10 House-Buying Scams: How to Keep Yourself Safe

Buying a new home can be overwhelming normally, but now fraudsters are taking advantage of vulnerable buyers, scamming them out of thousands of dollars. Unfortunately, house-buying scams are on the rise. According to the FBI’s Internet Crime Report, real estate or rental fraud accounted for over 11,000 fraud complaints in 2022 alone.

However, homebuyers can protect themselves by familiarizing themselves with common real estate scams, recognizing warning signs, and taking necessary precautions. This article outlines ten prevalent house-buying scams, red flags to watch for, and how to prevent yourself from becoming the next victim of real estate fraud.

10 house buying scams

House-buying scams come in many forms, including loan flipping, wire fraud, title scams, fraudulent foreclosure relief, inaccurate rental listings, incorrect moving estimates, house flipping, reverse mortgage scams, and more. We dive into ten common house-buying scams to help you avoid becoming a scammer’s next victim.

1. Loan flipping scams

How it works: In a typical situation, loan flipping involves a lender convincing a borrower to refinance a mortgage loan repeatedly while borrowing more money each time. Loan flipping differs from a traditional refinance, where the borrower benefits from a lower interest rate or other means to lower their monthly mortgage payment.

In a loan flipping scam, eventually, the buyer ends up with higher loan payments, longer loan terms, and potentially more debt. On the other hand, the lender profits from fees, charges, origination costs, closing costs, and more. Loan flipping is a predatory lending practice — fraudulent, deceptive, or unfair lending tactics that benefit the lender at the borrower’s expense.

How to protect yourself: There are several red flags to look out for in a loan flipping scam. Here are red flags and tips to prevent loan fraud:

• Someone contacts you about refinancing your home when you didn’t request any refinance information
• A loan officer pushes you to refinance when you’ve recently refinanced
• A lender refuses to meet in person
• The lender encourages you to sign documents quickly without adequately explaining what you’re signing
• The loan officer asks for upfront payments or charges

Regarding your mortgage, it’s best to consult with trusted professionals and get multiple opinions from various lenders. You should always verify your lender’s information and the mortgage lender or bank. Additionally, request to meet in person. Scammers will often avoid or refuse to meet in person. If your lender refuses to meet in person, it’s a good indicator they don’t have your best interests in mind.

2. Wire fraud

How it works: Escrow and mortgage wire fraud are increasingly popular mortgage scams. Hackers commit wire fraud by sending phishing emails containing malware to title company employees and real estate agents. If you click those links, the hacker can access email accounts and upcoming real estate transactions, including your closing date and information. Once they have that information, the hacker poses as your real estate agent or title company and sends a fraudulent email to you. The email may state a last-minute change or inaccurate closing information and changes the wiring instructions, directing you to wire the closing costs to a different account… theirs.

How to protect yourself: To avoid wire transfer scams, avoid emailing financial information, and ignore wire instructions sent via email. Be suspicious of emails, texts, or phone calls advising you of a last-minute change to the account number initially provided. Sometimes, hackers use email addresses and phone numbers that closely resemble your agent’s contact information, so pay close attention. If you receive contradictory information through text or email, do not act immediately. Call or visit the title company and ask them to verify the instructions you received.

3. Home title or deed scams

How it works: Home title theft is a type of real estate fraud where someone uses your (the homeowner’s) personal information to forge a deed and steal your home. The scammer obtains personal information through identity theft or stolen mail and creates false documents such as a fake driver’s license. They use your name and information to apply for a home equity loan or a line of credit in your name and fail to make payments, making you susceptible to foreclosure and credit damage.

How to protect yourself: As with many scams, protection is simple with a little due diligence. Don’t give out personal information by phone or via email. If you have documents with your personal information, shred or destroy them rather than throw them away. If you stop receiving your usual utility bills or property tax statements, it doesn’t mean someone is taking care of them for you. Instead, it can signify that you are part of a home title scam. Similarly, pay attention if you start receiving bills or collection notices for accounts you didn’t open. Notices or calls that you have unpaid taxes or bills are also red flags.

4. Foreclosure relief scams

How it works: Foreclosure relief scams target homeowners whose financial troubles put them at risk of losing their homes. Desperate to keep their homes and hopefully lower their monthly mortgage payments, these homeowners can fall victim to this scam, where scammers promise to make changes to your home loan or promise to ‘save’ your home by claiming they have direct contact with your mortgage services. Usually, they charge a fee and never deliver on their promises.

How to protect yourself: According to the Mortgage Assistance Relief Services Rule, it’s illegal for a company to charge an upfront fee until it gives you a written offer for a loan modification or other relief from your lender and you accept. Until those two things happen, do not pay anyone upfront. The company must also be transparent with crucial information, such as documents from your lender and any fees associated with their services. Scammers may also say you can’t contact your lender, which is also false. If you’re working with a lawyer, ensure they’re properly licensed in your state.

5. Home inspection scams

How it works: Home inspections are crucial to home buying, as they help identify potential safety or maintenance issues. But home inspection scams do exist. This type of scam occurs when a real estate agent has close ties with a home inspector. They recommend the inspector to the buyer. The inspector ignores significant problems in their home inspection to help ensure the sale goes through smoothly.

How to protect yourself: If your real estate agent is trying to push you into using a home inspector they recommended or suggests you don’t need a home inspection, that’s a red flag. If possible, read reviews about your inspector and their company online before your inspection. On average, a 2,000-square-foot home will take 2-3 hours to inspect. If your inspector races through your property and furnishes a perfect home inspection, you may want to get a second opinion.

6. Fake rental listings

How it works: Similar to Airbnb rental scams, this type of scam involves fraudsters making up listings for places that don’t exist. The fake ads might offer extremely low rent or incredible amenities. Scammers may copy the pictures and descriptions of rental listings, making the ads look legitimate. If you reach out about the listing, the scammer might take your money for an application fee, deposit, first month’s rent, or vacation rental charge. Then, they disappear, and you’re left with no place to go.

How to protect yourself: Google search for the images and see if any other listings come up. If other ads come up for the same address with different owner or rental information, it could indicate a scam. Schedule a time to see the rental in person. A legitimate landlord will have no problem meeting in person. Scammers may claim to be out of the country and unavailable for long periods. They may also urge you to make decisions quickly and request wire transfers to secure your deposit. As best practice, don’t send payment for a property you haven’t vetted. Avoid paying with cash, wire transfers, gift cards, or cryptocurrencies. If someone asks you to pay with one of those methods, it’s likely a scam. Sending money through one of those means is essentially sending cash, and it is nearly impossible to get back.

7. Incorrect moving estimates

How it works: Whether you’re moving across town or across the country, you need to watch out for moving scams. A moving company or broker gives an estimate over the phone without seeing your location. Most often, the estimate will be low to lure in customers. Once the movers are in transit, they’ll hold your items and demand more money.

How to protect yourself: To protect yourself against moving scams, pay attention to these red flags:

• The mover or broker doesn’t provide an on-site inspection and provides an estimate sight unseen
• The mover or broker says they will determine the cost after loading
• The moving company demands cash or a large deposit before the move
• The movers ask you to sign blank documents
• The mover or broker doesn’t provide you with a copy of the “Your Rights and Responsibilities When You Move” booklet, something they are required to do by federal regulations
• The company’s website has no information about registration or insurance
• On moving day, a rental truck arrives, rather than a company-owned or marked fleet truck

If a mover tries to charge you more than you agreed or says there are more goods than anticipated, require them to provide a new estimate signed by both parties. If your mover or broker displays any of the red flags above, keep searching to find a reputable company.

8. House flipping or real estate investment course scams

How it works: Property flipping is a fairly common way to make money in real estate. Someone buys a home, fixes it up, and then sells it, making a profit on their improvements. However, some illegal property flipping scams exist, where scammers buy a property intending to resell it quickly at an inflated price for a considerable profit. The catch? They’ve made only minor cosmetic improvements. The fraudster needs to sell this house quickly, so they contact a friend or acquaintance and tell them they can get a cut of the profit by simply applying for a loan to buy the house.

The con artist then pays an appraiser to submit a false appraisal, and the bank loans money to the “buyer.” The scammer may make a few mortgage payments to the lender, but once the “buyer” has been paid off, the scammer keeps the rest of the money for himself. The bank then must foreclose on the property, taking a hit on the home, which was never worth the loan price.

How to protect yourself: To protect yourself from house flipping, know what warning signs to look for. If the seller doesn’t answer your questions about the price or condition of the home, or if the home’s market value far exceeds other houses in the area, it may indicate house flipping. Similarly, the person you’re dealing with should be the same person who holds the title to the property. If the names are different, the property may have been sold recently at a much lower price, and the person is trying to sell it quickly to make a quick profit. If the seller offers generous amenities, like letting you move in right away before closing, or offers free rent, it’s likely a sign they are trying to dump the property.

9. “We Buy Homes for Cash” scams

How it works: Most of the “We Buy Houses for Cash” scammers want to convince homeowners to sign over control of their homes. Then, they lease your home out to tenants, but you’re still responsible for covering the mortgage.

How to protect yourself: Beware of anyone asking you to sign over the title to your home based on promises. If you’re having trouble paying your mortgage, speak directly with your lender to see how you can lower your monthly payment amount.

10. Reverse mortgage scams

How it works: Reverse mortgages are loans that allow homeowners aged 62 and above to borrow against the equity in their home. This can help alleviate some of the financial strain for seniors in retirement, but not everyone has a senior’s best interest in mind. Reverse mortgage scams involve a financial planner, relative, or other trusted individual talking a senior into getting a reverse mortgage when they don’t need one. Once the fraudster receives the mortgage proceeds, they disappear.

How to protect yourself: Beware if the business or individual offers something that sounds too good to be true, uses high-pressure sales tactics, glosses over details in contracts or agreements, or charges exorbitant upfront fees.

7 warning signs of a home-buying scam

While scams may differ in detail, many tend to have the same red flags. If something sounds too good to be true, it usually is, and it’s likely a scam. Overeager buyers, buyers willing to buy sight unseen properties, high upfront costs or fees, high-pressure sales tactics or urges to move quickly to secure special pricing or deals, and requests for wire or cryptocurrency payments are all indicators of a scam. Generally, it’s best to follow the adage that if something sounds too good to be true, it likely is.

• Overeager buyers: An overeager buyer is likely looking to make a quick transaction, hoping that you don’t ask too many questions and discover their fraudulent activity.
• They don’t ask to see the property in person: There’s a high probability that if someone is willing to buy a property sight unseen, it’s because they have no intention of living in it. They could be interested in taking your money and leaving you high and dry.
• They request money upfront: Most legitimate companies won’t ask for excessive money upfront. If someone you’re working with demands payment before rendering services, verify their legitimacy.
• They pressure you to move quickly: Moving quickly to secure special deals or pricing is a high-pressure sales tactic many scammers use. They hope to lure victims into signing contracts or wiring money before the victim realizes what is happening.
• They offer a deal that seems too good to be true: If it sounds too good to be true, it probably is. Someone offering to buy your home, sight unseen, without any terms or conditions, all for well above what it’s worth, and a cash offer? It’s probably a scam.
• They ask for payment via an app or wire transfer: Avoid paying via app or wire transfer. Wire transfers are like sending cash. Once the scammer receives a wire transfer, getting your money back can be nearly impossible.
• They give contradicting information: All information from your realtor, lender, or professional should be verified. If you receive contradictory information from any party, pause and don’t move forward until you’ve verified everything and everyone checks out.

What to do if you suspect real estate fraud

Real estate scams are an unfortunate reality today, and sometimes, even the most diligent homebuyer falls victim to a sophisticated scammer. Contact authorities immediately if you believe you’ve been involved in a real estate scam. First, immediately freeze your credit to prevent fraudulent charges or activity, and place a fraud alert on your account. Collect any contact information you have for the scammer, including email addresses, phone numbers, receipts, or any other information, and pass it along to local law enforcement.

Next, contact your state consumer protection office. Then, visit the Federal Trade Commission (FTC) to report the scam online. The FTC works to protect consumers and helps safeguard personal information. If your sensitive information, such as your Social Security number, bank account information, or credit card numbers, is stolen, go to IdentityTheft.gov to report possible identity theft. File a report with the FBI’s IC3, the central hub for reporting cybercrime. Finally, make sure you know how to read your credit report to monitor for any indication of fraudulent activity.

Best identity theft and fraud protection services

Identity theft protection is worthwhile for its recovery services alone. Still, the additional monitoring and alerts make identity theft protection plans and services an essential tool for protecting yourself online. Here are a few of our recommendations for the best identity theft protection services:

• Aura: Aura provides excellent identity theft protection, including credit monitoring and at least $1 million in identity theft protection to help offset any identity theft losses. Additionally, Aura offers bank account and title monitoring and alerts you to suspicious changes to bank accounts, auto, and property titles.
  
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• Identity Guard: Besides standard identity protection amenities like data breach notifications, transaction monitoring, bank account monitoring, credit monitoring, and up to $1 million in identity theft protection, Identity Guard also scours the Dark Web for your information for an added layer of protection.
  
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• Norton LifeLock: LifeLock’s primary services include credit monitoring, dark web monitoring, and suspicious activity alerts for your identity and Social Security number. LifeLock offers coverage of up to $3 million in identity theft recovery costs, a broad jump from other protection plans.
  
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• Omniwatch: Omniwatch plans include basic features to help keep you safe like credit, identity, and dark web monitoring. Although other identity theft protection services may provide more robust financial monitoring tools, Omniwatch offers up to $2 million in identity theft coverage.
  
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Real estate scams FAQs

Bottom line

Selling your home can be overwhelming, but when you add in watching for house-buying scams, it can be downright paralyzing. Fortunately, there are common warning signs to watch for – overeager buyers, pushy sellers, unclear phrasing, and vague contracts– and ways to protect yourself. Consider enrolling in an identity theft protection plan to monitor credit and help resolve fraud if you fall victim to a house-buying scam.