You may be surprised that Millennials are the most common victims of homebuying scams.
According to Realtor.com’s 2016 survey of homebuying trends for the upcoming year, up to 52 percent of this year’s buyers may be first-timers and roughly 61 percent of these first-time buyers are younger than 35. Millennials may face their own set of challenges when it comes to purchasing a house for the first time—like saving for a down payment and finding a house they can afford, Realtor.com’s survey says.
According to the Better Business Bureau, Millennials are the most likely among all age groups to get targeted by scams. What the BBB Institute referred to as the “invulnerability illusion” simply means that younger buyers may be more easily scammed because they don’t see themselves as targets.
Regardless of age, it’s this optimism bias that all homebuyers need to be aware of. We often think other buyers are more vulnerable than we are, so we forget to take precautions, according to CBBB Director of Marketing Research and Insights Rubens Pessanha.
How to Avoid Being Swindled by Real Estate Scams: Warning Signs
Scams where money is involved are nothing new. But in the digital age, homebuying scams and real estate fraud can look different.
Watch out for these subtle red flags that many homebuyers miss:
1. Phishy emails – If you’re in the middle of a home purchase, pay careful attention to your email. You may already be familiar with phishing—a form of email scam where third-parties pose as businesses to gain access to customers’ personal information.
In the world of real estate, a scammer could hack into a real estate agent’s email and send their clients fake emails or documents, posing as the realtor or title company. Any real estate phishing emails of this kind should be immediately reported to the FTC. The FTC and the National Association of Realtors issued a warning about this type of phishing scam in 2016, recommending that buyers never email financial information.
2. Loan fraud – Like a cleverly worded phishing email, loan fraud can be easy to conceal from homebuyers unfamiliar with the mortgage process. A common scenario, also called valuation loan fraud, may look something like this: An unethical mortgage lender and/or realtor may feel pressured to close a loan in a slow market. To jump this hurdle, a loan officer or realtor may purposely misrepresent some of a buyer’s numbers, whether income or credit score or home value, to make it possible for them to get a mortgage.
The FBI categorizes mortgage fraud as a subset of Financial Institution Fraud (FIF), noting that this practice can also be used to steal cash and equity from homebuyers. Fortunately, there’s a quick fix to this alarming problem: Work with a mortgage lender and a realtor known for their above-board ethics. Confirm their practices and reputation through online reviews and by calling past customers as references.
3. Unethical behaviors – It’s important to emphasize that most realtors have integrity and are very good at what they do. And while a bad apple won’t spoil the bunch, homebuyers, and first-time buyers especially, need to know what inappropriate behaviors look like coming from an agent.
A real estate agent should never charge an upfront fee to list a house; commission is paid to a realtor when a property is sold. It may also be a violation of realtors’ code of ethics to gossip about or slander their competition. And though it should go without saying, any realtor (or loan officer) who offers a buyer a kickback upon closing has broken a federal law and should be reported.
4. Unlicensed agent – Cases make the news when doctors are caught practicing without a license, and on a smaller scale, the same thing can happen in the housing industry. While unlicensed real estate agents help real estate agencies in the purchase and sale of homes, their authorities are limited. In many states, for example, an unlicensed realtor can’t show properties, provide clients with listing information, interpret contracts, negotiate a sale, or take a commission.
The best way to address this potential problem is to ask. A client can request to see their realtor’s licensing information or pocket card at any time. A realtor who is licensed is one held to a higher standard; practicing real estate without a license is also a criminal offense and should be reported.
Many times, it’s as simple as doing your homework. Check in with your realtor and your lender before making any online transactions. Look into a professional’s reputation before agreeing to use their services. And when in doubt, go with your gut. If at any time you feel uncomfortable in the homebuying process, when looking at a house or when meeting with a lender, speak up and address your concerns.
Bethany Ramos is the Creative Writer for Cornerstone Home Lending, Inc. Her work has also been featured on SheKnows.com, Time.com, Yahoo.com, Mamamia.com.au, Babble.com, and HuffingtonPost.com.
Written by Bethany Ramos
Bethany Ramos is the Creative Writer for Cornerstone Home Lending, Inc. Her work has also been featured on SheKnows.com, Time.com, Yahoo.com, Mamamia.com.au, Babble.com, and HuffingtonPost.com. Learn more