HMW #149: Avoid These 3 Common Real Estate Scams
Apr 17, 2024
Read Time: 6.5 minutes
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There's big money in real estate and scammers love to hang around big money.
You are probably aware of unscrupulous contractors and why they might ghost you and fake rental listings that are too good to be true. These scams are done with immediate cash requests for deposits or to help buy materials before the job starts. Any situation were you are willing to pay cash up front means you might be dealing with a con artist.
However, you might not be aware of these 3 frequent real estate scams that take a little more legwork and technical-savviness to pull off. You ready to hear about them?
Ohh, that's an excellent screening question! Off to a great start.
Real Estate Scam 1: Wire instructions spoofing
You might not know it, but bots may be monitoring your email. You downloaded some app ages ago that gave it permission to access your inbox. Some of the most prolific scammers sit and wait until they get notified that your inbox has these words appearing in it: real estate closing, earnest or escrow money, and wire.
Beware that even if they aren't monitoring your mail, these same bot could instead be monitoring a closing attorney's, mortgage lender's, or real estate agent's email for these same words too.
Once the scammers recognize a real estate closing is coming up for you, they will spoof email messages from all parties and go after your money by changing the wiring instructions. I (Alan) had a client fall for this to the tune of $50,000 (the down payment of a new multi-unit).
The phishing email that was sent looked like the closing attorney's email with same email signature, it also looked like I was cc'd on it (but it was a misspelling of my email) and it had the urgency of needing to be done that day in order for the deal to close on time.
We got the FBI and Secret Service involved and they traced the wire and saw it hopped from account to account and finally ended up in Nigeria where they couldn't do anything about it. Also, they said we were "lucky" as usually they go after the closing proceeds and net $250k or more.
The solution to combat this is to use old technology: the telephone. Call and verbally confirm the wire instructions before wiring anything. Don't just call the number in the spoofed email, as that has been changed too. Google the attorney and use the number on their website and save yourself from this headache of a scam that is all too frequent.
Yes it is. And expensive. Learn from others mistakes on this one.
Real Estate Scam 2: Whatsapp Conversations
The app Whatsapp is the default messaging app for most non-US countries. It has more monthly users than Facebook Messager and WeChat combined.
This popular app is also very popular with criminals.
If you are ever talking to a new client, wholesaler, buyer, renter, landlord or any other type of representative of a real estate transaction who continually wants to move the conversation strictly to Whatsapp, you should note you are most likely entering real estate scam territory.
Their goal on Whatsapp is:
- Get you excited about a deal or money so that you make snap decisions
- Compromise your Whatsapp account by providing an access code or other important information
- Change your account password and then pretend to be you to get funds from your friends and family
This often starts with a great real estate opportunity and ends often with your friends getting scammed. This is obvously not a good time for anyone.
The solution is often do person-to-person meetings, teleconferences with videos, or old-fashioned phone calls to make sure the person you are talking to is legit. If they avoid any of these ways of doing business, then they are not worth doing business with. It's that simple.
Perfect. Stay on this course for best results.
Real Estate Scam 3: Timeshares & Timeshare Exit Companies
This is a double whammy of a scam. Timeshares are not real estate. It's a lease that is impossible to get out of and often your heirs are forced to continue the payments even after you die. (Excellent 25-minute deep dive on timeshares by "Last Week Tonight" here.)
But guess what? Once you "buy" a timeshare, you have signaled to the world you are susceptible to scams and then you become the target of timeshare exit companies.
These are companies the promise to get you out of your mistake of investing in a timeshare for an upfront $5k-$30k fee. And guess what? They just take your money and run.
Then, you are often left with no choice but to try a different company to get you out of a timeshare and they do the same thing. It's such a bad deal that timeshare contracts are are offered on eBay for $1 or lower and there are literally no takers.
Timeshare salespeople do have a great sales presentation and love to trap you in a room for hours on end that makes it seem like the best deal in the world. My advice is to just stay away even if it earns you a free Disney ticket or other vacation perk. It's just not worth it.
Yes, never slip into a timeshare pitch and think you'll get out unscathed. These salespeople are the ultimate vultures of real estate.
Summary
- Verbally confirm all wire instructions before sending money
- Strict Whatsapp communication is a red flag
- Timeshare + anything is a red flag
- Cash + urgency is a red flag
- Too good to be true often is