Yahoo Finance I’m a Real Estate Agent: 3 Signs Your Property Deal Might Be a Scam
It’s a dangerous time to be a real estate investor scouting out parcels of land.
The United States Secret Service Cybercrime Investigations division “has observed a sharp increase in reports of real estate fraud associated with vacant and unencumbered property. Criminals are posing as real property owners and through a series of impersonations are negotiating the sale of properties which are vacant or lien free.”
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They’re alternately called lot scams, land scams or vacant property frauds, but no matter the name, the end result is always the same. Investors lose their hard-earned savings to criminals who sell them land that doesn’t exist or isn’t theirs to sell.
Here’s what you need to know, according to a veteran real estate agent who has seen land scammers bilk victims in the past and can help you protect yourself in the future.
What Is a Land Scam?
Chris McGuire, founder of Real Estate Exam Ninja, is a property investor, broker and Realtor licensed in several states with 20 years of experience. He’s seen enough vacant land frauds to know exactly how they play out.
“A lot scam refers to fraudulent schemes where individuals or organizations deceive buyers into purchasing nonexistent or fraudulent land parcels,” said McGuire. “These scams often prey on unsuspecting buyers’ desires to invest in real estate or acquire land for various purposes.”
At the start of 2023, the American Land Title Association (ALTA) issued an advisory echoing the Secret Service’s assertion that land scams are on the rise, and the bad actors who perpetrate them are getting more sophisticated.
“Detecting and protecting oneself from such scams requires vigilance and awareness of potential red flags,” said McGuire.
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The Fingerprints of Fraud
McGuire agrees with ALTA and the Secret Service that most land fraud schemes reveal the same telltale warning signs that something is amiss. It’s up to you to recognize them before it’s too late.
If It Sounds Too Good To Be True
The most obvious red flag with land scams is hardly unique to real estate fraud.
“If the price seems too good to be true, it likely is,” said McGuire. “Scammers often entice buyers with significantly discounted prices to lure them into making hasty decisions without conducting proper due diligence.”
Everyone knows to be wary of bargains that are beyond their wildest dreams. But people ignore this most blatant warning sign in land deals for the same reason they ignore it when negotiating for cars, used lawnmowers, Fabergé eggs and everything else — because they want to believe they’re landing the deal of a lifetime.
Pressure To Buy Denies You Time To Investigate
Both the Secret Service and ALTA agree that criminals who perpetrate land scams typically identify properties that are free of mortgages and liens, pose as owners and fraudulently offer parcels below market value. Then, they turn up the heat on their marks to buy without delay.
“Buyers should be cautious if pressured to make rushed decisions or if the seller insists on cash payments only,” said McGuire. “Scammers often create a sense of urgency to prevent buyers from conducting thorough research or seeking legal advice. Legitimate sellers would allow buyers time to review documents and consult professionals before purchasing.”
Closing Time: Your Last Line of Defense
After pressuring buyers to immediately agree to the purchase, it’s time to sign the final paperwork. This is one of your last opportunities to avoid becoming a victim — and warning bells ring during this stage, too.
“Another red flag is the lack of proper documentation or vague ownership details,” said McGuire. “Legitimate land transactions involve clear ownership records, valid titles and legal documentation. If the seller is unable or unwilling to provide concrete proof of ownership and necessary paperwork, it strongly indicates a potential scam.”
Both ALTA and the Secret Service advise that at the time of closing, scammers often refuse to sign documents in person and insist on remote notary signing. They often impersonate a notary and submit falsified documents to the attorney or title company closing the transaction.
Protect Yourself and Your Investment
The frightening rise in land fraud crimes is enough to make buyers rethink investing in real estate — but they don’t have to let the criminals win. Here’s how to protect yourself from lot fraud scammers who want to sell you land that doesn’t exist or isn’t theirs to sell.
Do Your Homework
Scammers pressure investors to buy right away because the more time they have to conduct due diligence, the more likely it is they’ll smell a rat.
“Buyers should conduct thorough research on the property and its ownership to protect themselves,” said McGuire. “They should verify the seller’s identity, review the land’s history, and check for any legal disputes or encumbrances on the property.”
ALTA also recommends requesting an in-person or virtual meeting with the seller and requesting to see their official ID.
Surround Yourself With Good People
While you should be able to recognize the brightest red flags, the lawyers, agents and other industry insiders around you are more experienced and better qualified to spot the more nuanced warning signs. Hire the best ones you can afford.
“Engaging the services of a qualified real estate attorney or title company can provide expert guidance and ensure a legitimate transaction,” said McGuire.
If You Take the Bait
If you realize you’ve fallen victim to a land scam, you still have a few cards to play. However, what you do right now will determine whether you ever see your money again.
“Gather all evidence related to the transaction, including communication records, payment receipts, and any documentation received,” said McGuire. “This evidence will be crucial in reporting the scam to local law enforcement authorities and filing a formal complaint. Victims should contact their bank or financial institution to halt any further payments or transactions related to the scam. It is advisable to monitor accounts closely for any unauthorized activity and consider placing fraud alerts on credit reports to safeguard against potential identity theft. Report the scam to relevant consumer protection agencies, such as the local real estate regulatory body or consumer affairs department.”
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This article originally appeared on GOBankingRates.com: I’m a Real Estate Agent: 3 Signs Your Property Deal Might Be a Scam
