How to Avoid Scams and Protect Your Finances, As You Prepare to Buy a Home
1.26.2023 | Category: Homebuying
Buying a home is a significant financial investment. It can be one of the most layered and complex financial decisions you will ever make. The process involves sharing sensitive and private information including income, place of employment, debt, and creditors as well as often previous addresses, social security numbers, bank account numbers, and even familial relationships.
The last thing you need to deal with when buying a home is identity theft, fraud, or scammers. It is important to be aware of these and other potential scams when buying a home and to take steps to protect yourself by doing your due diligence and seeking professional advice when necessary.
How Can I Spot a Potential Scammer When Buying a Home?
Being aware of potential scams can help protect you from losing your money or personal information. Scammers may use a variety of tactics, such as creating fake listings or impersonating legitimate real estate professionals. They may also offer deals that seem too good to be true, such as advertising a house at a significantly below-market price or asking for money upfront without providing any services.
Scammers may also try to take advantage of the time constraints buyers might face by moving quickly to close a deal and may pressure buyers to sign contracts or transfer funds before they have had a chance to thoroughly review the documents or research the property.
A trustworthy real estate agent will never rush you to make a decision you’re not ready to make and will always go through every detail of your transaction to make sure you understand every aspect of the home-buying process.
Be cautious and do your due diligence when buying a home to ensure you are working with legitimate professionals and not falling victim to a scam. This includes researching the credentials of any real estate professional or lender you are considering working with and being careful with online listings.
What are Some Examples of Potential Scams?
There are several ways a scammer can take advantage of potential homebuyers while they are on their home search. It’s important to take your time and ensure you’re working and communicating with trusted professionals the entirety of your home buying process. Here are examples of some of the most common scams you may encounter as you’re looking to buy a home:
Phony listings: Scammers may create fake listings or steal photos from legitimate listings to trick buyers into sending money or personal information. They may ask for a deposit or down payment in exchange for a house that doesn't exist or is not for sale. You can feel more confident knowing a listing is legitimate if you’re looking for homes using the MLS, or Multiple Listing Service.
For home buyers, the MLS can be a valuable resource because it allows them to access a wide range of properties that are currently available on the market. Because it is only available to licensed real estate professionals, it can be harder to access as a consumer. However, many real estate agents and brokers will give access to the MLS to buyers they are working with, and some online portals also have access to the MLS and are able to provide this information.
Impersonating real estate professionals: Scammers may impersonate real estate agents, mortgage brokers, or other professionals in order to gain access to personal information or money. They may ask for money upfront for services that are never provided or may ask for personal information that can be used to steal identities.
Real estate agents are required to be licensed in the states they do business and therefore will always have an agent or broker license number they use in their marketing and advertising materials. If unsure someone seems suspicious, as for their real estate license number and referrals.
Advance fee loan scams: One of the most frequently used tactics by scammers includes soliciting buyers for an advance fee or requesting wire transfers or cash in exchange for services. They may then disappear with the money and the buyers are left without a loan. Lenders will always take extra precautions when requesting funds, like your down payment or closing costs. Be sure to be extra careful when transferring these funds.
Property flipping scam: Scammers may buy a property at a low price and then sell it to an unsuspecting buyer at a significantly higher price without disclosing needed repairs or upgrades that won’t pass inspection or aren’t up to code. They may also ask for money upfront for repairs or renovations that are never completed.
You can avoid these scams by looking up the property’s transfer records with the city or county the property is in. If anything looks off, your buyer’s agent can look into it further for you.
How do I avoid scammers and protect my finances?
Protecting your personal finances when buying a home takes a little common sense and a lot of patience. By being aware of potential scams and taking steps to protect yourself, you can reduce the risk of losing your money or personal information and ensure that your home-buying experience is as smooth and stress-free as possible.
Be wary of unsolicited offers or requests for personal financial information. Legitimate real estate professionals will not contact you unsolicited or ask for sensitive information like your social security number or bank account information over the phone or over email. They will almost always use a secure server or cloud to exchange sensitive information.
Do your research. Look for reviews and testimonials from previous customers, and check the credentials of any real estate professional or lender you are considering working with.
Be careful with online listings. Scammers often create fake listings or steal photos from legitimate listings to trick buyers into sending money or personal information. Use the MLS whenever possible to seach for homes.
Never wire money to someone you haven't met in person. Scammers may ask you to wire money as a down payment or deposit, but wiring money is a risky move, as it is difficult to trace and recover.
Get everything in writing. Before making any payments or signing any documents, make sure you have a clear and detailed written agreement outlining the terms of the transaction.
Seek legal advice if necessary. If you suspect a scam or have any doubts about the legitimacy of a real estate professional or lender, you can always consult a lawyer before proceeding with the transaction.
Protecting your personal finances is one of the most important steps you can take during the home-buying process. By following these steps, you can greatly reduce the risk of falling victim to a scam and protect your finances as you prepare to buy a home.