Real Estate Scams: How to Protect Buyers, Sellers, and Renters

There’s a lot of money involved in real estate. So scammers definitely want a piece of the pie. If you own a house or property, they have scams to target you. If you’re hoping to buy or sell a house sometime soon, they have scams for you, too. Even if you rent, you can still be a target for fraud. If you live in a house or an apartment of any sort, there’s a real estate scam out there that can target you. It’s essential to know what these scammers are up to so you can avoid their tricks.

Real Estate Scams That Target Buyers

Buying a home or property is complicated, but it’s often exciting as well. You want to be focused on finding and buying the perfect house and anticipating all the possibilities of your new place. The last thing you want is to lose thousands to a real estate scam. So beware of these common schemes that target hopeful homebuyers.

Escrow Scams

Buying real estate requires putting some money in an escrow account, where a third party holds it until the transaction is complete. This real estate scam starts with a scammer getting access to the email of one of your real estate professionals, such as your Realtor or lawyer. Then they send an email pretending to be that professional. They tell you that your good faith money, earnest deposit, or other important fees need to be transferred to the escrow account. And they give you the account number to send it to.

Of course, the number they gave you isn’t the real escrow account. It’s actually one of the scammer’s accounts. When you send the money, it goes directly to the scammer. Often, nobody recognizes this fraud until your Realtor or lawyer asks you why you haven’t deposited the money yet. By then, the scammer is long gone with your hard-earned cash – potentially putting your home purchase in jeopardy.

Avoid this scam: Always double-verify where you should send money before you send it. To double-verify, use a contact method different from the one that sent you the information. So if you got the new account number by email, pick up the phone and call from a number you know is trustworthy. To be safest, stop by their office and transfer the money while you’re there so they can confirm in person that you’re sending it to the right account.

Bait and Switch

This real estate scam is fairly common, especially in larger cities. The scammer will advertise a great place for sale at an unbeatable price. It’s move-in ready, it’s in a great location, and it’s priced way under what you expect for a house like that. But when you call to ask about it, they tell you unfortunately, it just sold. However, they have other properties that are just as good that you could look at!

Once they convince you to look at the other properties, you can see that they’re in not-so-great condition or they’re actually way overpriced. But now that the scammer has you in person, they can use all their tricky hard-sell tactics. They don’t care that it’s the opposite of what you thought you were calling about – they just want to make a sale.

Avoid this scam: Most of us by this point know the old saying about things that are too good to be true. If you call about a house for sale at an unbeatable price and find out it just sold, thank them and hang up. Don’t let a shady salesman convince you that your dream house has an equally amazing twin. Talk to your real estate agent about finding some other options.

Land Scams

This real estate scam tends to pop up if you’re looking to buy land or abandoned properties. The scammer poses as a property owner who lives out-of-state or even overseas. They claim they inherited a piece of property and want to sell it. Often they target properties actually owned by people living away or abroad so they don’t have to worry about a real owner showing up and interrupting their scheme. And they’ll do their research – they generally know the names of the real property owners and some details of the property.

The scammers’ goal is to get you to buy “their” land. You may end up paying for it and thinking you’ve purchased some land, but since it was never the scammer’s to sell, you don’t own it. You may even end up getting in trouble for trespassing or destruction of property if you start making changes to the land you thought you purchased.

Avoid this scam: Do your due diligence to spot these real estate scams. Check property records and verify as much information as you can to make sure the person you’re talking to is who they claim to be. You can even ask (or have your real estate agent or lawyer ask) for documentation of their identity and ownership. And if the “owner” will only talk to you through lawyers or intermediaries, that’s a sign that you shouldn’t proceed with this deal.

Real Estate Scams That Target Sellers

There’s a lot of moving parts to selling a house or piece of land. Besides the usual complexity of a real estate transaction, if you’re selling your home, you also have to simultaneously secure a new place to live. Scammers take advantage of how much you have on your plate to swindle you out of your money. Some may even use schemes like a timeshare exit scam, where they promise to help you sell or exit a timeshare but instead leave you with more financial burden. These are some of the more common scams targeting people who want to sell their house or land.

We Buy Houses Scams

You’ve probably seen the signs on the side of the road declaring “we buy houses!” They offer to buy your house, no matter its condition, for cash. That can sound great, especially if you need a quick sale or if your house isn’t in great condition. But it’s important to be cautious.

Not every company that claims to buy houses for cash is a scam. But scammers love to use this ploy because this real estate scam is a great opportunity for them. It doesn’t take much for a scammer to start a fake “we buy houses” company, and the losses can be huge – thousands and thousands of dollars, or even your house stolen right out from under you.

Avoid this scam: We have a whole article on how to spot and avoid “we buy houses” scams. But here’s the bottom line: Talk to a Realtor or a real estate lawyer, thoroughly research the company before you decide to work with them, and never sign or pay anything before closing – at least not without having your Realtor or lawyer look at it.

Lockout Clauses

This type of real estate scam is done by scammers who actually do want your house, but they want to take advantage of you as much as they can to get it. It often targets sellers who are in some kind of financial trouble. This unscrupulous buyer seems to be in a big hurry to close the deal. This is appealing to a lot of sellers. But they pressure you into signing a contract with a hold clause or lockout clause as part of this great deal. That clause prevents you from negotiating with or selling the house to anyone else for a specified period of time.

Once you sign that contract, you’re committed to selling the house only to this particular person. They are gambling on the fact that you’re desperate enough to do anything to get the deal done, and done quickly. So the scammer demands additional fees, or even a lower price on your house.

Avoid this scam: Thoroughly read every contact before you sign. Remember that anything you sign is legally binding, so you want to understand exactly what you’re committing to. If you have a hard time understanding the legal language or just want to make sure you’re not at risk of getting scammed, have a real estate lawyer look it over before you sign. This scam commonly targets FSBOs, or For Sale By Owner properties – you can make yourself less of a target by using a Realtor to sell your property.

Foreign Cash Buyers

In this real estate scam, a prospective buyer reaches out to you, usually by email. They usually explain that they’re a foreigner planning on moving to your country. Whatever their story, they want to buy your house, and they can pay cash. Because they’re overseas, they can’t meet you in person or talk very much. So they recommend a lawyer to help handle the transaction.

You connect with the lawyer, and everything goes smoothly. The buyer is ready to buy. So they send you a check for the purchase price. But oops, they sent you too much money! It’s not a problem, the lawyer says. There’s an easy fix: Just deposit the check into your account and wire back the difference. But in the end, the check bounces, and any money you wired “back” is lost to a scammer.

Avoid this scam: Be suspicious of any buyer who can’t talk personally and wants a quick sale. No matter how appealing it sounds, it may be better to avoid a buyer who you can’t meet in person, or at the very least regularly communicate with over the phone. And never accept a payment that’s too much. You can write “void” on the check and send it back. Having a real estate agent can also help manage the process on your end to weed out these kinds of real estate scams before they even get to the check-sending stage.

Real Estate Scams that target Homeowners

You’ve already bought your house. You’re happy with it and you don’t want to sell. That means you’re safe from real estate scams, right? Wrong! Scammers are happy to target you, too. They just use different schemes. Here are a few to watch out for.

Mortgage Wire Fraud

To run this scam, the scammer finds out who your mortgage lender is and a few other details about your loan. This can be done through all sorts of methods, such as a data breach, social engineering, or even public records in some situations. Then they contact you pretending to be someone at your lender’s office. Something has changed at their office, they claim, and you need to update how you pay your mortgage.

When you change your payment details, your mortgage payment is now going directly into a scammer’s account. Not only have you lost that money, as far as your lender knows, you’ve just stopped paying your mortgage. It will hurt your credit score and put you at risk of foreclosure.

Avoid this scam: Verify any message, whether it’s a call, email, or text, before you take action. Call your lender on a trusted phone number, not one that the person who messaged you gave you. If they called, ask for their extension so you can get to them again when you hang up and call a trusted number. Someone who really works with your lender’s office will understand that you’re committed to security. If they try to say you can’t do that or pressure you not to hang up, that’s a guarantee that they’re a scammer.

Foreclosure Relief

Being threatened with foreclosure is stressful. An offer of foreclosure relief can sound so amazing that people often don’t stop to think critically about it. But any time something sounds like a perfect solution, it’s a good time to stop and think. Real estate scams always sound amazing at first, but they leave you worse than you started.

With foreclosure relief, scammers look through the public records of pre-foreclosures. Then they reach out to you and offer relief. They promise they can fix your foreclosure, reduce your payments, renegotiate your loan, or do something else to your benefit. All you have to do is pay some fees. But this scam swindles people out of thousands of dollars in fees. And worse, not only have you lost all that money, but you’re still facing foreclosure.

Avoid this scam: The best way to deal with foreclosure is to work directly with your lender to modify your loan, request forbearance, or explore what other options they have. It can be uncomfortable, but it’s your best option. Don’t trust people who call you saying they can help. And anyone who tells you that you should work with them and not with your lender is definitely trying to scam you.

Real Estate Scams That Target Renters

Just because you don’t own property doesn’t mean you’re immune to real estate scams. Scammers are clever and they have a plan to scam everyone. If you’re a renter, watch out for these scams.

Rent Fraud

This real estate scam is very similar to the escrow scams that target buyers and the mortgage wire fraud that targets homeowners. In this case, the scammer gets access to your landlord’s email, spoofs your landlord’s phone number, or get into whatever online system your landlord uses to communicate with you. They then reach out to you and tell you the way that you need to pay your rent is changing. Instead of whatever you were doing before, you need to send the money somewhere else.

Just like escrow scams, that money goes directly to the scammer and your landlord never gets a cent. Not only have they run away with your money, as far as your landlord knows you just skipped paying rent. If the fraud isn’t discovered, you could be facing eviction. Even if it is discovered, you may have to pay your rent twice that month because the first payment went to a scammer.

Avoid this scam: Make sure you have a trusted number for your landlord. And any time you get instructions to change how you pay your rent, call them on that trusted number to verify. Even if it seems like it was just your landlord calling, hang up and call them back. If your landlord has an office, you can even go over to the office and confirm the change in person.

Bait and Switch for Renters

This real estate scam is almost identical to the version that hopeful home buyers experience. The only difference is that instead of listing the amazing property for sale at an unbeatable price, the scammer lists the property for rent at a monthly cost way below the median rent in your area.

The rest of the scam is the same. When you ask about it, they’ll say it was just rented out, but they have similar options for rent and you could come take a look. Once you come look, you’ll find that the properties are in poor repair or extremely overpriced – or both – but the scammer will try to pressure you into signing a rental agreement right way.

Avoid this scam: Just like the buyer version, if you find out your dream apartment or rental house has already been rented, move on to looking at the next place. If someone promises they have other properties for rent and you think you might be interested, ask for the name of the property management company and do some research. Does the company exist? What other properties do they own? Are they well-rated? If anything feels off, keep looking.

Rental Scams

In this real estate scam, you encounter a great-looking rental online. There’s something that’s particularly appealing about it. Maybe the photos are amazing, maybe the rent is lower than market value, maybe it’s available in a desirable area where there’s never anything available. Whatever the reason, you’re interested.

So you contact the landlord. They’re out of town and can’t show you the place. But there’s a ton of people interested, they say. It’s not hard to believe since the listing seems so great. They need you to put a deposit down to reserve it, otherwise they’ll rent it to someone else. They’ll pressure you to reserve it now, before the other applicants get it.

In reality, the rental property doesn’t exist. It used stolen pictures and a fake address, or it’s a real property that someone else already owns and lives in. The scammer doesn’t own it and they certainly can’t rent it to you. They just want to convince you to put down a deposit of some kind so they can disappear with your money.

Avoid this scam: Never pay for anything sight-unseen, no matter how great. Even if the property does exist, the pictures could be outdated or faked. You can do a reverse image search to see if the photos were stolen from another listing, and check property records to see if the person you’re talking to is actually the owner. If they want the deposit though a strange method of payment like Zelle or cryptocurrency, be suspicious. And if they try to pressure you, it’s definitely a scam. After all, if there’s so many people interested, why would they care if you are the one who get it?

Real Estate Scams That Target Landlords

That’s right – landlords get targeted, too. When we said that real estate scams target everyone who owns or lives in a house or apartment, we weren’t kidding. Scammers have tricks and schemes to defraud landlords, too. Here are some of the most common.

Over-Payment

Over-payment is one of scammers’ favorite tricks to play with money. They’ll use it on landlords just as much as anyone else. In this real estate scam, you get a new tenant for your property. They just have to get you the deposit and first month’s rent and they’re good to move in. So they send you a check. But bad news – the check is accidentally for more money than it should have been!

The tenant tells you not to worry, there’s an easy solution. Just deposit the check into your account and wire them back the rest. But if you were paying attention to the foreign cash buyer scam that targets home sellers, the same thing happens. The check bounces, and you’ve lost any money you wired.

Avoid this scam: Never accept a check for the wrong amount. Instead, void it and send it back. And keep written records and receipts for every such interaction. To be extra safe, don’t let new tenants pay with personal checks at all. Instead, require them to get a cashier’s check or money order for the correct amount.

Subleasing Scams

Subleasing, or subletting, isn’t necessarily a bad thing. If it’s permitted in the lease and you’re kept informed of the situation, it may not be a problem. But scammers can also use it to steal innocent renters’ money and defraud you at the same time.

In this real estate scam, a scammer becomes your tenant. They fill out the paperwork, pay you the move-in deposits, and everything proceeds normally. But they immediately turn around and sublease the property to somebody else. Often they collect a few months of rent from the victims up front, but never pass that money on to you. By the time you realize the situation, your original “tenant” is long gone with the money, and your property is occupied by a new tenant who thinks they’ve paid for several months. They may even have receipts from the scammer to prove it, creating an even more complicated mess for you.

Avoid this scam: Don’t allow tenants to sublease your properties. That will help your case if you ever have to take an instance of subleasing to court. But since being against the rules never stopped a scammer, also do regular checks on the property. See what the minimum required notice is for you to stop by, and try to inspect the place semi-frequently during the first few months of a lease to see if you can identify subleasing.

Landlord Impersonation

In this real estate scam, a scammer steals the listing information of your rental property and posts it online with their own contact information. They get the interest of a prospective tenant. The scammer may even be able to get access to the property, such as by obtaining the code to the lockbox that has the key, and give the tenant a tour. As far as the tenant knows, everything is legitimate.

The scammer eventually gets the tenant full access to the property, whether it’s by getting that lockbox code, stealing a key, or some good old-fashioned breaking and entering. They let the tenant move in and tell them to change the locks right away. Now you show up to what should be a property ready to rent out and found tenants already moved in. Your key doesn’t work in the lock and they think they have a right to be there. And of course their rent money isn’t going to you. It’s difficult and expensive for you to sort out.

Avoid this scam: Keep all keys and lockboxes incredibly secure. Change lockbox codes immediately if you think someone could have gotten access. Do regular inspections on a property while it’s empty. And you can even consider temporary security cameras to spot if anyone tries to get inside or move in while it’s supposed to be vacant.

How to Report Real Estate Scams

Scams are everywhere, targeting everyone. If you own property or live in a house or apartment of any kind, there’s a real estate scam that can target you. It’s easy to be embarrassed if you’re targeted by a scam, especially if you lost money to it. But it’s important to not be. Even the smartest, most intelligent, most aware people can fall for a scam. And reporting it can help other people avoid it in the future. It can also help law enforcement track those scams and stop them in the future.

If you encounter a scam, even if you didn’t actually fall for it, you can report it so other people know what’s happening and law enforcement can find patterns. In the United States, you can report it to the Federal Trade Commission and to the Better Business Bureau’s Scam Tracker. If you did fall for it and lost some money, you can also report it to the FBI through their Internet Crime Complaint Center. If you’re outside of the US, look up where you should report scams and fraud in your country. By reporting them, we can make more people aware of the dangers that are out there and help law enforcement monitor, catch, and prosecute these scammers.