5 Common Home Buyer Scams To Watch Out

When it comes to accumulating wealth, few things can compare to owning a house. It has the potential to provide financial stability for future generations and to make your life and the lives of your loved ones more fulfilling if managed correctly.

Real estate transactions are stressful enough without worrying about being conned out of your hard-earned money. Crooks are becoming increasingly creative in how they target unsuspecting victims. Be wary of a lack of in-person engagement, professionalism issues, money demands, foreign actors, high-pressure tactics, and unsolicited proposals. 

Always think back on real estate’s first rule of thumb: if a bargain seems too good to be true, it most certainly is. Fraudsters target potential buyers, sellers, and tenants in real estate, as they do in other businesses. Fortunately, there are many safety measures you can take if you’re concerned about real estate wire fraud and other home buyer scams. 

Predatory Lending

Refinancing your mortgage is a prudent course of action. It is possible that your interest rate, as well as your monthly payments or the length of time you have to pay back the loan, will be reduced. You will come out ahead thanks to these savings.

But loan-flipping fraud is another story. The perpetrators of a loan-flipping scam will attempt to persuade their victims to repeatedly refinance their houses while charging exorbitant fees and points on each transaction. Consequently, the borrower will wind up with hefty loan payments beyond their financial means, and the equity in their house will be severely diminished.

Older people often have considerable equity built up in their houses, making them a particularly vulnerable target for these cons.

Senior citizens, people with language barriers, and first-time home buyers should limit their financial dealings to lenders they are familiar with and trust. Before making any choices of this kind with their finances, individuals should discuss the matter with a trusted friend or family member. 

Consider it a warning sign each time a lender offers to assist you with refinancing, particularly if you haven’t explicitly requested their assistance. If you have just refinanced your mortgage and are now being approached with more refinancing opportunities, this should be an even more ominous warning. 

Refinancing should only be done with lenders you know and trust. To avoid falling victim, know that lenders must make a complete list of all charges associated with a loan. If you’re not a math whiz, bring a friend who is. Turn away from any lender that refuses to provide you with the mandatory Truth in Lending disclosure. 

Foreclosure Relief

Fraudsters will target those on the verge of losing their houses to foreclosure in a foreclosure relief ploy. Scammers may offer to halt the foreclosure or alter the debt in return for money upfront.

Real estate scams like this one are particularly upsetting because they leave their victims with next to nothing and in more danger of losing their house. As a precaution, never pay cash to a service provider ahead for work that hasn’t yet begun.

Also, conduct your homework on the person or company that claims to be able to assist you. Do some research on the legitimacy of anybody contacting you who claims to be an attorney, for example, by visiting the website of your state’s bar association.

Paying a fee in advance for assistance with mortgage relief is a violation of the law. This is a sure sign that a business is dishonest. A significant cautionary sign is if the business advises against speaking with your mortgage lender. Additionally, this is illegal. 

Working with your mortgage lender is the best course of action if you face foreclosure. Perhaps they can restructure your loan or provide another option for mortgage repayment. A real estate lawyer or a housing counselor whom the HUD has authorized are other options. 

Escrow Wire Frauds

To secure a house loan, you may be required to pay a deposit known as earnest money. Depending on the final selling price, this expense may range from 1% to 3% of the total. The money is held in escrow and allocated to your closing expenses.

This is a golden chance for con artists to steal your money. How to know if a realtor is scamming you? To present themselves as a representative of your title or escrow firm, they may telephone, text, or send emails. Scammers utilize fake phone numbers, bogus email addresses, and false websites to seem legitimate.

When they have you in their crosshairs, they’ll tell you to transfer the money to an imaginary bank account. In most cases, you’ll only find out at closing that you made a mistake in routing your payments. 

Verify the wire instructions you get from your lender by calling the phone numbers indicated on the original paperwork you received from them before sending money to a third party. Confirm wire instructions with a real person on the phone from a number that you’ve contacted and confirmed before clicking on any email or text links or sending money online.

The next time someone contacts you and asks you to alter your wiring instructions, be very skeptical of their request! Double-check the escrow account number before sending money, and make a quick phone call to your settlement agent to affirm the fund transfer.

“We Buy Homes” Mailers

Families who are having trouble keeping up with their mortgage payments are a prime target for con artists who put up posters and send postcards stating, “We buy homes!” Homeowners might react to a mailer or advertisement that states, “we buy homes;” however, most of these businesses aren’t interested in buying houses, rather, they aim to persuade you to hand up the deed to your property so that they may take control of it.

After that, the house-buying scammer finds a new tenant to occupy the space and rents it out. As a consequence, the owner loses the rights to their property but is still liable for paying the payments on their mortgage.

These we buy houses scams may also devastate those looking at homes for sale or rentals. Advertisements that promote rent-to-own arrangements that turn out to be deceitful and often include enormous up-front costs might lead you astray if you let them. 

Don’t answer an ad from a telephone pole if you want to sell your home to a cash buyer. Find a reputable business that has a physical location, a website, and a track record of success. Request references, then verify their reliability.

Be wary even if you’re working with a reliable business. Examine the cash offer to evaluate how it stacks up against the actual worth of your house. By using websites like Redfin or Zillow, you may learn how much your house is worth. If you need to sell quickly, accepting an offer below market value may be advantageous, but you should be aware of the financial costs involved.

Lastly, always acquire a sizable down payment upfront, such as 5% to 10% of the home buying price. Verify that the contract specifies that it is non-refundable. Doing this lowers your chance of ending up with nothing if the transaction doesn’t work out.

Foreign Cash

Suppose you get an email from a foreign national asking for assistance in moving to the United States of America. They may even explain why. This fake house buyer claims to have seen your home, loves it, and is ready to make an offer without ever seeing it. Afterward, they offer to mail you a cashier’s check.

As a rule, this fraudster wants you to hire an attorney and asks for your recommendation. Everything you need to know will be sent to you, including their personal information and the day and time they want to seal the deal. In the end, you won’t receive the money, and you may have to give up some of your own in the process.

When a buyer from another country wants to purchase a house sight unseen, it raises suspicions. Why? A property is more likely to be bought by someone who has had a home inspection (or at least had their real estate agent view it) or is acquainted with the neighborhood. It is quite unlikely that this con artist will inquire about the property at all.

The fraudster might claim to be from any nation. Payments made using a foreign check may take longer to clear, and the buyer’s nationality may be to blame if the email contains several errors.

If you see any warning signs, it’s best to steer clear of this cash for houses scam. As a first step, you may be approached by a potential buyer who wants to buy your home before you’ve even posted it on the market!

Steer clear of doing business with purchasers who give off a dubious vibe. Do not take a cashier’s check from someone you do not know as a form of payment. Lastly, don’t promise to reimburse overpayment funds by wire transfer until the buyer’s check has cleared, and never before.

Don’t Get Scammed Selling Your Home

It’s regrettable but true that con artists operate worldwide, masquerading as potential buyers. And those perpetrating the biggest real estate frauds have one goal in mind: to separate unsuspecting sellers and the agents working with them from their hard-earned money.

These fake cash buyers don’t really wish to purchase your Houston property, despite the variations in the home buying scams’ specifics. However, they will put much effort into convincing you that this is the case. Get in touch with an established real estate investor like Assemble Houston if you are interested in selling your house to a cash home buyer. Finally, contact law enforcement immediately if you suspect you’ve been the victim of any type of real estate fraud.

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