Don’t let scammers steal your money and ruin your investment dreams.

Real estate can be a lucrative market for investors – and for scammers.

Are you considering investing in real estate? It can be a way to build your wealth and earn extra income, but it comes with risks. One risk you don’t want to take is falling prey to a real estate investment scam. Unfortunately, with property values increasing across the country, scams are also on the rise. In this article, we’ll explore four common types of real estate investment scams, reveal red flags to watch out for, and offer tips on how to stay safe. Let’s dive in!

4 Common Real Estate Investment Scams

Real estate can be a lucrative market for investors – and for scammers. Here are four common scams to avoid.

1. Lending Scam
   Some property investors seek financing from private lenders due to stricter requirements for investment properties versus owner-occupied homes. However, these lenders may have lower standards for property conditions, resulting in interest rates and shorter payback periods for their loans.

   Unlike conventional mortgages from banks or credit unions, private loans are less regulated, making it more challenging to differentiate between legitimate lenders and fraudsters. Because licensing requirements for private lenders can vary from state to state, it can be difficult to differentiate between legitimate lenders and scam artists. Do your research. A lender who readily offers money without asking questions may be suspect. Be wary of large upfront lending fees – once the lender receives payment, they may vanish without providing any loan or services, leaving you empty-handed – or lenders discovered through social media or uncertified real estate websites.

2. Property Condition Scam
   This scam targets investors who are looking for properties in more affordable real estate markets. Unscrupulous sellers or agents take advantage of out-of-state buyers seeking property in cheaper real estate markets by falsely claiming that the property is in excellent condition. They do this in the hope that the buyer will not inspect the property themselves because of the distance involved. The scammers may even provide the buyer with the contact details of a local inspector or contractor who is part of the scam.

   With a fake report in hand, the buyer may be fooled into believing that the property is in good condition and make an offer that is much higher than what the property is actually worth. Unfortunately, once the buyer has purchased the property, they may realize too late that it is in poor condition and requires significant repairs or renovations.

   To avoid falling victim to a property condition scam, it’s crucial to thoroughly inspect a property before making an offer. Consider hiring an independent inspector who is not recommended by the seller or their agent. Additionally, research the property’s history and check for any disclosures about its condition. Don’t be afraid to walk away from a property if something doesn’t seem right or if the seller is not willing to allow an inspection. Remember, it’s better to be cautious than to end up with a property that requires extensive and costly repairs.

3. Seminar Scam
   In a seminar scam, a “real estate guru” promises to reveal the secrets of making a fortune with investment properties. These individuals often claim to have a guaranteed system for achieving financial success, even with no experience and minimal effort required. To learn the system, the victim is asked to attend a seminar, purchase books and videos, or enroll in expensive one-on-one coaching. However, if the guru’s promises sound too good to be true, it’s because they likely are.

   These scammers may lure you in with infomercials or online ads, inviting you to attend free events or watch introductory videos. However, they will later demand a substantial fee for the coaching they promised. They may even show you success stories of people who have benefited from their coaching program, but it’s challenging to verify whether these stories are legitimate.

   The truth is that scammers often exaggerate the potential profits you can earn through their program. They also fail to provide the step-by-step guidance they promised and misrepresent the success of others. These tactics are all part of a ploy to convince you to spend thousands of dollars on an investment coaching program that ultimately doesn’t deliver on its promises.

4. Listing Scam
   When searching for rental properties, real estate investors often turn to the internet, but unfortunately, so do scammers. A listing scam is a type of online scam that involves a cybercriminal posing as a legitimate seller to advertise a property that they do not own or have the authority to sell. The scammer will typically use online classifieds or social media platforms to reach potential victims.

   To make their fake listings appear more convincing, the scammer may steal photos and descriptions from legitimate listings. They might also create listings for vacant properties that are not currently being occupied, since no one is around to discover the ruse.

   To lure in unsuspecting investors, the scammer may offer the property for an exceptionally low price or with a promise of high returns. They will then ask for a fee or down payment, often by wire transfer or another method that is difficult to trace. Once they receive the payment, the scammer will disappear, leaving the victim with nothing.

   Listing scams can be very convincing and can target anyone looking to buy or invest in property. It’s important to be vigilant when looking for properties online and to work only with reputable sellers and real estate agents. If an offer seems too good to be true, it probably is.

Red Flags to Watch Out For

To avoid falling victim to these scams, it’s essential to do your research and be aware of these red flags.

• Unsolicited contact. Be wary of any unsolicited contact, whether by phone, email, or social media message, especially if it involves a too-good-to-be-true investment opportunity.
• Sketchy “lenders”. Be cautious of anyone who seems ready to loan you money with few or no questions asked.
• Limited time only. Scammers may pressure you to act quickly, claiming that time is running out, or that the offer is available only for a very limited time.
• No written agreements. If there is no written agreement or contract, it’s a red flag. Do not provide money without a signed contract or a written agreement.
• Requests for upfront fees. Scammers often request upfront fees for various reasons, including application fees, processing fees, and inspection fees. Avoid anyone who asks for upfront fees by wire transfer, gift card, or cash.
• Lack of a physical office. Be cautious of real estate investment companies that do not have a physical office or a legitimate address.
• Promises of unrealistic returns. Scammers often make promises of high returns or guaranteed profits that are unrealistic or too good to be true.
• Unlicensed professionals. Check if the real estate agent, broker, or investment company is licensed and authorized to conduct business.
• Incomplete or false information. Be wary of incomplete or false information provided by the seller, such as regarding property, legal documents, and disclosures.
• Insistence on cash transactions. If the seller insists on cash transactions, it’s a red flag. Cash transactions can be hard to trace and difficult to recover in case of fraud.
• Lack of transparency. Be suspicious of a seller who is not willing to provide more information, show the property, or allow an inspection.
• Suspiciously low listed prices. Listings with prices that are much lower than market value or suspiciously low prices that do not make sense are a definite red flag.

Tips for Staying Safe

How can you stay safe when investing in real estate?

• Look for properties through the Multiple Listing Service or a licensed agent. The Multiple Listing Service (MLS) is a database of properties listed by licensed real estate agents. Using a licensed agent can help you avoid scams and ensure that the property is legitimate.
• Seek out financing from a trusted financial institution. Work with a trusted financial institution, such as a bank or credit union, to obtain financing for your property. Avoid lenders who promise quick and easy loans, as they may be scams.
• Never agree to buy a property sight unseen. Always view a property in person before agreeing to buy it. Don’t rely solely on pictures or videos because they can be misleading.
• Hire a professional inspector you find yourself. Do not rely solely on the seller’s inspection report. Hire your own inspector to thoroughly assess the property for any issues.
• Research the seller. Do your research on the seller before entering into any agreement. Check for reviews or complaints online and verify that they are a legitimate seller.
• Verify property ownership. Verify the seller’s ownership of the property before proceeding with any transaction. You can check public records or hire a title company to perform a title search.
• Get everything in writing. Make sure all agreements, contracts, and promises are in writing. Verbal agreements are difficult to prove in court, so it’s important to have everything in writing.
• Be cautious of wire transfers. Wire transfers are often used in real estate scams, so be cautious when making payments. If possible, use a secure payment method such as a check or bank transfer.
• Trust your instincts. If something seems too good to be true or makes you feel uncomfortable, trust your instincts and walk away. It’s better to be safe than sorry.

If You’ve Been Scammed

If you think you’ve fallen victim to a real estate investment scam, it’s important to act quickly.

• Contact your financial institution immediately if you’ve sent money or provided sensitive information.
• File a report with the Federal Trade Commission at reportfraud.ftc.gov.
• Contact your state attorney general’s office at naag.org.

Remember these tips – and shut out real estate investment scammers! To learn more about protecting your investments, reach out to your financial institution today.