the realtor to do a physical inspection of the property, as advertisements or online listings can be misleading. You can also hire a professional home inspector during walk-throughs to provide an objective evaluation of the property's state and offer advice before making an offer. 

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Opting out of a professional home inspection to save time and money can lead to a slew of issues later on. As mentioned above, these undiscovered problems can become significant financial burdens. A thorough inspection is crucial to uncover potential problems that aren't apparent during the first walkthrough.

As such, always have a qualified inspector appraise your home to identify any issues like structural problems, electrical, and plumbing concerns, etc. The inspector's report can also provide valuable leverage in negotiating the price or requesting repairs as you move forward in the buying process. 

Related: Home Seller's Checklist: 15 Tips for Selling a Home Now

In escrow fraud, the money meant to be held in escrow (like the buyer's deposit) is actually sent to a scammer or phony company. This can happen through fraudulent agents or third-party escrow services. The buyer may end up losing substantial amounts of money with little recourse for recovery.

To avoid this terrifying scenario, always double and triple check with your agent and escrow company to ensure you're wiring the money to the right place. Remember to verify the legitimacy of the escrow account and ensure that the routing and account numbers are correct. 

Be cautious of any unusual requests for fund transfers or payments, and never wire money based on email instructions without verbal confirmation. 

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