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It’s an unfortunate reality that in every industry, there are unscrupulous people eager to manipulate the rules for their own ends. The real estate industry is no exception. Real estate scams can be devastating to their victims, the consequences ranging from bankruptcy and damaged credit to loss of one’s home. Anyone can be targeted by these scams at any time, but often they are directed towards low-income individuals and the elderly, who are presumed to be vulnerable. Homeowners in foreclosure are also considered prime targets. The following is a list of the most common and most serious types of real estate fraud homeowners may encounter, and how to safely avoid becoming the next statistic.

Foreclosure and Mortgage Schemes

Foreclosure rescue People who are behind on mortgage payments or in the process of foreclosure are vulnerable to this scam. Shady companies will typically call homeowners in dire straights and convince them that their home can be saved if they “temporarily” transfer the title of the home to the company. The company will reassure the homeowner that this is just a leaseback and that the homeowner is free to stay in the home and pay rent during the title transfer period. Soon after the title is transferred, the company will sell the home, leaving the original homeowner stuck as a renter in their own home and still on the hook for mortgage payments.

Mortgage Modification Scams– This scheme also targets people who are behind on mortgage payments or in the process of foreclosure. There are several ways for borrowers to get caught up on payments including forbearance agreements, repayment plans, and mortgage modifications. You can apply for ANY of these options without needing to pay a company for assistance. Scammers will send out official-looking mailings trying to convince you otherwise. Their main goal is to convince you to pay them instead and in many cases will not even attempt to negotiate with your mortgage lender.

Some tips for avoiding being victimized by Mortgage Modification and Foreclosure Rescue scams:

• Don’t pay upfront fees. The first warning sign of a scam is a request for a large payment in advance. Federal law and many states prohibit foreclosure rescue companies from collecting money before fulfilling services, as well as place other constraints on foreclosure rescue activities.

• Don’t pay a modification company instead of your loan’s servicer. In some cases the “rescue company” will advise the victim to pay their fees instead of their regular mortgage payments. This should be a warning signal that all is not well. The company might take your money, fail to get a modification, and leave you further behind in payments.

• Don’t ignore your lender. Modification companies try to discourage communication with your lender and insist that they “do all the negotiating”. It is important to continue to talk and listen to your loan’s officer because they may be able to offer a solution to the situation that you had not considered.

• Work with a HUD-approved housing counselor. HUD Office of Housing Counseling offers FREE assistance for working out a modification.

Mortgage elimination In this scam, individuals or “companies” will contact mortgage holders and offer them a plan to eliminate their mortgage in a very short amount of time that usually involves some sort of fantastical loophole. The plan itself is usually confusing, farcical, and difficult to understand. The promised mortgage elimination never occurs, and meanwhile the individual or company charges a high price for the “service.”

Counselling services This scam is similar to mortgage elimination, only the services offered are quite real. Companies who engage in this scheme initiate targeted marketing campaigns that offer “exclusive” counselling and advice to homeowners on how to save their mortgage–for a premium fee, of course. What they don’t reveal is that much of this “advice” can be found for free on government websites, or is fairly simple and can be gotten for free from real estate agents or other legitimate sources.

Reverse Mortgage Fraud A con artist obtains the property’s title and then deeds the property to a fictitious individual that qualifies for the age requirement terms of the reverse mortgage loan. The swindler then receives the “lump sum cash out” or monthly payments until the scam is discovered. 

Mortgage Servicing Fraud This fraud occurs when a dishonest servicing company diverts principal, interest, or escrow funds from the underlying lender, pocketing the money for their own use. This can also include misleading tactics such as issuing false information regarding collections, intentional breach of contract terms, or submitting accounts to collections when debts have already been paid or are non-existent.

There are some important steps you can take to avoid becoming the victim of mortgage fraud. The Federal Bureau of Investigation, which investigates fraud, suggests the following:

• Get Referrals. Make sure you know who you’re dealing with when you decide to buy or sell a house. Get referrals for real estate and mortgage professionals and also check their state and local licenses.

• Do Research. Find out what other homes, particularly those of similar size and value, have sold for. Also check recent tax assessments of nearby homes.

• Stay Away from “No Money Down” Loans. These are typically gimmicks to get people to buy homes they can’t afford. At best, these loans have very objectionable interest rates and terms.

• Don’t be Persuaded into Making False Statements. This includes real estate agents, mortgage brokers or anyone else involved in the transaction. Even a slight embellishment of income is considered fraudulent.

• Never Sign a Blank Document. There are no justifiable excuses for signing a blank document or one containing blank lines. Make sure you read and understand what you are signing, without exception.

An aerial view of a neighborhood

Equity Schemes

Equity skimming An individual engaging in equity skimming is pretty easy to spot right off the bat. They will pose as a legit homebuyer and attempt to convince the seller to re-list the property for an incredibly high amount. The scammer will proceed to take out the large mortgage, pay the seller the asking price of the property, and abscond with the rest of the mortgage money.

Equity fraud An individual perpetrating equity fraud first obtains their victim’s personal information in good old fashioned identity theft. They then use this information on mortgage or loan documents, forge the victim’s signature on one or more property deeds, and steal the equity.

Sales Scams

Chunking Appropriately named, this scam involves multiple properties that are “chunked” together. Similar to property flipping, this scheme typically originates as a seminar or program for “getting rich quick”. The swindler encourages the investor to purchase one or more properties with swindler as the go-between. The swindler then uses the investor’s personal information to procure additional mortgages unknown to the investor. The properties are purchased from the swindler or an associate at a greatly inflated price with the assistance of a corrupt appraiser. The swindler then disappears leaving the investor burdened with hard to sell properties.

Unsolicited Offers to Buy Typically, these offers come in the form of a short note or postcard explaining how the buyer is interested in a property and would like to pay cash quickly. They express their readiness to pay a “fair price”, which may not in reality be fair to the homeowner. Homeowners who receive these communications are typically within one of two groups. They reside in a highly desirable neighborhood or community where homes are in much demand or they may have some financial difficulty and may have been unlucky in selling their home through a real estate broker. These buyers are often hoping to find sellers willing to sell at 70% or less of a home’s market value. In many cases these may be legitimate offers, however before selling through an unsolicited offer to buy, a seller should be aware of their property’s true value. In most cases sellers do better selling through a real estate brokerage, even if it takes longer to get the full value of your home.

Cash for Homes Similar to the unsolicited offers to buy, “Will buy your homes for cash” offers may be legitimate, disingenuous, or outright scams. Often seen advertised on signs at busy street corners, this process is aimed at sellers who need to sell quickly and without the time or money to make home repairs that most buyers would expect prior to the sale. Upon calling the number on the sign you will most likely be asked to set up an appointment to determine the value of your home. One of the first questions you’ll be asked is if the home is owned outright or what balance remains on the mortgage. The cash buyer wants to quickly calculate how much money the seller could receive and offer the promise of cash after the deal closes. The buyers ultimately want to buy the home for as little as possible, often as much as 50-60% of its actual value. Sellers typically receive much less than they would if they placed it for sale with a real estate agent. Although the sellers may receive their money much faster with this process, their home equity is lost forever.

The best things a seller can do to avoid these situations is to:

 Consult with a licensed realtor to make sure the offer is in line with what the property is actually worth

 Know who your buyer is before accepting an offer

 Consider all factors in deciding who to sell your property to, not just money

 If problems arise, consult a lawyer immediately

A model of a home, a stack of money, a calculator, and financial paperwork

Land and Rental Fraud

Land fraud In land fraud, a company engages in direct mail and telemarketing to potential property buyers, promising them extravagant benefits and perks if they agree to buy land from the company, usually priced in the range of $50,000 dollars or more. This land turns out to be low-quality and unimproved, which the company originally bought for less than $2,000.

Rental fraud This type of fraud occurs when a renter files forged “satisfaction of loan” documents with the local court. The scammer forges the owner’s signature, the bank officer’s signature, and bank seals, and is then free to take out new loans on the property. They usually vanish shortly afterward.

Fake Rentals & Craigslist Advertisements Potential home renters are extremely susceptible to being swindled by responding to fake classified ads for properties that either don’t exist, are unavailable, or have been placed by fraudsters who don’t actually own the property. Commonly occurring for properties like vacation rentals, for properties in highly desirable areas, and with renters who are moving from out of town and may feel compelled into leasing the property without seeing it in person first. They may be so anxious to “seal the deal” that they willingly wire an application fee, deposit, and first month’s rent to the con artist. The potential renter ends up with a bogus lease and lost fees and deposits. The scheme is also harmful to landlords. Some swindlers instruct the renter to move in and change the locks to the property causing major inconveniences to both parties. Landlords and property managers may want to watermark all online photos with their company name and phone number to avoid the image being repurposed for use in this type of scam.

Here are some tips from the Federal Trade Commission for avoiding Rental Fraud:

• Research the rental company online. Enter the name and words like “review,” “complaint” or “scam.” If you find bad reviews, you may want to go with a different company.

• Seems legitimate? Rental home listings may appear in many places, including rental company websites and online listing services like Zillow, Trulia or Craigslist. If you see a rental company’s listing on an online listing service, do a quick confirmation that the home’s address appears on the rental company’s website. If it does not appear on the company’s website, it is very likely to be a scam.

• Is the price too low? Is the rent considerably less than other rentals in the area? This may be a warning sign that the listing is fraudulent, or that there is something under the surface of the rental listing.

• Request a tour and make sure to ask the agent for identification. Rental agents should have photo ID badges issued by the company that owns or manages the property or at the very least be able to provide some sort of identification.

• If all appears well after careful verification it’s time to take the next step. Apply through the rental company, licensed real estate professional or listings website.

• Before you sign a lease, always verify with the company or better yet, the actual owner of the home. You can search the local property appraiser’s website to find out who the current property owner is and look for contact information online.

• Never pay with cash, wire transfers or gift cards. If anyone suggests you pay in this way it is a sign that this is not a legitimate transaction. Wiring money is like sending cash, once it has been sent there is no way to get it back.

A person at a computer using a mouse

Wire and Check Fraud

Wire fraud A growing and exceedingly costly real estate scam that affects buyers is the wire transfer scheme. This scam defrauds buyers out of thousands of dollars in down-payment funds. The scam appears to be legitimate while using email technology to cheat buyers out of consequential sums of money. The scam begins with the fraudster gaining access to the contact information of a vendor involved in the closing of a property– this could be a title company, lender, or real estate agency, for example.The scammer sends the buyer an email with instructions for sending the down payment through wire, appearing to come from legitimate and trusted sources. This is called email spoofing, which is the forgery of an email header so that the message looks like it has been sent from the actual parties involved with the transaction. Since the email appears to be coming from known sources, the victims are more likely to follow the scammer’s instructions and follow through with the money wire. Sadly, by the time everyone involved realizes the scam has occurred the swindler has absconded with the money.

Although this deception can be hard to spot, here are some signals to watch for:


Emails that are sent outside of typical business hours
Emails that contain poor grammar and/or misspellings
Emails with a slightly different address than previously used
Payment methods change to a wire transfer at the last minute

Parties involved should also take steps to ensure secure communications such as encrypted email, verified phone number, and confirmation instructions. Additionally pass codes and PIN’s may be used. Buyers should ALWAYS verify and question any wire requests to ensure the message has come from a legitimate source.

Check fraud Check fraud can be done in almost any industry, but in the real estate business it usually involves a realty company sending an individual a fake check for a great deal of money. Unwitting victims cash the check, at which point the scammer contacts the victims explaining that they mistakenly sent the check and demand to be compensated. The check bounces in a few days or weeks, and the victim must cover it.

Thoroughly researching a company before entering any type of business arrangement is an excellent practice — always. Anytime you receive a large check unexpectedly, confirm that there has been no error before cashing. In fact, it is always a good practice to call and discuss the situation with your bank before acting. Do not issue any refunds until the check has fully cleared.

People shaking hands in front of a home

These scams can seem frightening, but knowing about them and learning how they work is already half the battle of avoiding victimhood. Never sign any documents that you don’t understand, and learn to distrust any offers that seem too good to be true. If a buyer engages in odd behaviors like trying to convince you to list your property for more money, cut off contact with them. A simple rule of thumb for avoiding real estate fraud is to call your attorney or local real estate agent any time someone makes you feel uncomfortable, or you receive any strange offers from companies or individuals you don’t recognize. Stay alert, stay informed, trust your gut, and you’ll be one step ahead of any scammers who would try to take advantage of you.

Need any advice about buying, selling, or renting? Our knowledgeable agents at Showcase would love to answer your questions or assist you in your next real estate endeavor! Contact us today!