Buying real estate is a major commitment that comes with a degree of risk. Buyers have to give up liquid capital when they deposit earnest money. They are also vulnerable after they negotiate a purchase agreement, as they typically have to complete the transaction unless unusual circumstances arise.
Buyers are also potentially vulnerable if they fall victim to a fraudulent real estate listing. People sometimes list properties that they don’t own and therefore cannot legally sell. Unsuspecting buyers may end up losing thousands of dollars if they fall victim to fraudulent listings or other trickery.
How can buyers try to protect themselves from criminals with nefarious intentions on the real estate market?
Prioritize legitimate MLS listings
Many people hope to find a more affordable property by looking for homes listed for sale by owner. Some people specifically try to avoid working with real estate agents in an attempt to save money.
Many fraud schemes involve listings on digital marketplaces rather than the standardized multiple listing service (MLS) used by licensed real estate agents.
While not every private real estate transaction involves fraud, the lack of an MLS listing number is a red flag for potential real estate fraud. So are grammatical errors throughout listings and stories meant to elicit sympathy from buyers.
Look into title records early
The title history for a property shows who is the current owner. Affirming that the seller’s identity aligns with the name currently on title for the property can help people spot warning signs of fraud.
Sometimes, people with no interest in a property agree to sign quit claim deeds giving up their stake in the property. The deed is a legitimate document, but the so-called seller does not actually have an interest to transfer. Validating who owns the property and the identity of the other party is critical.
Avoid direct wire transfers
Another way that people facilitate fraudulent real estate transactions is by requiring questionable wire transfers. They may even instruct an individual to use Western Union or similar services to transfer funds.
Wire transfers are common during real estate transactions, but they involve the mortgage lender sending funds to another financial institution. Avoiding direct transfers to sellers can protect people from fraud. So can taking the time to double-check wiring instructions, as some sorts of fraud target people in the middle of a legitimate transaction by tricking them into wiring funds to the wrong party.
Buyers hoping to adequately protect themselves on the residential real estate market may also want to partner with an attorney. Having support during every stage of a sizable transaction can help reduce the risk of fraud or other issues arising that could cost the buyer money. Being proactive about identifying and avoiding real estate fraud can help people successfully complete a potentially life-altering transaction.