The Internet explosion has meant that we all live our lives in an entirely different way – from how we connect to communities, to how we do our banking or how we get the groceries, the world has changed.
Just as these changes are occurring, there are fraudsters out there trying to evolve their scams to further exploit a growing system. In this rapidly growing and changing digital age you need a trusted partner to help you keep checks and balances or else you will become one of the millions of victims of the new digital fraud.
Advances in technology have created opportunities for bold fraudsters to scam buyers and sellers out of large amounts of money. As a result, it is of vital importance that prospective home buyers, sellers and conveyancers, are aware of the methods being employed to scam unsuspecting people out of their hard-earned money.
“In this rapidly growing and changing digital age you need a trusted partner to help you keep checks and balances or else you will become one of the millions of victims of the new digital fraud," says Shaun Rademeyer, CEO of MultiNET Home Loans.
How to Identify Real Estate Fraud
Encountering property fraud can be one of the worst experiences in your life. Knowing how to identify these scams can help you avoid unnecessary loss and litigation. If you do suffer from one of these scams, recognising what scam you have been subjected to or key details can help you or your lawyer to recover what was lost.
Scepticism Within Reason
Although there are many different scams, the most common scams involve fake realtors using real listings to make themselves appear more legitimate, scam artists offering rental properties whose real owners are unaware, and con men creating entire fake realtor sites and banking accounts.
When possible, ask for proper paperwork and check the credibility of other parties, whether they are homeowners, agents, or real estate companies without well-established reputations.
Fake Homeowners
One of the oldest fraudulent practices includes the added scam of identity theft. By co-opting existing listings, clever scam artists follow the bids that property buyers put in on listings and then respond using the name and identity of the actual seller. They usually ask to meet in person and leave real estate agents out of it under the premise of not wanting to pay an agent.
Identity Theft
This is the most damaging step forward in the evolution of fraud as it has far reached, even inconceivable consequences. Experts believe that every two seconds someone’s identity is stolen. Studies show that more users are becoming victims to these crimes despite public awareness projects.
We have all read the stories of people’s identities being stolen and then used to create fake credit accounts where huge amounts of debt are raked up. Everything from houses, luxury vehicles and jewellery.
Identity theft is often described as a “silent” crime, which means it can go undetected for months while victims have incredulous debt build up. Identity theft is not a new occurrence as any document, printed or electronic, that contains any personal information about you puts you at risk of identity theft. However, due to massive data dumps and the acceleration of e-commerce the access to your personal information is at an increased risk.
Shady Agents
When a listing doesn’t exist, however, other practitioners of fraud will invent one for themselves. They locate a property that seems vacant, even if the owner is merely on vacation or away for a short time and create a listing as the property owner. They put forward that because you will rent the property, you can move in first and fill out paperwork later. They push for immediate payment and insist you move in quickly rather than planning for a specific date.
Companies Without Reputation
When pretending to be a homeowner or an agent doesn’t satisfy them, many con artists will even form fake realtor companies. In a similar fashion as the deception used to make you believe they are an agent; they find abandoned properties and make them just presentable enough on the surface to be believable.
They try to get you to commit without visiting the property personally. The most dedicated scammers may even establish fake agency websites and accounts. Many realtors earn a commission from selling properties.
These online frauds may not even aim for the money earned from selling or renting the property, but instead, ask that their commission is sent to a personal bank account. Once the money for suggesting the property to you and showing you around has been earned, they may keep up the fraud or quit with their earnings.
Intercepted emails
This involves scammers hacking into the email of people involved in the transactions, such as agents or lawyers, by tricking home buyers into transferring funds to them instead of the appropriate parties. They will often use a generic email address indicating that the funds should be wired to a specific account which will then vanish without a paper trail.
Changes made regarding payment details must always be done by the seller in person if possible, or telephonically verifying the email, and not via email alone. Always double-check all the details from the email address it’s coming from to the actual banking details.
Protect yourself by double checking everything, verifying all emailed instructions that deal with the purchase, even if they're from trusted parties, and any bank detail changes need to be accompanied by the required verification of the bank accounts in question.
Fraudsters posing as a buyer
They will approach a seller privately and show keen interest in the property and put in an offer. After a few days, the supposed buyer will contact the seller asking for a document to be signed to help them get their home loan approved, which the seller then signs without reading too much of the document, only to discover later that a third party claims to have bought the home.
It will be found that the scam artist (the first buyer) had been marketing the home online as an agent by taking the photos off various websites, and has found a buyer who is also unaware that something is wrong - and who might have paid a large deposit over to the supposed agent. Make sure you check every detail when it comes to property sale transactions - documents can be falsified and email addresses cloned.
The bait-and-switch scheme
This occurs when a prospective buyer offers an ‘above market value’ price to a seller. The seller, impressed by the high offer, signs the contract, meanwhile the deceitful buyer has no intention to purchase the property. Once the seller signs the contract, the seller may only sell to that buyer for a specified time, when that time ends, the fraudster asks to extend the contract a few weeks to work out closing details. Sounding reasonable, the seller agrees to the extension, blinded by the high offer.
In the meantime, the seller keeps paying taxes, maintenance, utilities and insurance, while the buyer comes back to the seller with an excuse as to why this price no longer works, and requests a reduction to below market value and threatens to cancel if their demand is not met. Stressed by time and ongoing costs, the seller agrees to the reduction.
Duplicated listings
‘Fake Agents’ copy legitimate rental listings and advertise these at a much cheaper price. Unfortunately, many people fall for these fake listings and wire money to the owners of these fake listings. When searching for a rental, do your research and make sure you are working with a reputable company or agent.
Fake rental agents
When you find a property, you really like, you call the agent to arrange a viewing and they say they will meet you there. Later they call and say they won't be able to make it anymore, but no need to worry the landlord will be there to show you around. The agent then promises to negotiate a lower price with the landlord. When you arrive at the house you find many other people interested in renting the same place. You call the agent back to negotiate a better price that you're happy with, and they will phone you back shortly to inform you of the new price, all you have to do is transfer the money for the first two months to secure the place.
On moving day, you find someone else is moving in and the agent wasn't an agent; they just found the property online and reposted it with their own contact information. They purposely send several people at a time to view the property to generate a sense of urgency for the potential renters.
How to avoid becoming a victim:
1. Be wary of payment requests
The faster a scammer gets you to agree to a business deal, the faster they can steal your money and avoid getting caught. The seller will often use high-pressure tactics that attempt to push you into acting quickly in order to purchase the home. Don’t be prodded by any seller to send money.
Be wary when you are requested to make a payment for something minor like a credit check or security deposit, in most cases, there’s nothing you can do to get your money back because the scammer can’t be tracked.
2. Too-good to be true prices
If the price looks too good to be true, it probably is. Prices are considerably higher than they were a few years ago.
3. The email sounds strange
Some listings hide the email address when you send a message, so you might not be able to see the address if you respond to the listing. Scammers usually use free email servers and they will often go by a series of random letters to make them less easily traceable.
4. The agent won’t show you the property
If you ask to see the property and they claim it’s impossible, it’s probably a fake listing. Agent will make time for people who are interested in the property.
5. The seller pushes you
The faster a scammer gets you to agree to a business deal, the faster they can steal your money and avoid getting caught. The seller will often use high-pressure tactics that attempt to push you into acting quickly in order to purchase the home. Don’t be prodded by any seller to send money.
6. The seller asks you to transfer money
When you see the term ‘transfer’ or similar variation of that phrase come up in a business conversation with someone you’ve never met, red flags should go up. Many scams entail transferring of funds because it’s more difficult to trace and enables the scammer to collect the money sooner. Scammers will come up with a variety of plausible reasons why the money should be wired rather than sent through a bank or lawyer.
7. The buyer or seller is foreign and wants to buy a home unseen
Most people want to at least see a property and become familiar with the area before making a large investment. This doesn’t mean you should be wary of all foreign inquiries, but many scams often occur overseas because it’s harder to trace the person behind the fraud. Foreign buyers who don’t ask questions, act in haste, and don’t care to see the property indicate a high likelihood of fraud.
8. Know market-related prices
Be well informed about market-related prices in the area you are looking to rent or buy. If a property is advertised way below the market-related price for that area, it should raise your concerns.
9. Always question a ‘bargain’
If you found a ‘bargain’ online you should call the estate agency to find out if the deal is for real. Don’t call the number at the bottom of the ad because this number could lead to a fake office. Rather find the actual office number, call there and ask the receptionist to give you the number of the specific agent or branch you are looking for.
10. Don’t be rushed
Be wary of agents and landlord who seem too eager or pushy to get you to live in their property or one they are marketing. A legit agent or landlord will always conduct the necessary checks and will not be too disappointed when you don’t show much interest in the property.
11. Always view the property before paying
If the agent is constantly making up excuses as to why they are not able to meet you or show you the property, you should also be worried. The chances are good that they don’t have access to the property and are stalling for time until they can think of a clever way to get you to pay the deposit.
12. Deposit payments
Never pay a deposit before you have viewed a property.
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