Each year around this time, I like to warn my Boston Real Estate Blog readers about Boston apartment rental scams. A few days ago The Boston Herald wrote an article how the Boston FBI is cracking down on Craig Lists scams.
The article mentions, as college students scramble to find off-campus housing at the last minute, FBI Boston and local police are sounding the alarm about too-good-to-be-true rental scams in the region’s highly competitive real estate market.
Authorities are urging renters to be vigilant while responding to rental properties and real-estate online, stressing that this is a peak season for rental scams — which last year cost 290 reported victims in Massachusetts a total of nearly $9 million.
Just recently in Cambridge, for example, police reported that they helped take down a fraudulent rental property listing from Craigslist.
The rental was listed as a brand new one-bedroom apartment with a balcony in Central Square for $1,800 a month. However, with rental rates climbing, the average rate for a one-bedroom rental in Cambridge is about $3,000 a month. The FBI notified Craig’s List an was able to take down the apartment rental listing.
These real estate scams are not only going after apartment renters, but Boston condo buyers are also a big target market.
A sharp increase in the use of online apartment rental applications since the start of the coronavirus pandemic has caused a consequent jump in red flags for fraud.
The percentage of so-called fraud triggers detected by TransUnion increased by nearly 30% from March to August, according to the credit reporting agency.
Real estate and mortgage fraud were two factors that contributed significantly to the demise of the American housing market a decade ago, and these unethical practices became more commonplace in the most active regional markets. Even though regulation and oversight have largely improved the real estate markets, scammers are always on the lookout for opportunities to ply their wicked trade.
In a Boston condo seller’s market such as the one we’re having now, prospective Boston condo buyers should be aware of certain situations that could put them at risk of fraud. Here are five real estate scams you must avoid as you look at condos, lofts, or penthouses for sale in downtown Boston.
CNBC reported on this real estate scam last year. At a time when Boston condo buyers are finding few mortgage options that allow down payments lower than 20 percent of the purchase price, hackers are trying to breach email accounts so they can intercept wire transfers. In most cases, hackers will send a fraudulent email message to the buyer with a change of wire instructions. This message will appear to come from the title agent in charge of the closing. To avoid this scam, Boston condo buyers should confirm wire transfer instructions in person or over the telephone.
Scammers who take advantage of For Sale by Owner listings often present homebuyers with a rent-to-own proposal that is too good to be true. In many cases, these fraudsters impersonate sellers of vacant properties that do not belong to them. The most sophisticated crooks resort to identity theft, but they are usually flushed out with a title search.
3. High Appraisal
In this scam, sellers produce a copy of an appraisal that indicates a property value thousands of dollars higher than the listed price. In a seller’s market, this situation will not make financial sense even if the homeowner is in a rush to close the transaction, and there is a chance the seller’s appraisal is a fake document.
Although this real estate practice conforms to property transfer laws, it is currently under investigation in various states. Instead of signing a mortgage, buyers are pressured into signing a contract that obligates them to make improvements to a property that is falling apart. The onerous fees and outrageous conditions are designed to make buyers fail on their contracts and transfer the title back to the seller, usually a real estate investment company, after a few months.
This scam is more likely to be pulled by a mortgage broker working with a condo builder. A construction loan offer is made and easily approved with favorable terms and conditions. When the unit is finished and ready for occupancy, the broker will push the mortgage applicants to agree to new and unreasonable fees, terms, and conditions. Buyers should not limit their mortgage options to a sole broker.
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