We’ve been hearing a lot about fake news and the like in recent years, but the truth is that there are plenty of real estate scams that go on every day. The good news is that many of them are pretty easy to spot. Here are four common ones to watch out for:
Real estate marketing order scams.
The real estate marketing order is a scam that can be committed by real estate agents and mortgage brokers. It works like this: A broker makes an agreement with a seller, then sells that deal to another buyer at a higher price. This is illegal and can be reported to the FBI. It’s also against the law, which means it could land you in hot water if you get caught trying it out. If you ever find yourself on trial for committing this type of crime, prepare yourself for jail time!
Low appraisals
The appraiser is paid to come up with a low appraisal value. The mortgage lender uses this appraisal value to charge the buyer a higher interest rate on loan, so they can make more money from their loans.
In some cases, the seller could pay an appraiser to come up with a lower appraisal value than what the property is actually worth. This way, they can get more money for their property than it’s really worth by selling it at “lowball prices.”
Phantom inventory
Phantom inventory is a form of fraud that occurs when a real estate agent or broker lists a property for sale at an inflated price. The agent may list the property at a very high price, knowing that the seller will accept a lower price for it.
The goal of phantom inventory is to get people interested in buying your home—even if you’re not actually planning on selling anytime soon. You then hope that another buyer will see your listing and also buy their own home from you instead of going through the trouble of trying to find someone else’s house and making an offer themselves.
Mortgage scams
Mortgage fraud is a type of fraud in which a person or entity misrepresents or omits information when applying for a mortgage or commits fraud against a lender or the government in connection with the mortgage application process.
The most common mortgage frauds are:
- Loan origination, during which lenders and brokers commit fraud through misrepresentation of borrowers’ income, employment status and other factors.
- Property flipping schemes, where property buyers buy properties at inflated prices and sell them immediately after closing before paying off their mortgages; these schemes normally involve corrupt appraisers who inflate property values to allow for more profit margin on resale. Mortgage loan modification scams may also be included as part of this category.
That said, when you take out a mortgage loan, you need to choose a trusted lender. That way, you can avoid falling prey to potential scams. Also, have a keen eye for interest rates. As experts at SoFi recommend, “select from a variety of home loan options with mortgage rates and monthly payments that work for your budget.”
If you’re looking to buy or sell real estate in 2022, it’s important to know what kinds of scams are out there so that you can protect yourself. While you can never be completely safe from scams, being informed about them is the first step toward avoiding them.
