By Bob Walsmith Jr.
Santa Barbara Association of Realtors
We all know that the real estate market is hot and that homes are being purchased almost as soon as they are listed. However, this hot market can bring out the worst in people as well.
Finding a place to live can be an exciting but stressful experience. As people hurry through the home buying or renting process, their eagerness will sometimes lead to fatigue. They may let their guard down and not notice the signs of possible real estate fraud.
According to one recent study, real estate is the third most common sector for fraud attempts behind construction and commercial services. Housing scams are prevalent across all aspects of the housing industry, with criminals targeting both renters and owners. This is due to the large sums of money involved in the transactions as well as the sharing of sensitive information among multiple parties.
Traditional real estate transactions revolve around email, which makes them vulnerable to cyber-attacks. The FBI announced in its 2020 Internet Crime Report that real estate fraud complaints resulted in over $1.8 billion in losses in 2020 alone. Despite growing awareness around cyber-attacks, it continues to be a threat in the real estate industry.
Being aware of common forms of real estate fraud is an important step in avoiding scams. The following are ways criminals often target the public:
Wire Transfer Fraud
The most common form of real estate cybercrime is wire fraud, targeting buyers as they navigate the process of buying a home. By hacking into email and other forms of communication, criminals can gain access to banks accounts, social security numbers and other sensitive data. With this information, criminals can intercept transactions and steal hundreds of thousands of dollars from consumers. Criminals often send professional-looking emails asking a potential buyer to wire their closing funds. If the consumer doesn’t pay close enough attention to the source of the email, they may wire their life savings to a bogus account. I attended a seminar a few years ago and a colleague asked the moderator from the local District Attorney’s Office what someone should do if they inadvertently wire money to the wrong person. He jokingly said that they should raise their right hand and wave it goodbye. It is almost impossible to trace the source and get the money back. Always verify with your title and escrow company that they are the ones asking for the wire transfer.
Home Title Theft
Home title theft, also known as deed theft, deed fraud, or house stealing, occurs when the title to a property is obtained illegally without the owner’s consent. Title theft often occurs at critical stages of transactions, where funds and sensitive information are passed between parties. Thieves often acquire the information they need to execute a title theft by assuming the identity of a real estate professional or third party. Always be careful about your sensitive information.
According to research conducted by Apartment List, 5.2 million US renters have lost money from rental fraud. A common scam involves fake rental advertisements. In this case, a scammer creates an ad, typically on Craigslist, for an apartment or house and attempts to collect a deposit or lease payments from a potential tenant. The Federal Trade Commission warns that any payment requests, especially via wire transfer or cash, prior to meeting a landlord or signing a lease are red flags for rental scams.
I have received more than five phone calls in just the past two months from people asking me to help them verify whether a Craigslist ad was legitimate or not. In all cases, they turned out to be scams. These typically involve a house for rent with a price that seems below market value. Scammers often use photos from recent house for sale listings. If you are unsure about whether a potential rental is a scam, contact your local Realtor for assistance. It is our pleasure to help verify an advertised rental and to make sure that you don’t get scammed. The adage is truer today than ever when it comes to rentals: “If it sounds too good to be true, then it probably is!”
Bob Walsmith Jr. is a native to Southern California and a Realtor® with Berkshire Hathaway HomeServices California Properties in Santa Barbara. During his work with the Santa Barbara Association of Realtors, Bob has served on the CORE Committee, Education Committee, been Chair of the Budget & Finance Committee, and the Multiple Listing Service Committee. He also is on the Board of Directors of the Alpha Resource Center of Santa Barbara. Bob lives in Goleta with his beautiful wife Julie. When not working, Bob enjoys playing golf, fine wine, fine dining, and walking our beautiful coastline. Bob can be reached at 805.720.5362 and/or firstname.lastname@example.org