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BEWARE OF REAL ESTATE SCAMS

by Evian White De Leon

LEGAL ALERT: BEWARE OF REAL ESTATE SCAMS!

Fraud is on the rise in the real estate industry – know how to protect yourself and your customers. Below are examples of the type of fraud the real estate industry is seeing, best practices on how to avoid getting scammed, what to do if you suspect a real estate scam, and resources.

 

FRAUD IN THE REAL ESTATE INDUSTRY & HOW TO AVOID GETTING SCAMMED

 FAKE SELLER & VACANT LOT SCAMS

  • What are fake seller scams? Someone posing as the owner of a property tries to get a listing, a contract, and a closing where they can steal funds for a property they do not own. They usually supply fraudulent identification and will typically use the internet and telephone to close the transaction. If they are identifying themselves as authorized representatives of companies that own the property, they tend to use fake emails instead of corporate emails and will try to sign listing agreements with the name of the company rather than the name of the individual who is authorized to represent the company to avoid getting caught.
  • What are vacant lot scams? This is a form of a fake seller scam. Typically, the victims of fraud live outside the United States and own vacant properties without mortgages. Often, the properties are owned by LLCs. A “seller” will reach out to a real estate agent to list “their” property, or they will identify themselves as authorized representatives of the companies or corporations that actually do own the land. They will usually want to rush a deal and will generally not meet with their agents in person.
  • How to avoid getting scammed?
    • Do your due diligence as soon as possible.
      • Independently verify whether there is a mortgage.
      • If you are considering skipping title insurance, consult with an attorney first to fully evaluate the risk.
      • Check the local property appraiser’s website to see whether the individual or entity claiming to own the property actually does own it. If you see that there were “errors” in recording the deed, but the seller is assuring you it was just a mistake, this should be a big red flag.
      • Contact the true owner to verify they are actually selling the property, the price, and to whom. Do not rely on the contact information you were given – talk to the neighbors, search online for additional contact information (phone, email, social media, addresses). Consider sending a letter, with tracking and delivery receipt, to the true owner. That said, be mindful of your obligations under the Code of Ethics.
      • If you are working with a buyer and the seller is working with an agent, talk to the listing agent. Ask whether they know the seller personally, and if not, ask how they met and how they have been communicating. If all communications have been by email without any prior relationship, be on alert.
      • This article by The Fund® provides examples of real scams and advice on how to verify the true owner and their intentions to sell.
    • Be alert when documents are signed outside your presence. Remember, you should always exercise caution in closing transactions where you do not personally know the seller or where the seller is executing a deed outside of your presence. If the seller executes and notarizes documents abroad outside of your presence and sends them to your office via an international postal service, be on high alert.
    • Carefully review all signatures. Cross-reference signatures with government-issued documents. Verify that passports are valid with government authorities. Get a second form of identification.
    • Consider using RONs. If the seller insists on a remote closing, but refuses to use a Remote Online Notary, it might raise a red flag.
    • Check for forged notary blocks.Notary stamps should clearly display the name of the notary, their commission number, and the date their commission expires. Verify the notary through the relevant government agency. Be on high alert of any of the notaries that The Fund® has flagged are listed on closing documents or deeds, as it might indicate a forged notary block.
    • Proceeds should only be disbursed to the person in title. Make sure you consult with the title company and an attorney if you think the situation merits an exception.

COMMISSION ADVANCE SCHEMES

  • What are commission advance schemes? Fraudsters are posing as real estate agents and are trying to obtain commission advances under those fake identities. Sometimes the fraudsters hack into agents’ emails and provide details on deals that are in the works and sometimes they create fake deals.
  • How to avoid getting scammed?
    • If you are a broker, consider whether you allow commission advances. Keeping in mind that all business decisions must always be made unilaterally and independently, brokers will want to weigh the pros and cons of allowing agents to seek commission advances.
    • If you are an agent, give your broker written instructions on how to handle commission advances. If your broker allows commission advances, email your broker about how you want your broker to handle any requests for commission advances. For example, if you know that you will never request a commission advance, tell them. That way if they do get a request, it will raise red flags. Likewise, if you want your broker to get written confirmation from you before sharing any information with commission advance companies, tell them that.
    • Identity theft protections. Even if you have not yet been the victim of a scam, you can request that the credit reporting agencies “freeze” or “lock” your credit. This blocks access to your credit report and prevents anyone from opening an account in your name. Visit Experian, TransUnion, and Equifax online to do so. These are free services that usually have options to upgrade to more robust credit monitoring services.
    • Monitor your records with DBPR. Check the DBPR records frequently to make sure your contact information is accurate and that it has not been changed. Sometimes, fraudsters will change your information with DBPR so that they can then pose as you with other agencies.
    • Practice good password hygiene. Make sure your email and any document management services have strong passwords that you change frequently. The first point of entry for most scammers is your email – once they get in there, they can take over deals and your identity.
    • Use multi-factor authentication. This requires that you prove to the service that you are trying to access, like email, that you are who you say you are.
    • Monitor your accounts with MIAMI REALTORS®. Always feel free to reach out to us (live chat, email, or call us at 305.468.7000) with any questions or concerns about your account, like verifying the email and telephone numbers we have for you on file.

 RENTAL LISTING SCAMS

  • What are fake landlord scams? Usually, someone who claims to be the landlord or owner of a property posts a fake rental listing online.
  • How to avoid getting scammed?
    • Monitor third-party websites for your listings. If you are the listing agent for a rental, search third-party websites like Craigslist, Facebook Marketplace, Apartments.com, and Google with the property address. If you see your listing anywhere it should not be, contact the website admin immediately to take down the fake listing. You should also contact MIAMI MLS at mlsstatus@miamire.com.
    • Read the FLORIDA REALTORS®’ article, “Fake Landlord Scam.”

 

 WHAT TO DO IF YOU SUSPECT A REAL ESTATE SCAM

  • Contact law enforcement ASAP – local, county, and the FBI. If the property is located in a municipality, then first contact local law enforcement. Take that case number to the county law enforcement, where applicable, so they are also aware of the issue. See the “Resources” section below on who to contact. 
  • Email the MIAMI MLS at mlsstatus@miamire.com with as much detail as possible (listing number, individuals involved, details about the transaction).

 

RESOURCES:

DISCLAIMERS: 

This resource page is meant to provide education and information on relevant legal topics facing the industry and is not a substitute for legal advice. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user, or browser. MIAMI REALTORS® does not recommend or endorse the contents of third-party sites. For legal advice or representation, contact private counsel or call the Florida REALTORS® Legal Hotline (1-407-438-1409). The information and materials on MIAMI REALTORS®’ website are provided for educational and informational purposes only and should not be construed as legal advice or as an offer to perform legal services on any subject matter. It contains general information and may not reflect current legal developments or information. Nothing is intended to create an attorney-client relationship and shall not be construed as legal advice. The information is not guaranteed to be correct, complete, current, or suitable. MIAMI REALTORS® makes no warranty, expressed or implied, about the accuracy or reliability of the information in this program or materials. Recipients of the information in this program or materials should not act or refrain from acting on the basis of any information without seeking appropriate legal advice on the particular facts and circumstances at issue from an attorney licensed in the recipient’s state. MIAMI REALTORS® expressly disclaims all liability with respect to actions taken or not taken by the recipient based on any or all of the information in this information and materials.

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