The Real Estate Law Podcast

13 - Real Estate Scams and How You Can Avoid Them

June 03, 2021 Jason Muth + Rory Gill Season 1 Episode 13
The Real Estate Law Podcast
13 - Real Estate Scams and How You Can Avoid Them
Show Notes Transcript

Real Estate Scams have been around for decades. But now, we are entering a brand new era in the world of real estate, where people have more access to information than ever before. The upshot is that we know more, are better informed, and are also more skeptical.

Unfortunately, this has led to a rise in scammers in our industry. Real estate scams are nothing new; but what is new is that the internet has provided scammers with far greater access to potential victims, as well as lending them a sheen of respectability and believability.

They’re not going anywhere anytime soon which is why we must be cautious whenever looking to sell or buy real estate. Real Estate Scams are not uncommon, and if you're not paying attention to all of the details in your transaction, you might fall victim.

How can you protect yourself against Real Estate Scams? Join Jason Muth and Attorney / Broker Rory Gill of NextHome Titletown and UrbanVillage Legal in Boston, Massachusetts, and learn all about real estate scams and how you can avoid them during this episode of The Real Estate Law Podcast!

In this episode, we discuss a number of Real Estate Scams that you should watch for, including:

1.     Wire fraud
2.     Loan Modifications
3.     Up Front Money
4.     Guarantees
5.     Cash Buyer Direct Sales
6.     Rental Scams

_____________________
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The Real Estate Law Podcast is hosted by Jason Muth and Attorney / Broker Rory Gill.

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Speaker 1:

The key thing is to call and make sure that the instructions that you have are correct. And don't just call a phone number that was in that email. Don't call a phone number. That was just on that sheet because you're just calling the scammers to confirm their wire information.

Speaker 2:

You found the real estate law podcast because real estate is more than just pretty pictures and all goes well beyond the paperwork and courtroom argument . If you're a real estate professional or looking to build real estate expertise, then welcome to conversation and discover more@realestatelawpodcast.com. Welcome to

Speaker 3:

The real estate law podcast episode number. I , I have no idea what episode number is is , do we know we're not,

Speaker 4:

But at

Speaker 3:

Some point we'll track them, but actually I think we're , we're recording a few different episodes and I don't know the order in which we're going to re release these. So, you know, let's just call it episode 487, which it's not. So my name is Jason Meuth and this is Rory Gayle . He's a attorney broker here in Boston, works for next some Titletown real estate and urban village. Legal welcome, Rory, how are you? I'm great. Great. We're recording this on a Monday. So , uh, you know, I hope you don't have a , the case of the Mondays or the Sunday scaries or any of those fun hashtags we've seen online

Speaker 1:

Now we're late enough in the day and Monday that we're past that. So we're , we're good to move on,

Speaker 3:

Right? I'm on coffee number two. So I'm kind of fired up. I got plenty to say, what does that number number cheers to you?

Speaker 1:

Like the podcast? I'm not keeping count.

Speaker 3:

Exactly. See, we're on video right now. So, you know, the first round of the podcast that we did, it was all audio. No one could see us drinking coffee , uh, but you know, it's a video age these days, everyone is on zoom. Everyone is staring at screens. Uh, so we figured why not? We'll we'll put ourselves on video too. So you just set the topic over to me , uh , moments ago. And I was like, well, that's a great topic for a podcast. We're talking about real estate scams today, and some things to watch. And I'm sure that you've seen a lot of real estate scams in your day. Uh, both as a real estate broker and on the attorney side, you know, as we kind of get into a couple of different scams that are out there, like just, you know, without digging too deep into them, where are we headed today? Uh , with this discussion, what are some of the big kind of categories? And then we'll dissect all those

Speaker 1:

Well real estate scenario where we have lots of money going back and forth. And there were big assets that people only do a handful of times in their life . So there are opportunities there for people to swoop in , um, scam , people who don't know what they're doing and take a great deal of money away from them. So, you know, in every year they get a little bit more sophisticated and there's just a few things that I want everybody out there to watch for.

Speaker 3:

Yeah. There's definitely been some things that you've kind of drilled into my head. One of which is, you know, even when I'm at a bank about to wire money, for whatever a refinance or a purchase or something, you know, just verifying exactly where you're sending it, you know, it was a really simple thing, which I'm sure we'll talk about in a bit, but that's probably

Speaker 1:

Where we'll end up starting, just because that's the, that's the biggest opportunity for , uh , for scammers to take your money away.

Speaker 3:

So tell us, w what is the scam in place like you're about to buy real estate, you're taking your life savings or a huge chunk of money for the bank's money, right? And then, and then you're going to wire it to another account account,

Speaker 1:

But this is your money. So, you know, real estate attorneys need to have the money on hand as you're going to close. Otherwise they can't close and why our transactions are a great means of doing that. In fact, I require for almost all transactions is that the money be wired. But if you think about it, a lot of people don't send very many wires on their day to day. This isn't going to the VA and taking money out. This is something that a lot of people aren't sure of. And once you send a wire, the money is gone. There are some things the FBI can do to try to track it down, but once the money is sent, the money sent. So because of the unfamiliarity with this, there's a big opportunity for scammers to come in and trick you into sending the money to the wrong place.

Speaker 3:

So what is some advice that you have, you know, when you're working with people and they're about to wire, a large sum of money,

Speaker 1:

The key thing is to call and make sure that the instructions that you have are correct. And don't just call a phone number that was in that email, don't call a phone number. That was just on that sheet, because you're just calling the scammers to confirm their wire information, talk to the attorney office that , um, that you've, that you've been working with all along, go back at the very least to it really early email when you first worked with them. But the best thing to do is to go online, look at their phone number on their website, look at the phone number , um , in Google listing something that's in the broader directory. So you're not just trusting all the information that you have in one email.

Speaker 4:

Okay. So on the list of like

Speaker 3:

Bad things, if you could not, you have to rank them, but just tell me one to 10, how bad this is. Like I'm going to buy real estate and I'm going to Venmo you money. How bad is that?

Speaker 1:

You can't, you can't use Venmo to send , um , money for real estate transaction. If you do that. So, you know, wires have a place in a purpose because their money disappears from your account instantly. It arrives at the closing account very quickly. So that's a, so there's a real use for it, sending money on Zelle or Venmo or cash up to a closing attorney, isn't going to work. And if you try that, you're not going to close on that day. Um, you can't bring a personal check to closing. Instead there you need that money needs to really be in the closing attorney's account that day. Um , otherwise they can't do their job.

Speaker 3:

Can you put a deposit down on a property using events ?

Speaker 1:

Um, sometimes actually, yes. I don't see a reason for that. Um, it's just that in the moment of the real estate transaction, there are no take backsies, as I say, you can't go back and undo the transaction once everything's done. So a check bounces or any ch has returned , um, the attorney's actually done something illegal and went ahead and processed a closing that they didn't have good funds for. Um, so they have to make sure that that's the case. If you , uh , deposits put down more, generally more than two weeks before closing , um, other forms of payment are okay, because the risk of that payment be bouncing or turning around or significantly less , um, than if then if you try to do, you know, try to cut a personal check for $200,000 in the morning of a closing. So have

Speaker 3:

You had people bring personal checks to closings?

Speaker 1:

Yeah. So before wires kind of became the only way we bank checks were pretty common for that purpose too, but , um, yeah, there have been moments where people didn't understand what a bank check was and they thought a bank check was just a check. So we've, that mistake has happened. I've seen that before, and that requires a panic trip to the bank to, to fix it. But yeah, I've definitely seen people try to pay another mess at methods at the closing table, but attorneys just can't accept that

Speaker 3:

Right now, bank checks. You mentioned, you know, I've gotten those before those show proof of funds, right. In your account, like with the bank check, but so we

Speaker 1:

Don't take bank. We typically don't allow bank checks , um, for the risk that somebody may have tried to do a scan scan deposit first, and then , um, try to deposit a second time with us that I've heard of that happening elsewhere in the country. And it's only a theoretical problem that we've never had an attempted here, but that's a reason why we discouraged bank checks. Um, except when it's a very small amount of part of the transaction. But if you're bringing 20% down for the, your home purchase and it's , um, it's, it's going to have to be by wire,

Speaker 3:

Right? When are we going to start taking Bitcoin for transactions?

Speaker 1:

You convert it into dollars and wire it from your traditional bank account, that's it there's um, because what's, what's going behind this. There is a law that says that attorneys have to have good funds. Good funds means us dollars actually sitting in your bank account in , uh , where the , the funds cannot be taken back. Um, and if attorney goes ahead and processes, a closing meeting puts it on record and pays off the seller pays off the seller's loan. It makes disbursements, they've done something unlawful by allowing the transaction to proceed without the good funds. And an attorney can face , uh, the consequences up to disbarment if they bounce something out of that trust account. Um, and it's , it's, it's pretty serious and it can end somebody's career.

Speaker 3:

So, you know, on your list of scams also, that we're gonna talk about today. You mentioned cash by our direct sales, which I think is similar, but different to what we're talking about right now, but let's just pull this apart a little bit, a cash buyer, which we hear a lot of these days. Like there's a lot of competition out there and sometimes you're competing against a cash buyer. They're not really bringing in, you know, bags of cash to a closing, are they?

Speaker 1:

Nope . We never seen that in however bag . You've probably could legally show up to a closing with a bag of cash. Um, and if you hand it over to the attorney, because now they actually have good funds in possession. Um, if somebody showed up to a closing that I was doing with that, I'd be very, very unhappy. And I would tell them to go to the bank. Um, I'm I'm not going to , I'm not a casino. Yeah .

Speaker 3:

You also don't know if the money is counterfeit or not. Right. I mean, you don't, you don't have that fancy marker . They have at the grocery store to check the a hundred dollar bills.

Speaker 1:

No. And you wouldn't want to do it in every single one of them. Um, I'll , we'll let some, I will let the bank take on that liability.

Speaker 3:

Right? Okay. So cash, but if you are a cash buyer though, in theory, you're still wiring funds, right? From your account with cash in it, to the buyers again ,

Speaker 1:

That's absolutely right. So in, you know, in a , uh , transaction, a lender transaction, you'll have the closing attorney will receive a wire one from the lender and one from the buyer to complete the amount of money that you need to close. The only difference in a cash transaction is you have one wire and that's from the buyer.

Speaker 3:

Okay. So what is a direct sale? Like, is there another scam involved that , um, we're not that we didn't touch on right there.

Speaker 1:

Sure. So there's a scam that luckily is less prevalent here in Massachusetts because we are an attorney closing state. That means that only attorneys are allowed to process in , um, to, to manage closings. But if there are circumstances where a seller may offer to do a direct transaction with a buyer, and they convince that buyer to go around all of those safeguards, to not use an attorney, to not use a title company, to not get title insurance and just basically traded deed for cash. And that will get recorded, that will affect a legal transfer of ownership. But there you're, by going around all the safeguards, nobody's looked at title, nobody's confirmed that the seller actually is the owner of the property. Nobody's confirmed what liens are on the property. And once you've given the money and taken title, you're, you're now likely liable for the mortgages that are unpaid on the property, any taxes that have haven't been paid for the property, all the normal things that would have been uncovered by an attorney, handling the closing and insured against , uh , if you obtain title insurance. Yep . So if you're, if you're a cash buyer and the seller's pressuring you to deal with them directly , um, and go around the normal process , um, even if it's, they're just saying it's just faster, it's easier. You're incurring a ton of risks .

Speaker 3:

Right? Right. Like the ex-wife shows up, you know, years later also, and she, you know, says, Hey, listen, this is my property. What are you doing here?

Speaker 1:

You know, the ex-wife the other siblings that, you know, that also inherited , um, an ownership stake in the property. That's actually it , when there are family disputes, tight relationships , that's the biggest issue. Um, when somebody leaves property to their children, you now need to coordinate among all the children to get the property sold. And if you don't get somebody on board, that's a fatal title defect. If you don't get all , all adult children on board.

Speaker 3:

So we're Turkey talking to attorney, broker Rory Gill at urban village legal next on Titletown real estate here in Boston. We're talking about all these scams that are happening in real estate, which, you know, apparently there's a lot of them talk about loan modifications. Do you mean with the current mortgage that you have with the bank or, or what's that? So

Speaker 1:

Loan modification scams are sad because they're praying against people who are the most vulnerable in the real estate world. People who are facing foreclosure facing hard times. And that sense of desperation leads them wildly vulnerable to , to scams out there outside third-parties that promise to be able to solve the problems for them. Um, and this is a whole category, give different scams. There are ways that people scam artists can be clever, but they reach out and they extend a helping hand to somebody who is facing foreclosure, facing the loss of their home and promise to help them out through a variety of methods to buy the property for them. And then to turn around and sell it back to them. They will promise that if you go through our program, we can negotiate with the bank for you and , um, provide , um, a guaranteed loan modification. And they're just out there taking money away from those who need it the most.

Speaker 3:

Yeah. You just, don't kind of hear about these things when you're going to open houses or checking out properties online, you know, you're looking at square footage, you're looking at parking situations, you're looking at how new is the roof. Like, you know, but people aren't really, and if you're a seller, you know, I'd imagine that scams could be coming out of the woodwork as well. Uh, you know, you want to sell your property, you want your money. Um, but along with all these, you know , potential buyers are going to come. Some of these, that eggs that, you know, cause attorneys to remain employed in places like Massachusetts to make sure that stuff doesn't happen, right?

Speaker 1:

Yeah , absolutely. But there's a hot market and it's not just here, it's everywhere. Um, and it's pretty easy to target people on social media with advertising that re that promises to solve them , uh, solve these problems for them. But what I watch out for, with any of these offers that are red flags, they all need to be vetted. They all need to be, to be analyzed, but a loan modification scheme , um, a couple of key traits. So ask for money upfront , um, legitimate , um, agencies that will offer you help are not going to ask for money up front. So you're not a significant amount of money up front . So if you're in talks with a third party, they promise to help you , um, stave off for closure , use that as a red flag. The other thing to watch out for is when they guarantee that their service will , uh , stop the foreclosure. Nobody can guarantee that , uh , when you're negotiating with the lender, there's a lender that has to sign off and approve on this. There are, there are ways to fight the, the , uh , foreclosure and the resulting eviction, but nobody can guarantee that it won't ever happen. So look for, for anybody who asks for money upfront and watch out for , um, you know, 100% guarantees from, from these potential scam artists, the legitimate versions of these are going to be generally nonprofits that are known and well-respected in the community. There are programs that they are putting forth in certain neighborhoods to protect home ownership. Um, so those agencies can be trusted, but they're not going to be asking for money upfront . They're not going to be promising you that in 100% of cases , um, they can get the desired result. And then the other , um, the other type of service that can help you in this situation is an attorney. An attorney, an attorney will sit down with you and go over what your options are in a very realistic way and help you make a better decision, but even they can't offer a hundred percent guarantee that you're going to keep your house

Speaker 3:

In real estate attorney, real estate transactions. Often don't buyers just use the bank's attorney to close. Uh , and if you do that, you know, what are your, what's the limit of the protections that you have like that go ahead. So

Speaker 1:

We're talking about title here and the kind of scams that we went over. There is no problem using the bank's attorney for that purpose, that you are still going through , um, a vetted channel that an attorney that will perform the title exam and issue title insurance. So those kinds of problems outlined as potential scams for cash buyers. Don't really apply if you're going through an attorney, including the bank's attorney. And so similarly, the wire fraud , um, you know, if the money finds its way to the, to that attorney, the bank's attorney , um , you've completed your part of the transaction , um, and it's there and those attorney's offices, by the way, they're protected , um, in two ways. So if you sent money into , um, a closing, they have malpractice insurance in case they messed up , um, with the wire trends transaction. And if they are using a title underwriter, that title underwriter is also promising the lender of the transaction, that the attorney won't take off with it and go on vacation , um, and leave the country. So there are a couple of additional protections , uh, regulating attorneys that , um, that keep that money safe. But for that purpose, using your own individual attorney and using the bank's attorney , um, isn't the, the opportunity first for a

Speaker 3:

Scam, right? So everything we've talked about so far has been mostly on the buy sell side. Um, and you know, before we wrap this up, what about rentals? You know, there's, there's gotta be a lot of scams happening out there, especially in a rental heavy market, like here in Boston with a lot of students moving in and out of houses ,

Speaker 1:

Rentals are a fertile ground for, for scams. Um, and it largely goes the, the prototypical rental scam is somebody posting a listing for rent, regardless of whether they own or even been to the property and then convincing an unwitting tenant to put down money and sign a lease for it. You see this in short-term rentals as well, where somebody thinks that they were , um , engaging with the owner of the property, but they were not in these scams are pretty easy to do , um, because it's easy to put up a listing and Craigslist , um, or another websites and find , um, find , uh, an interested tenant. Who's willing to put down money things to look out for that where this might be the case include a listing rate. That's too good to be true. So if the rent is significantly under market , um, it's, they're enticing you that there's no real landlord there that's concerned about making money. They just want to get , um, they just want you to put down money, any money in and send it off to the scam artist. Um, as always look out for international transfers, most genuine landlords, even if they are based overseas, are going to have a bank account in the us , um, that they use to manage the property. So look out for , um, direct international , uh , transfers , um, look out for putting down money, sight unseen , um , especially if it's not to a legitimate real estate brokerage. Um, that's , um, a typical red flag and, you know, use common sense if , um, you know, if you are , uh , interested tenant, who's looking to find an apartment , um, and another part of the country where you can conveniently go visit in advance, either use a professional real estate agent or use somebody you trust who's on the ground , um, in that city to, to scope things out for you. Um, if you can't get access to the property at all , um, that's a red flag that , um , there's something there. And if you really want to get more advanced, you can take a look at , um, Dedan necessar records to make, to match the name of the person you're dealing with to the name of the , um , actual owner of the property.

Speaker 3:

Right. We could probably do a whole nother episode about , um, short-term rental scams. Cause I could talk about that, but I will say, I will say a little bit from the owner side that, you know, scams are out there, even on the big platforms, like, you know, with our rentals, we use Airbnb and VRBO or BRBO whatever you want to call them. Um, I never post on Craigslist. Um, I rarely post on Facebook, I think early on a couple, like the first year I did it, we had a couple available weeks or weekends and I posted on there at a friend groups. But , um, all of our bookings, if I don't know you directly, like if I don't know you like as a friend or family, or , uh , like a referral from a neighbor, like I've definitely done some direct deals with people that, you know , live nearby and they have family coming. Everything I do is off of those two platforms. We did one TripAdvisor once, but I never get anything from those guys, but those two platforms are great because they vet the guests , uh , with a number of different protocols. Like they, they, you know, require ID and verification of age and , and that kind of stuff and bank information. Um, but with that said, I've never seen a scam knock wood through Airbnb, but I definitely get inquiries on, BRBO not infrequently that are obvious scams and it's, it's easy to kind of pick them out , uh , because of just the, the, the random dates they always pick , um , the questions which are usually like is your property available. And you could probably figure that out from just looking at the calendar every so often I get sucked into a little conversation with someone that turns into, oh, this is a scammer. So you just mark it as spam or whatever it is. Um, and I did learn with VRBO that you have to, you have to respond, even if you're responding, like just with a period or a word saying not available and then respond because if you don't, I remember early on it, it affected my rating , uh , when I was just marking them as spam. And I talked to somebody there and they said, well, it shows that you didn't respond. And I said, well, the three that it did , I didn't respond to. I marked them as spam. And they said, respond like, say something back, just show your metrics, show that you responded. And then mark it as a scam. It's a little bit weird, but yeah . Oh no . I mean, you can always figure it out.

Speaker 1:

So there's a clear frustration based on that variety of scan that you see for owners. But think about this, you know, while those platforms may be able to control for scams on their platforms, what's to prevent somebody, a third party from spoofing or cloning, your listing, taking the photos, taking your texts , putting it into Craigslist, getting money from somebody and having somebody show up at the property expecting , um , to move in or to stay in the home. You know, there's something you largely cannot control for, and you'll have an upset person , um, at the home , um, in , in a way you're a victim of that, but there's, there's a, there's a world out there that you can't control for either.

Speaker 3:

Yeah, absolutely. Yeah. Again, knock on wood that hasn't happened yet, but , uh, I've heard that happens or again, not infrequently, you know, technically I don't really have a responsibility to them and they're not getting inside cause they don't have a code to get in, but yeah, you're right. They're standing on our property and they're upset because you know, they got taken. Uh, so you know, there's a lot out there and I'm guessing that right now with the, with which real estate's moving, that these scams are becoming more and more common,

Speaker 1:

Well, they continue to evolve. So the, the advice I'm giving you this year about wire transfers may be outsmarted , um, next year , um, by some innovative plans . So, you know, all the real estate professionals also need to , um, keep up with it. Um, I've watched the attempted , um, wire fraud, scammers become more and more sophisticated with my own office. You know, it started off a few years ago , um, in, you know, badly mitten written messages , um , telling somebody that I must wire money to their client, you know, internationally. And like, those are clearly spam, but it's become a little bit more and more sophisticated where now , um, scammers will actually have , um, they will, you know, no vendors that you work with. They will spoof an email conversation between two people say at the bank , um , a fragile conversations between the two. And then , um, you know, there'll be messaged to you saying, oh, see below , um, our wire information has changed. Um, you know, please update your records accordingly. And it looks, it's becoming much more and more sophisticated and realistic looking. So if our standards were those of 2012 of what to look out for , um, for scams, it changes. And that goes, whether you're a real estate professional, if you're a buyer or seller really need to keep up on things. And if there is a question, verify the information with , with the people that you do trust.

Speaker 3:

So some party thoughts, some final advice, you know, one big takeaway I have is beyond the lookout because scams are out there, but use a real estate attorney because that will give you some protection and they know what to look out for.

Speaker 1:

Yeah . Yes. And you know, when you're interacting with your real estate attorney , um, you just have the same red flags to a real estate attorney. Um , who's making demands that seem funny to you that also could be a , uh , a bit of a red flag. So just keep out, just trust the people that you're working with , um, make sure who they are, who they say they are. Um, and when in doubt, remember that you are only going to engage in a handful of real estate transactions in your life. So take the time to do it correctly. Don't feel rushed. Don't feel pressured , um , take every step correctly.

Speaker 3:

Great. Well, good advice. We'll have to update this in the future. Once cryptocurrency is basically, you know, the norm and there's no more cash bills going around, but , uh, thanks once again. Uh, Rory Gail , where can we find you? I am@nexthometitletownnexthometownrealestate.com

Speaker 1:

And urban village legal urban village, legal.com. I look forward to hearing you

Speaker 3:

There. Great. Well, this is the real estate law podcast. Once again. Thank you so much for listening. My name is Jason Meuth. This is attorney broker RO regale, and we'll see you next time. Thanks.

Speaker 2:

This has been the real estate law podcast because real estate is more than just pretty. And law goes well beyond the paperwork in courtroom arguments. We're powered by next home. Titletown greater. Boston's progressive real estate brokerage more@nexthometitletown.com and urban village legal Massachusetts real estate counselor serving savvy property owners, lenders and investors, urban village legal.com. Today's conversation was not legal advice, but we hope you found it entertaining and informative. Discover more@realestatelawpodcast.com. Thank you for listening.