Real estate scams cost buyers, renters, and landlords billions of dollars annually. The transition to digital real estate solutions and a rampant housing market resulting from the COVID-19 pandemic has seen them increase more than ever before.
You should be mindful of these four real estate scams currently trending in the digital sphere, from wire fraud schemes to phony home and apartment listings.
1. Closing Wire Fraud
Buying a house is equally exciting and nerve-wracking whether you’re a first-time buyer or someone constantly on the move. Imagine the stress when a transaction is nearly completed and the closing funds suddenly vanish.
According to the Federal Bureau of Investigation’s (FBI) 2021 Internet Crime Report, wire fraud accounted for $350 million in losses from real estate investments and closing funds in the United States. However, only 12%-15% of these situations were reported, with victims losing an average of $100,000 last year.
Real estate transaction schemes are a popular tactic for hackers to scam homebuyers, often impacting closing and title companies the most. The scammer hacks inboxes looking for a pending transaction, then creates a legitimate-looking email address as a credible alias.
They use the email address to send the buyer wiring instructions for a down payment, mortgage or final closing costs, which are funneled into the scammer’s accounts instead. Buyers often lose hundreds of thousands of dollars they will likely never recoup.
Wire fraud scams gravely impact buyers, sellers, and the entire real estate industry. Clear communication between all parties regarding wiring money is the only preventive measure to avert these digital real estate scams.
2. Timeshare Resales
The American Resort Development Association (ARDA) estimates that 9.9 million U.S. households own a timeshare — many of whom probably signed up excitedly while on vacation themselves.
Timeshares appear to be a fantastic opportunity at first, but they typically prove burdensome. Buyers often get trapped after overlooking essential provisions regarding the right of refusal, survivorship, and continuity within the never-ending pages of the contract.
As if the initial timeshare signup wasn’t dishonest enough, resale scams are also gaining traction. For example, scammers call timeshare owners pretending to be real estate agents with an interested buyer.
They might use real names, personal details, business phone numbers and, sometimes even professional websites and paperwork to appear credible. Once they’ve convinced you to sell your timeshare, they’ll ask for you to wire the money upfront. You’ll likely have lost a large sum of money by the time you realize the buyer and sale were fake.
The Federal Trade Commission (FTC) reminds sellers to contact their timeshare management company or developer directly and look out for callers who promise fast transactions, several interested buyers, and guaranteed returns on the unit.
3. Phantom Rental Listings
There were about 6.12 million existing-home sales in the U.S. in 2021, a historic high not seen since 2006. However, with the increase in properties hitting the white-hot real estate market, an uptick in online phantom listings has surfaced — especially in the rental sphere.
Consumer credit reporting agency TransUnion detected a 30% rise in rental fraud from March to August 2020, including many fake tenant identities and listings.
Craigslist is a hot spot for fraudulent rental listings. It’s possible to find a great deal on an updated apartment in a safe neighborhood, but Craigslist hosts many scammers eager to take advantage of prospective renters.
Scammers will search reputable listing sites — such as Zillow and Trulia — collecting photos, descriptions, and other essential details. They’ll create a fake rental listing on Craigslist using the stolen pictures and captions, pricing the unit below market value.
Renters then contact the scammers thinking they’ll get a good deal, often putting a placeholder deposit down without ever seeing the unit in question. The scammer clears the funds only for the renter to find out the listing was a hoax.
Whether you’re buying or renting, if a listing looks too good to be true, it probably is.
4. Short-Term Rentals Payments
Short-term rentals from Airbnb and VRBO have grown in popularity throughout the last few years. Short-term rental bookings are becoming more common as the world reopens from COVID-19, with people looking to travel again. However, property managers and guests are at a heightened risk of being targeted by various scams.
The most typical short-term rental scam has to do with transactions. Scammers might ask Airbnb users to pay a security deposit or for a booking outside the platform by check or a third-party app. They often persuade renters with the promise of a beautiful rental at a discounted rate. A similar scenario happens to the property managers and owners who fall victim to phone scams from interested Airbnb and VRBO users.
People reserving a short-term rental should conduct all bookings, communication, and payments through the official platform.
Avoid Falling Victim to Digital Real Estate Scams
Technology has reshaped the real estate industry, making it easier to perform marketing and sales tasks. However, while online wire transfers are faster and property listings can reach broader audiences, real estate professionals, buyers, sellers, and renters must be vigilant and protect themselves from digital scams.
About the author: Evelyn Long is the editor-in-chief of Renovated, an online resource for the real estate market. Her freelance writing has been published by the National Association of REALTORS®, Insights for Professionals and other prominent industry magazines.
