The largest purchase of your life is a festering swamp for fraud. It certainly makes sense. Banks, insurance companies, and other corporations hide behind sophisticated security systems.
But the average down payment in the San Fernando Valley is $100,000 - and the only form of security is a Gmail password. Buyers are a low-difficulty, high-reward target.
When you fall in love with a house, you’re much less likely to second-guess the red flags. Here are the three most common local scams to watch for.
1. Wire Fraud
It’s the mother of all real estate scams.
You’re 2 days away from closing, and you’ve trudged through the gauntlet of the homebuying process. It’s been three-hundred signatures, 50 home showings, $10,000 of unexpected repairs, and 6 months of pain. You’re ready to wire in your $120,000 down payment.
The problem? Your Realtor’s email was hacked. Instead, your wire goes to an unknown offshore account. You’re not getting the house and you just lost years’ worth of savings. Not only is it the most devastating, but it’s the end goal of all other scams.
It usually happens at the end of escrow. But in reality, any way that scammers can get your attention, they finish it with wire fraud.
HOW TO PREVENT
Give all amounts in person. It's call wire fraud for a reason. Forego the whole process and bring a cashier's check with the amount.
Make sure your realtor uses a secure email. They often will go to a Starbucks or other public venue to use wi-fi. This is a hotspot for hackers to steal information.
Only accept wire instructions that are secure and encrypted. If wire instructions are sent simply by in a PDF, then it’s not safe. Reputable escrow companies require you to log in with a discreet password.
Do not send any funds without multiple calls to parties. If your escrow officer wants something, call your escrow officer and your realtor.
2. FAKE LISTINGS
The Valley is expensive. Everyone wants a deal. And in the age of the Internet, buyers have access to nearly the same listings that Realtors do. But specifically on Zillow and Trulia, anyone can post a home for sale.
Here’s what happens: you see a home that’s in your price range, but it's shockingly better than its competition. It has more square footage, a better kitchen, larger pool, expansive lot size, yet it’s the same price.
You call them and two things happen. This is especially common with rentals. They charge assorted fees to push along the application process. Then, they request the whole deposit and first month’s rent. After you send it, you never hear from them again.
Sometimes, renters show up to the house to find that it’s not even on the market!
In the case of home purchases, scammers will collect phone calls in order to start hounding you for business. For them, it’s an easy way to collect leads.
Anyone can post a home on Zillow and Trulia. This is mostly on the Internet. It is especially prevalent now.
How to Prevent
1. Look out for pictures that look grainy. Drive by the house to make sure it exists. The house above is not a real address if you drive by it. 2. Never put an offer on a house without a walkthrough. Make sure it's the real deal. Especially when it comes to rentals, it can get tricky. You should demand a showing.
3. This ties into wire fraud as well. The end goal of fake listings is to take your money.
You've seen the bandit signs. These are real estate investors that take advantage of misinformed sellers. These investors buy your house at a steep discount, renovate it, then flip it. It's nothing more than a lead generation device.
These guys will usually buy your house around $100,000 under value. The only people that fall for this don't know the true value of your home. They're also usually in a dire situation. Whether it's divorce or foreclosure, they want a discreet quick-close.
That's great, but is it worth $100,000 to you? To me, that's a lot of money.
Other times, if they can't get you to agree on a price, they'll actually list your house on the market. That's not so bad, but do be aware. This is a lead generation technique. It's plain and simple.
They may not be an actual credible Realtor.
You see these at the tail end of the market. When the market is unhealthy, investors take advantage of people in rough situations.
HOW TO PREVENT
1. If you need to sell, hire an actual, qualified Realtor (818-390-3265).
2. As with anything, get multiple opinions. Even if you really do want a quick cash close, see if you can find a better price.
Buying and selling homes is an emotional experience. Normal consumers get into high-volume transactions and are unaware of the legal repercussions that accompany it. Double-check everything. Get a good Realtor.
You've worked your whole life for this money - shouldn't you it treat that way?