Real Estate Agent Podcast Episode 75: Real Estate Scams
According to the FBI, more than 13,600 people were victims of real estate or rental fraud last year alone.
About This Episode
Real estate scams have preyed on individuals since property ownership. Some of history’s most brazen, brilliant, and lucrative conmen have scammed in the modern era. From blank checks to deceptive deals and computer hacking, real estate scams can cloak themselves in many fashions.
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Intro: Hello and welcome to ShopTalk, the real estate show. I’m Brett Van Alstine and on today’s episode we’re going to cover real estate scams. Later in the episode we will be joined by a colleague of mine, content specialist Jeff Erbert to discuss a common real estate scam agents should watch out for.
Brett: Scams are unfortunately a real threat for anyone invested in the real estate market. They are often cloaked in grand promises of high returns or low prices that you can’t pass up. And in a competitive landscape like the current According to the FBI, more than 13,600 people were victims of real estate or rental fraud last year alone. Thatƒ market we are navigating, there’s always the temptation to accept these snake oil deals when the pressure is on. ranks real estate and rental wire fraud number seven out of more than 30 types of fraud tracked by the FBI's Internet Crime Complaint Center.
Brett: Based on victim complaint data, Business Email/Email Account Compromise scams targeting åthe real estate sector continue to rise. From 2015 to 2017, there was over an 1100% rise in the number of these victims reporting real estate transaction scams, and an almost 2200% rise in reported monetary loss. Victims at every stage of a real estate transaction have reported such activity to the Internet Crime Complaint Center.
Con artists are masters at tricking potential clients, so in an effort to help raise awareness for identifying their tricks, let’s go over some famous real estate scam artists, their crimes, and common real estate scams happening today that you can detect and avoid.
Brett: Famous Real Estate Scam Artists
Charles Ponzi - Charles Ponzi was an Italian immigrant who moved to the U.S. and became one of the most famous con artists to date. He is the namesake for the Ponzi scheme. He’s famous for his 1920 stamp scam in Boston and his 1925 real estate fraud in Jacksonville, Florida.
Brett: Walter Forbes Walter Forbes, CEO of Cendant, a travel and real estate company that evolved into Avis Budget Group, would set the new standard for corporate fraud in 1998 after masterminding the greatest accounting scandal in U.S. history. Forbes was sentenced in Jan. 2007 to 12 years and seven months in prison and ordered to pay $3.28 billion. His fraud was reported to wipe out $14 billion of market value in one day at Cendant.
Brett: Bernie Madoff Charles Ponzi may have made Ponzi schemes famous, but Bernie Madoff almost pulled off the largest Ponzi scheme in history, just 90 years after Charles Ponzi attempted his first. Madoff managed to get away with his scheme for much longer, juggling his financial charades for decades, starting in the 1970s. In 2009, Madoff pled guilty to creating and running the largest Ponzi scheme to date, making close to $19 billion. He is currently serving a 150-year sentence.
Brett: Though we’ve touched on a few notable criminals, there are hundreds of real estate scams taking place every year. Let’s take a quick look at three historic hustles before outlining how you can keep yourself and your clients safe.
Famous Real Estate Scams
Brett: Brooklyn Bridge - The Brooklyn Bridge has long been used by conmen since its completion in 1883. Swindlers would talk unsuspecting and gullible New York residents into “buying the bridge”. As crazy as this might sound, wannabe investors were told this would be the opportunity of a lifetime, and that the deal was too good to pass up. Of course, there was no real transaction or even a bridge to buy, however, that didn’t stop scammsters. Notable con artist figures that have sold the bridge include Peaches O’Day, a con artist turned mayor, and George C. Parker, a New York grifter who sold the bridge more than once to unsuspecting immigrants.
Brett: Swampland in Florida - After running from the law in Boston over a stamp scam, Charles Ponzi fled to Jacksonville where he started a company named Charpon Land Syndicates. Under this shell company, Ponzi created a plan to sell ten million plots of property in the swamplands that surrounded Jacksonville. He acquired around 100 acres of land for $16 an acre, divided it into 23 lots, and sold each lot for $10 each. He ended up profiting 500% of his investment.
Brett: Fannie Mae - During the height of the housing bubble (December 2006 to August 2008), Fannie Mae top executives were found guilty of manipulating the company’s accounting, paying unearned maximum bonuses to themselves, and conspiring to cover up their nefarious activities. Subsequently, they were ordered to pay $400 million for these actions that some argue played a contributing role in the burst of the housing bubble itself.
Brett: As a real estate agent, it is your responsibility to protect your clients and unfortunately, not all criminals get caught. That’s why it’s crucial to be alert and pay attention to the red flags that accompany common real estate scams.
Most Common Scams and How to Spot ‘Em
Brett: The top five most common real estate scams are:
1. Escrow wire fraud
2. Loan flipping
3. Foreclosure relief
4. Rental scams
5. Moving scams
Let’s break down each one!
Escrow wire fraud: Scammers will claim to be from your client’s title or escrow company with instructions on where to wire their escrow funds. Fraudsters will go to great lengths and will set up fake websites that appear similar to the title or lending company with which your client is working, making it seem like the real deal.
Loan flipping: Loan flipping occurs when a predatory lender persuades a homeowner to refinance their mortgage repeatedly, often borrowing more money each time.
Foreclosure relief: Homeowners who fall on hard times and get behind on their mortgage payments can become desperate to save their homes. Scammers will swoop in with offers of foreclosure relief to capitalize on homeowners’ vulnerability.
Rental scams: Scammers post fake property rental ads on Craigslist or social media to lure in unsuspecting renters, using photos from other listings. Fraudsters, who have no connection to the property or its owner, will ask for an upfront payment to let your client see the property or hold it as a deposit.
Moving scams: Your client has found a new place to call home, and now they have to find a way to move all of their belongings. They fill out a form for a moving company estimate, outlining all their belongings, and they receive an estimate for $4,000 to ship everything from their current home to their new one. Once this is done, the “company” will raise the estimate and corner your client into paying more for their stuff.
When a deal seems too good to be true, alarm bells should start going off in your head. But what else should you watch out for?
Brett: Red flags to look out for
The other party is not willing to provide contact information such as their address or phone number, and they lack proper documentation. Always check that the number you have is correct before signing any documents.
You haven't done business with this person before nor have any of your colleagues, and you can’t find them online.
The seller asks your client to send a large sum of money via wire transfer or over the internet.
The fraudulent party sends you or your client a check with instructions to wire back the overpayment after depositing it from their bank account.
There’s a lack of professionalism in this deal or proposed transaction.
Ad spot: After the break, we’re joined by Jeff Erbert to discuss real estate agent fraud, a type of scam most of us wouldn’t consider, but often takes place right in our own communities.
Real estate scams can be a real threat to homeowners, so it’s up to real estate professionals to keep a watchful eye on deceptive deals and practices in their market. Homeowners put a lot of trust in real estate agents, and look for agents to be the hero’s their communities deserve. Real estate hero’s who care about their clients and the community choose to learn online with The CE Shop. Enroll in our mobile-friendly courses today and save 25% with promo code SHOPTALK
One last scam or type of fraud to look out for is real estate agent fraud to help shed some light on this dark side of the industry. Here is content specialist. Jeff Erbert. Jeff, thanks for hopping on the podcast today.
Yeah, Brett, thanks for having me.
So let's just jump right into it. What is real estate agent fraud?
Okay. real estate agent fraud in most cases real estate agent fraud is when there's proof that the real estate agent had the intent to defraud deceive or misrepresent facts to the detriment of the buyer or seller fraud to mean kind of a lot of different things. An agent can purposely list a home with larger square footage or fail to disclose vital information like something like recent water damage or knowledge of new construction that will happen right next door kind of things like that. So since fraud can kind of mean many different things here's, here's a few different examples of kind of what they can look like. Breach of contract is one that can be kind of common. This is kind of when an agent violates the agent client contract. Okay. Breach of duty is another one when this product curves, because the agent did not act in their client's best interests and yeah. Negligence, which is a word we hear quite a bit, but that's when the agents who that's when agents kind of agents who commit this kind of fraud owed a duty to their clients, but they breached that duty.
Seems like, at least to me that a lot of these kind of all-encompassing is when an agent representing, you know, either side is breaching kind of a crucial part of one, their duty, like responsibility of being an agent, but also the contract, you know, the more legal binding side of this breaching any side of that and, you know, either misrepresenting, or intentionally leaving out information. And it also sounds like, you know, this could definitely be something hard to spot, you know, this fraud site could be hard to spot. So it needs to be kind of top of mind for not only homeowners, but agents on, you know, on the other side of it keeping this top of mind and being aware of the fact that there are going to be some fraudsters out there.
Yeah, definitely. Of course, real estate scams are kind of becoming more frequent, more sophisticated too. So other things that kind of think about considering most real, most real estate scams today occur online where many victims simply aren't as savvy as the fraudsters. Yeah. And clients put a lot of trust in the real estate agent. So a real estate scam can take advantage of that trust. So it's essential to protect your clients and be aware of those kind of common, real estate scams that are out there.
Sure. Yeah. No, that makes 100% sense. Well, thanks for educating us on real estate agent fraud and talking with us today. Jeff, we appreciate it.
Yeah, no, thanks for having me on the show.
Brett: All in all, do your research and don’t be afraid to ask questions. Legitimate business deals take time, so if the other party is rushing you or your client into acting quickly, that’s the best time to slow down and check in.
Brett: Now that you’re equipped to sniff out real estate scams, keep your wits about you. If you spot a scam be sure to report what you find to the Federal Trade Commission. For scams found online, file a report with the FBI Internet Crime Complaint Center.
Brett: That’s it for this episode, thanks for listening! If you enjoyed the podcast, you can subscribe to us and leave a review on your podcast player of choice. Shop Talk is a production of The CE Shop.