Protect Yourself from Real Estate Scams by Watching Out for These Red Flags

Unfortunately most industries and consumers are at a potential risk of becoming a victim of scams, fraud, or other illegal and ill-intended business practices. Real Estate is no different, and many Real Estate Brokers and clients are seeing a rise in attempted scams designed to steal small and large sums of money from unsuspecting home buyers and sellers, attorneys, and lenders.

The North Carolina Real Estate Commission published an article detailing real life examples of scam attempts that have been reported recently, red flags that brokers and clients can look out for that may indicate something is amiss, and potential actions that brokers can take to mitigate these risks for themselves and on behalf of their clients.

Recent Real-Life Examples

Example 1 - For Sale By NOT the Owner

A neighbor was driving by a parcel of land adjacent to their own and noticed a For Sale By Owner sign but did not recognize the phone number on the sign. Suspicious, the neighbor, who knew the property owner, called the owner with the phone number the neighbor already had and asked if they were selling. The owner said ‘No’ and called the police to take down the sign and investigate.

Example 2 - Fake Seller Contacting Listing Agents

A listing agent received a call from the purported owner of a vacant lot located in a new subdivision about listing their lot. The listing agent did their due diligence by pulling the deed to verify that the names matched, and then sent the listing agreement for digital signatures. Once the signatures were received, the agent put their sign in the yard. As luck would have it, again a neighbor was suspicious. After calling the rightful owner, the listing agent learned that the property was not for sale. The rightful owner showed up, called the agent on the sign and had the sign removed 3 days after the listing was posted. Later that day the property was re-listed with another broker who put their sign in the yard. Again this second listing broker was alerted to the fraud and removed their sign. The property owners now look daily to see if the property is listed for sale either on the MLS or on various websites.

Example 3 - Fake Buyer Dodging Due Diligence Fee Payment

A homeowner receiving a job transfer listed their home for sale. The seller received a full price offer the first day with a quick closing. The seller contracted to sell the property and immediately contracted to purchase a home in their new town and submitted a Due Diligence fee equal to the amount of Due Diligence payment they were to receive from their home sale. The buyer made one excuse after another and the Due Diligence payment never came. The seller was told that the buyer was sorry and offered to raise the price $25,000 if the seller would wait until the closing to get the Due Diligence fee. When the seller went to the attorney’s office to sign the settlement documents, the seller learned that the buyer wasn’t real and was trying to get the attorney to wire the proceeds of the sale to them. The seller was unable to purchase their new house, lost the Due Diligence fee they had paid, and was in serious danger of losing their job because they did not relocate. With the loss of the Due Diligence fee on the new home, the seller also was unable to make their next few mortgage payments.

Example 4 - Fake Seller Disappears After Receiving Due Diligence Fee

Someone claiming to own a property listed the property for sale and got multiple offers during the ‘Coming Soon’ period. A buyer went under contract and delivered a large Due Diligence fee that was wired to the seller’s account. The “seller” was never heard from again.

Potential Red Flags

• The buyer/seller is traveling on vacation (sometimes abroad), claims they cannot meet in person, and has to do everything by email.

• The seller has a family emergency, needs a quick cash sale, and will accept substantially less than full price if they can close in a very short time.

• The email address or phone numbers are from another country. Of course, there are legitimate buyers and sellers who live overseas, but this does raise a flag that should be checked.

• The photo IDs, such as drivers’ licenses or passports, are barely legible.

• The Seller does not require a Due Diligence fee and/or low or no Earnest Money combined with a quick closing (in order to obtain quick proceeds before a scam is discovered).

• The buyer/seller makes constant excuses, is not able to perform the terms of the contract, or is not returning paperwork.

• The buyer/seller gets very angry at the broker as the transaction gets closer to closing and applies pressure on the broker to make sure the deal goes through. Sometimes they offer an incentive such as commission bonuses or promising other opportunities to buy or sell.

Protective Actions to Take

Many of these actions should be taken by your real estate broker, but you should both do everything in your power as partners to act responsibly with diligence and intentionally to protect everyone's best interest.

• Always verify the authenticity of anyone you are potentially going into business with by obtaining clear copies of their identification and verifying that the ID represents them.

• Always verify the actual owner of any property by checking the county tax records or the register of deeds.

• As much communication as possible should be in writing (either digital via email and text message or physical writing) or recorded so there is a record to be used as proof/evidence if needed.

• If you are selling your property and buying a new property at the same time, wait until you have received the funds of your sale BEFORE you spend money on your new purchase.

• Educate yourself on wire fraud and how to reduce the risk of becoming a victim of wire fraud, such as avoiding public wifi when transmitting financial and sensitive personal information, only clicking links from known and trusted emails and websites, and verifying the identity of all business partners.

• If you think you have been the victim of fraud or a scam, you should contact the Federal Bureau of Investigation (FBI) and your state Attorney General.

The information in this article was provided by the North Carolina Real Estate Commission in the December 2022 eBulletin.

After years in advertising and marketing, living and working for companies in Georgia, North Carolina, and China, I decided to acquire my real estate license so I can use my established marketing and communications skills to help others and work for myself.

For many people, buying and/or selling their home is one of the most important and most stressful times of their lives. Having an advocate and an agent who has experienced years of corporate marketing, managing teams through challenging projects with tight deadlines, and negotiating complex deals - will aid in the home buying or selling process.

If you or anyone you know is interested in real estate investment, a personal real estate search, or property management, please reach out to me directly - I would love to provide my services to help find your goal property as soon as possible.

Bo Hardegree, NC REALTOR®
Espin Realty
[email protected]
704-748-0958