You’re on the verge of closing on the purchase of a new house when an email comes in from the agent. It includes instructions on how to wire your closing costs just as you anticipated. The timing is correct, and the email seems legitimate, so you don’t question it.
You wire the funds and start imagining how your favorite dining set will look in your new space. Only the funds never make it to the title or escrow company. You’ve been scammed, and the money that you need to close on your new home is long gone.
Consumer Affairs is alerting the public that real estate scams that have been around for years are picking up steam. This top one involves an email exchange at closing. The scam is wildly successful because the timing is so perfect. As the North Carolina Consumer Council so thoughtfully outlines, it’s never safe to drop your guard during the home-buying process. Instead:
- Find out the protocol for transferring funds and sending information early in the process.
- If you receive an email including a change in the process, question it and confirm it offline with at least one other source (a phone call to the lending company or your real estate agent, for instance).
- Before submitting any money at closing, talk to the person or company receiving it before and after the transaction to ensure your money gets to where it needs to go.
- You can even consult your financial institution about the transaction before it happens. Let them know how much you’re sending, how, and to whom. They can alert you to any red flags you may not have considered (they’ve seen it all).
Reverse mortgages are another area to watch carefully. These loans are designed to allow homeowners ages 62 and older to access their equity, but with every legitimate opportunity, there is more than one scam lurking. The U.S. Department of Housing and Urban Development recently issued a bulletin warning that scammers are using this type of loan to take advantage of older Americans, “stealing their hard-earned money and, in some cases, their homes.”
Rising interest rates have a negative effect on the reverse mortgage industry—particularly companies that specialize in refinancing—which means older homeowners may see more aggressive marketing tactics aimed at them this year. Common reverse mortgage scams will start out sounding like a good idea. For instance, a group of real estate “professionals,” including appraisers, attorneys, and loan officers, work together to provide and back up an inflated home appraisal. You’re thrilled that your home is worth more than you thought and are then led to believe you have more equity in your home than you do. You’re convinced to take out a reverse mortgage to tap into that “value” while scammers run away with the loan proceeds, and you’re left with little to no equity or cash.
Other real estate scams target those open to a reverse mortgage but also homeowners with other sources of funds. These include:
- A house flipping scam in which you’re convinced to take out a reverse mortgage or tap into other funds and use that cash to buy an additional property, fix it up, and resell it at a profit. The scam? Only cosmetic changes are made (with the excess funds pocketed), and the buyer is left with a home in disrepair while you grapple with your “participation” in the fraud.
- A similar scam convinces you to purchase property you’re assured will appreciate, but it doesn’t. Instead, the real estate scammers who helped with the purchase profit from the sales fees.
- Refinancing scams in which you’re convinced to refinance—sometimes repeatedly—costing you more than if you hadn’t refinanced, all while the scammer collects fees.
- Scams in which a contractor claims there’s something wrong with the home that requires expensive repairs. But don’t fear! If you don’t have the funds, a reverse mortgage or loan is suggested and is often touted as “free money” to cover the cost. Spoiler alert: No loan with fees is free money, and, in any case, the money is wasted on fixing a problem that never truly existed. Check online reviews and with the BBB before using a contractor for home repairs.
Be careful out there: scams are all around us, and real estate scams can be extra costly because of the amount of money involved. For questions on keeping your assets safe, feel free to contact us.
