Unfortunately, it’s not uncommon for home buyers to get caught up in a real estate scam. Thousands of victims have reported housing fraud to the FBI via their Internet Crime Complaint Center. Get savvy about the telltale signs. Here are five common real estate scams and how to spot them.


  1. Illegal property flipping:

Property flipping is generally legal. An investor purchases a fixer-upper, makes any necessary repairs, and then sells it for a profit. In this instance, however, the most common real estate scam occurs when the home is falsely appraised at a higher value than it’s actually worth, or major issues are covered up, such as toxic mold.


  1. “Bad credit doesn’t matter”

Loans that disregard poor credit are most likely predatory. They tend to take advantage of low-income buyers who are trying to enter the market with damaged credit. Loans of this nature are sure to come with unethical terms.


  1. Escrow wire fraud

Sometimes scammers hack into a real estate agent’s email, or create fake websites that resemble the actual site of your lending company. The scam artist contacts you to inform you of a last minute change regarding where to wire your down payment. These types of shifts are a red flag. Before sending money, confirm the escrow account number, and verify wire instructions by contacting someone from the original documents you received.


  1. Prepayment penalties

Dishonest lenders will tack on fees if you manage to pay off your loan early. Such prepayment penalties are illegal, and a clear real estate scam.


  1. Foreclosure rescue scams

If a lender files a “Notice of Default” because someone failed to meet their mortgage payments, it then becomes public record. This can make a struggling homeowner an easy target for real estate scams. There are government-sponsored loan modification programs, but in this case a scam artist offers to help desperate homeowners for an upfront fee. Be wary, as no legitimate program will require fees as a prerequisite to providing assistance. If you need help, it’s best to work directly with your lender.


Getting into the real estate market can be rewarding, but keep in mind if an offer sounds too good to be true, it probably is, and proceed with caution. One mistake could cost you.