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How to Spot and Avoid Real Estate Scams

By MNR News posted 24 days ago

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How to Spot and Avoid Real Estate Scams

As a Realtor®, you are in a unique position: helping guide home buyers and sellers taking on one of life’s biggest changes and largest financial transactions. However, these high stakes transactions involve exchanging large amounts of funds, which means you or your clients may be targeted by scammers looking to take advantage of the process.

According to a 2024 Study by State of Wire Fraud, nearly 25% of consumers said they have been targeted by a wire fraud attempt during their real estate closing process. This, along with data from the FBI’s Internet Crime Complaint Center showing that real estate fraud resulted in losses of more than $173 million in 2024, means that your Realtor® toolkit would not be complete without the skills to spot and avoid real estate scams.

How Real Estate Scams Work

A real estate scam, also known as real estate or property fraud, occurs when someone uses a real estate transaction (think: buying a house, selling a house, signing rental agreements, etc.) as a pretense to steal money. It seems that, every year, scammers are getting increasingly skilled at impersonating not only Realtors®, but consumers, lenders, title companies, and more, in their pursuit of taking money from unsuspecting victims.

According to Rocket Mortgage, “real estate scams often involve someone posing as a legitimate contact in your transaction to divert and intercept payments, steal your personal information, or push fraudulent loan deals. In other cases, unscrupulous lenders or unlicensed brokers spread misinformation to trick borrowers into paying unnecessary fees or signing unfavorable contracts.”

But there are ways that you can be prepared and protect yourself and your clients from falling victim to these real estate scams. The first, and arguably most important tip, is knowing what to look out for! Below, you will find a list that is by no means exhaustive but covers the major scams and tactics that people use to take advantage of consumers during real estate transactions. Please note: The information below should not be construed as legal advice on any subject matter.

Different Types of Real Estate Scams

Wire Scams

Wire scams are scams in which someone is manipulated into wiring money to a fraudulent account. In the case of a real estate scam, this could look like the scammer posing as a real estate agent or even a title company to trick you into wiring closing costs, a down payment, or other fee into this third-party account.

And unfortunately, once the money is sent, it is extremely difficult, if not impossible, to get it back. These scams are becoming more and more common and believable. Scammers will hack into someone’s real email account or attempt to make a nearly identical version and use manipulative tactics to reach their target to feel like they need to comply.

Foreclosure Relief Scams

Rocket Mortgage defines a Foreclosure Relief Scam as “a scam that targets homeowners who are struggling to keep their homes. Scammers pose as legitimate companies or attorneys promising to help you avoid foreclosure or modify your loan, usually in exchange for an up-front payment.”

These scammers will often pretend to be friends with peers, or even acquaintances with your lender. These promises are almost always false. A simple way to help prevent falling prey to this type of scam is to not exchange money with a person or company until you have been provided with a service. You can always double check someone’s credentials through a quick google search, consult the Consumer Financial Protection Bureau,and, in the case of someone pretending to be a foreclosure specialist or attorney, your state’s bar association.

Loan-Flipping Scams

A Loan-Flipping scam is when a lender/scammer repeatedly manipulates a homeowner into refinancing their mortgage, charging excessive fees with each transaction. Often targeting seniors or other at-risk borrowers, this type of scam leaves the victim with decreased equity in their home, higher interest rates, and excessive debt.

Fake Buyer Scam

A Fake Buyer scam is just how it sounds: someone pretends to be an interested buyer in a property in order to steal personal or financial information. While some real estate investors might use unsolicited text messages to find properties that are off the market, the majority of these unsolicited text messages are coming from scammers with the intents to get you to divulge information or wire money into an account (i.e., wire fraud).
Home Inspection Scam

A home inspection helps protect buyers and sellers. However, during the homebuying process, it is possible to take advantage of this crucial step of the process. During a Home Inspection Scam, an individual will pose as a licensed inspector.

These folks will often rush you through an inspection, skip large areas, or hide major issues that cause the buyer a lot of financial hardships down the line. Researching your inspector’s credentials and reading through their online reviews is a great first step to ensure the validity of their expertise. Fun Fact: In Minnesota, home inspectors are not required to be licensed! So, relying on reviews and trusting referrals is extra crucial.

During the inspection, pay attention to how attentive they are (Do they go into the basement and attics? Are they rushing? Etc.) and read through their inspection report at the end. Their report should be thorough. If you feel that something is missing, trust your gut and get a second opinion.

Rental Scam

Rental scams are entirely too common, and this is, in large part, due to how the rental industry works in comparison to buying. Most renters do not have a Realtor®, meaning that they are the ones doing all the communicating with a potential landlord and they are doing all the online searching for properties themselves.

Potential landlords will take advantage of unsuspecting renters and put up falsely edited photos of a property, a property they do not even own, or they will advertise one property that is already rented and only once they are connected with you, will they share the property is no longer available and then they will show you another property that is not as nice and out of your price range.

To help you verify rental listings that you have found online, look for signs like LMS watermarks on images and search the property address online to see if it is listed on any other selling/rental platforms. Additionally, never sign a lease or wire money to an individual before seeing the property, verifying it is real, and vetting that it’s the right property for you!

How to Avoid Real Estate Scams

Be Alert

Be wary and alert of who you connect with and how you do it. Whenever possible, partner with a licensed professional who has mutual connections you trust, people who can vouch for their credibility. If you cannot get this secondhand confirmation from a peer or professional, look to a quick google search to find what you are looking for. Also, trust your gut! If you are having trouble finding information about a certain person or business, that is probably a sign.

Protect Personal Information

Whenever possible, do not give out any of your personal information to anyone that you do not know and trust. If you are working with someone online, only upload important documents through secure web portals and avoid using a public Wi-Fi network or internet connection whenever sharing personal info.

Be Wary of Upfront Fees

The presence of upfront fees is a good gauge to use when considering the validity of a person or company. It is very rare for you to be expected to exchange money for a product or service before the service is complete. Especially if there is added pressure to act fast or complete the transaction as soon as possible. It is okay to take a moment to analyze the situation before handing over any money or information.

Be On the Lookout for Other Red Flags

Finding too-good-to-be-true deals. If your gut is telling you that a situation is too good to be true, then it is most likely! Finding a rental property at a price that doesn’t make sense (an extremely low cost for the quality/location) or being offered zero percent interest or no closing costs are each red flags when it comes to a real estate transaction. Before you sign anything, give out personal information, or send money to someone, take a closer look at the deal and be sure to consult a professional—like your Realtor®.
Feeling immense pressure. Real estate transactions can be stressful enough, and scammers often manipulate this to make you feel pressure to get the deal done fast. They will often tell you that if you “don’t act now, you will lose the deal” to get you to forgo a second look at the paperwork or time to consult a professional. If you are feeling pressure from someone in a real estate transaction, that is a clear indication that something is wrong.
Lack of paperwork. Real estate transactions are one of life’s biggest financial transactions—and that comes with a lot of paperwork! If you are being asked to send money before getting to review all the paperwork, that’s a red flag.
Zero transparency. No questions are dumb questions when it comes to real estate. There are a lot of moving parts, and it is a completely different world than most of us are used to navigating—that's why working with a licensed Realtor® is so important! If someone involved in the transaction is avoiding answering your questions, making you feel like you should not even be asking questions, or giving inconsistent answers, that is a big red flag and a sign that they are most likely trying to hide something from you.

As Realtors®, you are in a special spot to help folks navigate the complex world of real estate. To help them succeed, keep an eye out for the signs above and help educate clients about the pitfalls of real estate scams.

Additionally, these tips can work wonders to protect yourself and your own information! Share this blog with clients, friends, and more to help spread awareness about the rise of real estate scams and help them protect themselves.

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