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Keep your wits about you during any real estate deal and beware these common scams.
The Fixer-Upper
You find a home that seems perfect, but it’s a bit of a fixer-upper. That’s OK, you think, because the sellers seem pretty motivated, and they promise to knock a little off the asking price if you sign a document saying that you’ll close on the place quickly and forego an inspection. But any sort of agreement like this should set off alarm bells for buyers. Often a homeowner looking to sell a house as-is has knowledge of major problems beneath the surface. They might be looking to unload a home with a teeming termite infestation or a faulty foundation, issues that are not easy or cheap to fix. To avoid this scam, never sign away your right to have a professional inspector look the place over.
The Foreclosure Fraudster
The worst sort of con artists prey on the most desperate of homeowners: Those facing foreclosure. These fraudsters come calling, telling a distraught homeowner that they can offer a helping hand, like a loan modification that can help you save your home. All it will cost is an up-front fee — maybe a few hundred dollars — and they can help you save your home. But these scammers will will just take your money and run, leaving you a little poorer and no better off than before. To avoid scams like these, just say no thanks to anyone who wants to charge you money to help you out. There are many free services out there to homeowners facing foreclosure, like NeighborWorks or Operation Hope. If you’re struggling to make your monthly payments, check out one of these services instead.
The Long-Distance Landlord
The Craigslist posting seems legit, the photos look stunning and the price is right. You think you’ve found the perfect rental, but there’s just one catch: The landlord is out of town until next month, so he can’t show you around. But don’t worry, he says, the place is yours if you wire money for a deposit. It’s not until you attempt to move in that you find out, there is no home, and the “landlord” has made off with your deposit. This scam often works best in overheated rental markets, like San Francisco and New York, where desperate renters will do anything to land a place by the end of the month. To avoid falling for this scam you should always insist on seeing the place in person, and never, ever wire money to someone you talk to on Craigslist or any other listing service.
The Bait and Switch
You’ve been pre-approved for a mortgage, the rate seems great and you’re about to make an offer on the perfect home. Then, at the last minute, the lender jacks up the rate. Of course, you could always walk away from the deal. But shady lenders practicing the bait-and-switch technique will often charge up-front fees to potential homeowners lured in by their rock-bottom rates. Once they’ve already sunk a few hundred dollars into the deal, a homeowner is much less likely to walk away, even after a rate increase. To avoid falling for this scam, keep in mind that if a rate seems too good to be true, it probably is. And if a lender demands payment for fees before you’ve closed on a house, they are probably up to no good.
The Return of the Foreclosure Fraudster
You’re renting a great home and everything seems fine until one day when you get a knock on the door. It’s a sheriff’s deputy telling you that you’re getting evicted. Your landlord failed to tell you that he stopped paying his mortgage months ago and the house is now in foreclosure.
This can be a tough one to protect yourself against. You can check with your local tax assessor or county clerk to see if the home is in good standing before you move in. But that doesn’t protect you if the owner goes into foreclosure proceedings after you’ve started living there. If you find yourself in this situation, your best option is to stay put. They can’t kick you out right away. You’ll be able to live there for the duration of the lease, and if you’re currently on a month-to-month lease, you’ll be given 90-days notice. You could also try contacting the lender that’s taking possession of the house to strike a deal. After all, a lender would probably prefer a paying renter, rather than an empty house.