How would you feel if you found out that the $2,000 deposit on the house that you were about to rent was taken out of your account and the person renting to you disappeared? Scammed is the word that most people would use to answer that question and being in the real estate industry, I hear that word more than I care to. This morning I read an article published by the National Association of Realtors® that laid out three different scams that are popular right now. The thing of it is, these are the same scams that have been going on for years and people are still falling victim to them.
As a real estate professional and more importantly as a steward of homeownership and tenancy I feel obliged to write about this issue again, I wrote about this topic a couple of years ago. The more that we can talk about this issue the better we as an industry and as consumers can prevent our friends and families from becoming scam victims so let’s take a look at the three most common scams mentioned in the article. Clearly, these are not the only three scams and they have a multitude of different flavors but there is a solution that is pretty universal across the board for all scams including real estate scams.
The first scam is targeting renters for up front deposits for renting a home. We often see this on Craigslist or some other form of online classified add that allows for the poster to have anonymity. The gig generally goes something like this; a poster will take a real estate ad for a home that is for sale from another website, copy the information and pictures, paste that information into a classified add and state that the home is for rent. Once the stolen and misrepresented property is online a renter will call and ask to get more information whereupon the poster asks for an upfront security deposit to be mailed to them or a wire transfer and guarantees the renter that this is their procedure for renting the unit out and that they will meet the person there to see the house and sign the paperwork. The would be renter complies and when they show up for their appointment, quickly realize that they have been scammed and the home is occupied by the sellers and there is a for sale sign in the yard.
The second scam targets homeowners that have a mortgage on their home by a person calling and stating that they are a representative of a business that claims to help with a variety of loan modification programs ranging from foreclosure counseling, re-financing consulting, loan auditing, leaseback programs or even government assistance program specialists. From the initial phone call the representative will either take personal information and/or charge upfront fees for their services. In reality they take the money and information, waste your time and ultimately, they scam you.
The third scam that is still popular is the all too common scenario where a “real estate investor” offers a workshop, seminar, book, database or some other form of educational material or resource to consumers to teach them how to invest their money to maximize returns on investment etc. etc. they then charge you a sum of money for the privilege of their service and then you wait for the money to roll in. To many people’s disappointment, all that ever happens is they get spammed and or solicited for more money. The only real lesson that these people may get is that old adage, “If it sounds too good to be true, it probably is.” Which brings me to the universal solution of how to avoid being scammed.
Look at the deal and ask yourself, if this deal is too good to be true. Signs that it may be too good to be true and that in fact is a scam are as follows: upfront fees, advanced charges, a third party company is contacting you to talk about your mortgage but they “need some more information”, guarantee or promise unrealistically high ROI on investments or education, you are guaranteed a rental agreement after you provide them funds. Upfront fees or advanced payments are not a part of any real estate deal without some form of agency paperwork in place first. Whether I am leasing property or selling property I am obliged by my professional trade industry to create an agency disclosure contract with a consumer before charging fees so that they understand the implications of what I will be doing for them and what kind of consequence* that means for them, monetarily or legally. Additionally, the California Department of Real Estate must pre-approve advanced fee terms for services rendered by a real estate practitioner. If a third party representative contacts you about your mortgage you should always be wary of what their intention is, sometimes it is okay but generally speaking you should work with your lender for any foreclosure dealings and should not give away your personal information without first verifying the status of the agency contacting you. If you find yourself considering working with a representative I would advise seriously researching the rep and the program that they are promoting before surrendering any information.
When a business promises you a large ROI for some form of information or investment you need to verify the legitimacy of the source. More importantly, nobody gets rich quick in real estate with sound investment strategies. Good real estate investors make money because they have studied the ins and outs of the industry, they understand basic and advanced principles of financing, identifying properties that are sound and construction principles. While you might be asking yourself, “How do I educate myself if I shouldn’t take classes or go to workshops?” I’m here to tell you that it is okay to find legitimate courses in investing principles just be careful and look for courses that are approved by the department of real estate or some accreditation agency. To be entirely honest, I have read a lot of real estate investment books and that is only part of the equation for being able to find good deals. The other part is being immersed in real estate on a regular basis which I can promise is no quick and easy way to make a dollar. Investment takes commitment.
If there is anything that I want you as my friends, family and readers to take away from this article it is this: If you come across a fishy real estate deal, scrutinize it and call me to see what I think about the deal. It won’t cost you anything to contact me and it could save you a lot of time and money. I want you to be happy renters, buyers, sellers and investors and I want you to be safe whether I am your Reator® or not I am a steward of my industry and I take that seriously.
*In this case consequences can be good or bad i.e. I sell your house and you pay me vs. a seller lies about a bad property and they get sued for fraud.