You’d be foolish to think you couldn’t be fooled in a real estate transaction. While the majority of sellers, buyers and renters are presumably honest, there can be additional players with skin in the game, from landlords and real estate agents to title agency workers and bankers.
As Sacramento real estate broker Alexis Moore observes: “The crooks don’t always have on orange jump suits. Many are former real estate professionals who are using the system.”
So how do you know if you’re about to be scammed? You can’t, but there are warning signs and steps you can take to protect yourself. Even if you are working with honest people, these are smart ways to approach buying, renting or selling any home.
With a proliferation of online marketplaces for real estate, buyers and renters often start their searches for new homes online. Well aware of this trend, scammers will lift an actual listing and re-post it as their own on another site – often with an alluringly low price tag. The scam goes awry for renters when the “seller” asks them to wire money, or requests a fee for an application that is inevitably “denied.”
To avoid falling victim to these scams, we suggest you follow the Federal Trade Commission’s advice: Be cautious if you are asked to wire money, if they request a deposit or fees before you’ve signed legal paperwork, if they say they’re out of the country or are unavailable to show you the property for an indefinite amount of time, or if they ask you to give money to a third party on their behalf.
Sometimes, you really do stumble into a great deal, and, yes, you want to act quickly before someone else stumbles on – and snags – this great deal. But rushing means you have little time to question what you’re doing.
Joe Rand, managing partner for Better Homes and Gardens Rand Realty, which sells and rents home in New York and New Jersey, says that about once a week, he hears of a renter who saw a house but didn’t actually go inside.
“The person will tell the renter that they’ve relocated, they need to rent [the property] quickly, here’s a photo. Just go look at the place, but I can’t show you the inside,” Rand says. The renter will send the “landlord” deposit money and show up at one of his business’s many offices, asking for the keys. Of course, that’s when the renter learns he was working with a con artist who had simply taken a photo of an apartment and let the victim’s imagination fill in the blanks.
It may seem crazy to rent property without touring the interior, but as Rand explains: “What does every scam depend on? Somebody thinking this is an amazing deal, and they have to jump on it.”
If someone presents a deal to you, get your own real estate attorney to review it. Yes, it will cost you a little, but it’s money well spent – especially if you are considering investing a significant amount of money. Keep in mind that most attorneys will say that the deal is no good. They do this because they have everything to lose if the deal goes bad (you’ll fire them or sue them or both). And they have nothing to lose if the deal is a good one and they say it’s not. They cover themselves. Expect a negative report. That’s why you need a real estate attorney and not a general practice lawyer for this.
When your attorney chimes in, ask her why she thinks it’s a bad deal — if that’s the report you get. Ask her where your risks are. Remember that you went to your lawyer to see if the contract is a good one – not to get business advice. I looked at a great deal for a client once and of course suggested she send it to her attorney to check the contract. The attorney told my client not to get involved because she thought the partner’s split was too generous. That may or may not have been the case, but that wasn’t the attorney’s job to say. Unfortunately my client didn’t participate in the deal even though it later proved to be outstanding.
One of the best ways to ensure you aren’t getting into a real estate scam is by working with a reputable firm like Crawford Park Farming AG, which deals specifically in farmland investment mutual funds. Experts like these help investors to pool their funds, which provide dividend returns. No matter what type of real estate you are investing in, though, an expert will be able to guide you to make the best decisions.
Vet the person you’re working with.
Just because someone has a LinkedIn page doesn’t make him or her a swell human being. For instance, earlier this month, at least 14 unsuspecting homebuyers in towns around Monroe County, New York, paid down payments to a real estate agent whose license had reportedly expired. The homeowners wrote him checks, but instead of putting their funds in escrow, the agent allegedly pocketed the money. At the time of this writing, the accused agent, John Valerio, is cooling his heels in the county clink.
But one can hardly blame the victims. Valerio, after all, apparently was, until very recently, a licensed real estate agent. He doesn’t have much of an online presence, but his LinkedIn profile states that his company, Lamplighter Realty Inc., has been in business since 1971. What’s more, his business is listed in the Yellow Pages.
This scenario may happen more than we’d like to believe. Moore says she recently reported an unlicensed colleague who was still selling homes. Your safest bet is likely to walk into a bustling, reputable real estate office to meet with a new agent, but if you meet an agent randomly who has little more than a business card and a charming demeanor, ask to see an agent’s license to ensure it’s current, Moore suggests.
“We all carry a plastic card like a credit card in California, and it says the person’s name and their title, like broker or sales agent,” she adds.
If you’re really concerned, check online to see if anything concerning pops up. To find someone you trust, ask for a referral from a close friend or family member.
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