Real Estate Scams Keep Getting Worse—Here’s How to Protect Yourself

In This Article

Unfortunately, scams are becoming increasingly sophisticated, and property owners are often targeted by fraudulent contractors, fake insurance policies, and deceptive property transactions. Recognizing warning signs can help you avoid falling victim to these schemes and protect your investment business. 

Contractor and Roofer Scams

Unethical contractors and roofers often target property owners who need quick repairs, particularly after widespread disasters. They often exploit urgency to secure contracts and payments without delivering quality work—or any work at all. These scammers often approach properties with unsolicited offers, claiming to have noticed damage while passing by. They may exaggerate damage and push for immediate contracts, promising to handle insurance claims but delivering subpar work or disappearing.

Red flags and prevention

• No written estimate: Legitimate contractors provide detailed, itemized estimates before requiring you to sign a contract.
• Pressure to pay upfront: Never pay more than a small deposit until the work is completed. Avoid paying the full bill until the job is done and meets the terms of the contract.  
• Lack of credentials: Always ensure the contractor is licensed, insured, and reputable. Verify their business license and ask for proof of liability insurance.

Insurance Scams

Insurance scams can leave property owners either unknowingly uninsured or severely underinsured. Scammers often lure property owners with promises of low premiums and discounts, only to provide no real coverage—or inadequate coverage. 

One method of scamming involves “ghost brokers,” who sell legitimate policies but cancel them soon after, pocketing the premiums while leaving the property owner unprotected. Property owners typically don’t realize they’ve been scammed until they go to file a claim, only to discover the policy either doesn’t exist or was canceled without their knowledge. 

Red flags and prevention 

• Suspiciously low premiums: If rates seem too good to be true, they likely are. Always compare quotes from multiple reputable providers. 
• Unverified agents: Verify credentials by checking with your state’s insurance department. 
• Incomplete documentation: Ensure you receive official policy proposals prior to signing a contract and paying premiums. 

Transactional Property Scams

Some scammers forge documents to falsely claim ownership of a property, commonly known as title or deed fraud. By fabricating deeds and signatures, they can secure loans, sell the property, or even take out a loan against it. In some cases, a scammer may impersonate the actual property owner and sell it to an unsuspecting buyer, who later finds out the transaction was fraudulent. 

Another popular scam involves fake property listings. Scammers create enticing listings with unrealistically low prices, often using stolen photos or misleading descriptions to make the property appear legitimate. These fake listings are frequently posted on websites with little oversight, such as Craigslist or on social media sites. Once a potential buyer expresses interest, the scammer will pressure them to send an upfront deposit, claiming the property is in high demand. After receiving the deposit, the scammer disappears, leaving the buyer with no recourse. 

Red flags and prevention 

• Unrealistically low prices: If the price seems too good to be true, especially for the location and features of the property, it could be a scam. 
• Lack of detailed information: Legitimate property listings include detailed information, such as room dimensions, amenities, and specifics about the location.
• Suspicious photos: Scammers often use stolen images to make their listings look real. You can reverse image search listing photos to check if they appear elsewhere on other sites or in other listings.
• Typos and poor grammar: A legitimate listing will typically be professionally written. If you notice frequent spelling mistakes, awkward phrasing, or grammatical errors, it may indicate that the listing is not genuine.
• Requests for upfront payments: Be cautious if the seller asks for payment upfront, particularly through methods like wire transfers or prepaid cards. Legitimate transactions are handled through secure channels and escrow services, never via untraceable payment methods.

Final Thoughts

Avoid falling victim to fraudulent schemes by staying vigilant. Protect yourself from these and similar scams through thorough research, credential verification, and trusting your instincts.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.