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.
1. Email Access
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.
2. For Sale by Owner Ruse
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.
4. Contract for Deed
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.
5. Bait and Switch Mortgage
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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