Real Estate Scams and How to Avoid Them!

Understanding Real Estate Scams and Wire Fraud: How to Protect Your Clients

In today’s real estate market, scams and fraud attempts are becoming increasingly common. As real estate professionals, it’s crucial to stay informed and help clients protect themselves from these dangers. At Century 21 HomeStar and the 21 Mike Team, we are committed to keeping our agents and clients safe by educating them on the latest scams and fraudulent activities in the real estate world.

The 21 Mike Team at Century 21 HomeStar, is lead by Mike Ferrante and is based in Solon, Ohio, just outside of Cleveland. Our team, which was the number one Century 21 team in terms of transactions globally for 2023, covers the entire Northeast Ohio region and beyond. If you need real estate services in Cleveland, Akron, or Columbus, visit 21mike.com to schedule an appointment with one of our team members.

Joining me today is Debbie Hehr, office manager and trainer at Century 21 HomeStar. Debbie works closely with agents, offering support and insights into the challenges they face in the field. Today, we’re diving into some of the most common scams, including wire fraud, and discussing how to protect your clients and your business from these threats.

Common Real Estate Scams to Watch Out For

Real estate scams are becoming increasingly sophisticated, with fraudsters targeting both buyers and sellers in various ways. Below are some of the most common scams and tips for avoiding them.

1. Fake Sellers Targeting Vacant Land

One of the more recent scams we’ve encountered involves fake sellers, particularly those trying to “sell” vacant land. These scammers pose as out-of-state property owners and contact real estate agents to list the land for sale. Since vacant land does not require an in-person visit to a home, it’s easier for scammers to avoid detection.

In one instance, the scammers sent a forged driver’s license as proof of identity, but it was quickly flagged due to discrepancies in the address and other details. Debbie shares a critical tip: Always request both the front and back of a driver’s license when verifying an out-of-town seller’s identity. Scammers often won’t send the back of the ID, as it’s harder to forge.

Agents should always take precautions when working with out-of-town sellers. Use services like Forewarn, a tool from the National Association of Realtors, to verify a person’s identity and prevent fraud. Forewarn allows agents to run background checks on potential clients, providing essential details to help you make informed decisions.

2. Buyer Scams Through WhatsApp

WhatsApp is a legitimate communication tool, especially for international clients. However, scammers often exploit this platform to target real estate agents with fake buyer offers. A common scenario involves a buyer claiming to be working on an oil rig or in a remote area, making it impossible to meet in person. They offer to buy a property sight unseen and may even provide a fake earnest money deposit.

The goal of these scammers is often to manipulate agents into accepting false payments or sharing sensitive financial information. In cases like these, agents should be wary of any communication that seems too good to be true, especially if the buyer is offering full price without seeing the property. Always verify the identity of the buyer through multiple channels before proceeding with any transactions.

3. Wholesale Scams

Another common scam involves fraudulent offers from supposed wholesalers. While wholesaling is a legitimate business practice, there are bad actors who attempt to exploit this process by submitting low-ball offers and then trying to flip the contract for profit. These individuals rarely view the property in person and include suspicious language like “and/or assigns” in the buyer section of the contract.

At Century 21 HomeStar, we strongly advise our agents to be cautious when dealing with these types of buyers. Always verify their identity and the legitimacy of the offer before entering into a contract. As Debbie emphasizes, agents should do their due diligence and discuss any uncertainties with their broker or legal team.

4. Rental Property Scams  

Rental scams are another prevalent issue. Fraudsters take legitimate for-sale listings, typically found on platforms like Zillow or Craigslist, and advertise them as rental properties. They request deposits or application fees from unsuspecting renters, only to disappear once the payment is made.

To prevent falling victim to these scams, renters should always verify the property’s status and the identity of the landlord.  By checking the county auditor’s site, you can verify the owner of a property.  If you cannot tour the property in person or speak directly with the owner, it’s likely a scam. Agents should be vigilant and report any fraudulent rental listings they come across.

5. Wire Fraud

Wire fraud is one of the most financially devastating scams in real estate. Scammers often hack into email accounts or intercept communication between buyers and title companies, providing fraudulent wire instructions. Unsuspecting buyers end up wiring down payments or closing funds to the wrong account, and recovering the lost funds is nearly impossible.

To prevent wire fraud, always instruct clients to double-check wire instructions by calling the title company directly using a verified phone number. If the buyer receives an urgent email about changing wire instructions, it’s a major red flag. Title companies now use secure portals for transmitting sensitive information, and any deviation from this process should be questioned.

Protecting Your Clients and Business

As real estate professionals, it is our duty to help our clients avoid these types of scams. Here are a few tips to keep in mind:

• Always Verify Client Identity: Use tools like Forewarn to verify the identity of buyers and sellers, especially when working with out-of-town clients.
• Request ID Verification: Ask for both the front and back of a client’s ID to ensure its legitimacy.
• Be Cautious of Urgent Requests: Scammers often create a false sense of urgency. Take time to verify any unusual requests, especially those involving money.
• Use Secure Communication: Title companies use secure portals for wire transfers and sensitive communication. Advise clients to be cautious of emails requesting wire instructions outside of these portals.

By staying informed and implementing these precautions, you can protect your clients from falling victim to real estate fraud.

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