As the demand for convenient all-cash home buying services continues to rise, so does the number of home buying scams. Wire transfer scams could send your money to the wrong account, never to be seen again.
“Real estate fraud is one of the fastest-growing cyber scams across the country,” FBI Special Agent Siobhan Johnson told ABC News in Chicago. In recent years, the FBI reports a 42% increase in the number of real estate crimes as scammers specifically target home sellers and buyers.
8 common home buyer scams to avoid
The following scams involve fake or devious buyers trying to convince sellers or realtors that they want to purchase a home. They may take different approaches, but their end goal is always the same. To cheat you out of money.
1. The overseas or foreign buyer
This buyer contacts you — through a website, an email, or even through the mail — begging to buy a specific home. They explain that they’re overseas and won’t be back in the States until a certain date, but they really need a place to live. And then they offer to send a cashier’s check to secure the house.
A few days after the cashier’s check shows up and has been deposited, the buyer will come up with a reason to cancel the contract and request a refund. Most often the request comes prior to enough time passing for the cashier’s check to have been cleared. As a result, Escrow has a standard number of days required for the cashier’s check to clear before refunds are issued.
2. The eager-beaver and unavailable buyer
Beware the eager-beaver buyer. Being excited about a home is one thing, but a buyer who comes across as obsessively eager to send earnest money or a large down payment sight-unseen can be a red scam flag.
Similar to the foreign buyer scam, they’ll be unavailable to tour in person or take phone calls, but they still really want to purchase the property. They could make an offer over your asking price, offer cash, promise to deposit earnest money into an account, and run a cashier’s check or wire fraud scam.
Note that some legitimate buyers do buy homes remotely, particularly during the pandemic. But they’ll typically have an agent who walks them through the house on a video call or negotiates on their behalf. This is where a real estate agent is essential in helping to screen the real from the fake.
3. The detail-overload buyer
From the start, this buyer provides detailed financial records and personal information — far more than someone would expect on an initial home sale inquiry. They send bank and financial statements without even being asked, to “prove” they can afford to pay cash. In this situation, use common sense.
While proof of funds is part of a legitimate cash deal, the information would always pass between agents and the escrow company.
While they may be willing to provide lots of bogus financial details, they might not have references, a social media presence, or any real proof they exist.
4. The check-bungling buyer
This buyer says they accidentally sent too much money and will ask for a refund for the overage using a wire transfer right after you have deposited the check. They’ll claim that they didn’t intend to put that much down on the house. Since the request is only for a portion it seems less sketchy. However, after a few days, the check will bounce and the funds that were refunded will not be recoverable.
5. The bogus investor buyer
This buyer is an “investor” who pressures you to put a home under contract. They typically will not put down any earnest money or present references. That’s because they don’t actually have the money to buy the house — they’re just putting it under contract in the hopes they can turn around and sell the deal for a profit or a finder’s fee to another investor.
If they’re unable to resell the deal, the seller will have wasted valuable time while the house was off the market. No money will be lost however, won’t lost time has been taken away from what could have been with a legitimate buyer.
6. The wire fraud seller
Buyers in a hot market can start to feel desperate to find a house. After losing out on a few homes, a buyer could be an easy mark for a “seller” who’s really a scammer. These scammers steal photos and information from actual listings and then pose as the seller or a seller’s agent.
While they likely can’t get their fake property listed on a reputable website, they could list it for sale on websites that perform fewer, or no, diligence checks. Think of any website that lets you just sign up and post an ad. While some legitimate for-sale-by-owner sellers do use these sites, beware of any seller who wants money upfront.
They could insist that you deposit money into an account, or send a wire transfer, to secure the property. High-pressure sales tactics will definitely come into play, and they’ll claim to have multiple interested buyers. Once the money has been wired, it’s gone. And so is the fake home listing.
Buyers are also vulnerable to other forms of wire fraud. Someone may call you, posing as a representative of their agent’s real estate office, with instructions to wire your earnest money or closing costs. The call, and the account, are fake, and you could lose all your funds to these scammers. The relationship with the Escrow company is key in validating information for wire instructions in communication directly with the buyers. Also, call the agent and ask them to verify that the call — and the wire transfer instructions — are legitimate.
Verify everything. Call your trusted professional before sending money. And then check again.
7. The title or deed buyer
A homeowner who’s a victim of a title or deed scam could find their home stolen from underneath them — literally. These scammers will often steal mail to obtain confidential information and forge signatures or other documents to assume the title or deed for a property. They could try to take out a loan against the property.
While the problem can usually get fixed, it’s an expensive process. Watch out for missing mail, strangers mulling around a property, or a sudden drop in your credit score. All of these are signs that someone might have stolen your identity. Landlords and people who own vacation homes are particularly at risk because it may take a while to notice that anything is wrong.
8. The foreclosure relief offer
Distressed homeowners who are behind on their mortgage could find themselves in financial trouble of a different kind if they fall prey to a foreclosure scam. Foreclosure relief scammers target homeowners on the brink of losing their home, promising to either modify their existing loan or stop the foreclosure. The catch? They want money upfront.
While there are legitimate services and charities that help homeowners facing foreclosure, they don’t ask for upfront payment. Anytime a business demands upfront payment before services are rendered is a signal to be wary. Look up the company on the Better Business Bureau, investigate their website and online reviews, and if you can’t find much information, or they’re throwing up other red flags — run.