Real estate fraud and scams are on the rise and consumers need to recognize them before becoming a victim. Three of the more recent and common fraud schemes to be on guard against are summarized below.
Escrow Wire Fraud
How it Works
You are in the process of buying a home and you receive an email, text, or phone call from someone claiming to be from the title company providing you instructions on where to wire your escrow funds. The swindler creates a fake website that appears nearly identical to the title or lending company that you are working with, making their website look legitimate.
The swindler is also familiar with using “spoofing tactics” to make email addresses, phone numbers, and websites appear as the legitimate ones. They commonly substitute or transpose characters - a number or letter is off, which is very easy for anyone to overlook.
If an innocent party follows their instructions to wire the money, the funds have just gone into the swindler’s bank account and withdrawn before one finds out that they have been scammed.
So what can you do?
First, do not click on any email or text links, or send money online without verifying the wire instructions with a live person on the phone from a phone number that is known to you, and that you have called and previously verified as belonging to the title or lending company that you are using for your transaction. Then, before you send any money to a third party, go back and review the original documents that you received from your lender and call the phone numbers listed in your loan documents to verify the wire instructions that you received.
Also, be very suspicious if you receive a subsequent email or text requesting a change to wiring instructions that you already had received, and always make sure to confirm the escrow account number before wiring any money, and do not forget to call your title settlement agent to verify the transfer of the funds immediately after the money is sent.
If you become a victim of this fraud take quick action for the return of your funds! Gather information and be ready to provide:
- The email requesting the funds - with the wiring instructions.
- The email headers and IP (internet protocol) addresses used by the requester.
- Make sure that you have contacted your bank!
- Email the Colorado Bureau of Investigation (CBI): ReportWireFraud@state.co.us and report the matter on their website at: ReportWireFraud.com
- Also report to: the FBI at: www.ic3.gov; and the FTC at: www.ftc.gov
How it Works
The typical situation involves a predatory lender that coaxes and convinces a homeowner to repeatedly refinance their mortgage while also persuading them to borrow more money each time. Eventually, the borrower ends up with higher loan payments that they cannot afford while also reducing the hard-earned equity in their home, while that lender charges high fees and points with each transaction.
Usually the victims of this predatory practice tend to be seniors and unsophisticated borrowers. These lenders persuade homeowners to take advantage of a cash-out refinance when they may not need to, or that there is a much better loan product available than the one they presently have. While on its face the loan may appear to be a good deal, the additional fees and costs of the loan can put the borrower into a loan product that is not in their best interest.
So what can you do?
When it comes to a mortgage, always get advice from a trusted professional, including legal advice. If you recently refinanced your home, it may not be in your best interest to quickly turn around and refinance again. Typically, these predatory lenders will approach you without your requesting their help or having the need to obtain a new loan. Make sure that you deal with legitimate lenders and familiar banks, and also that you can personally meet with those loan officers. You should receive loan disclosures, estimates, and a satisfactory explanation of all the loan fees and charges. Finally, before closing on a loan read all of the documents and have your adviser or attorney review them to protect your interests.
How it Works
Typically, the fraudster posts a fake ad on social media, such as Facebook, Twitter, or Craigslist in order to lure those looking to rent a property. These ads can look very professional and may even be actual photos of the property. In reality, the fraudster has no connection to the property whatsoever, but the ad will ask for an upfront payment as a deposit to see the property, or go even further to ask for a month’s rent and security deposit in advance, with the promise that your money will be held in escrow at a title company. In actuality, the money that you will send goes to a fake title or escrow company.
These rental scams are so common that in a 2018 survey by ApartmentList.com, it was estimated that 5.2 million renters in the United States said they had lost money from rental fraud, with 1 in 3 losing more than $1,000. With the pandemic eviction moratoriums possibly coming to an end soon, there is a greater likelihood of these rental scams continuing. The Federal Trade Commission (FTC) has also reported that renters are being targeted with fraudulent rental assistance offers, if one pays them a fee upfront and provides personal information.
So what can you do?
Be skeptical of anyone asking for money upfront for you to see a rental property. Make sure that you are actually communicating with the property owner or a legitimate licensed real estate professional. You can find out the owner’s name and property information on the county assessor’s website where the property is located, and you can verify a real estate broker’s license with the Colorado Division of Real Estate on their license look-up page. Make sure those persons are who they say they are and verify their identity and contact information.
Stay away from doing any rental transactions over the phone, by email, or on the internet, as you need to meet in-person with the owner or the owner’s real estate agent, as well as physically visiting the property. Do not send any money without completely verifying that it is going to the correct and legitimate place.
Partners Fighting Real Estate Fraud
If you believe that you are the victim of real estate fraud, here are some resources that you can contact: