The fires were still raging on Maui when Gov. Josh Green and the Hawaiʻi Office of Consumer Protection issued a call to licensed agents and brokers to assist the state in protecting consumers against the real estate scams cropping up in the wake of the near total destruction of the Lāhainā area.
Sadly, after nearly three decades of combined experience as a real estate agent, international safety expert, and security educator, I wasn’t incredibly surprised. There’s no shortage of scammers and fraudsters trying to take advantage of homeowners, and uncertainty only heightens the problem.
But, as those leaders in Hawaiʻi point out, the real estate community can and should protect consumers against real estate fraud. In this article, I’ll uncover the top seven real estate scams happening right now, plus provide expert tips to help you recognize the warning signs. Finally, you’ll learn ways to stay safe and keep your clients from becoming victims.
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What Is a Real Estate Scam?
Any time you have a rapidly changing industry that involves large sums of money—as is the case for real estate—there’s potential for bad actors. Real estate scams run the gamut from wire fraudsters redirecting mortgage funds into their own bank accounts via fake wire instructions to properties for rent that don’t exist. Below I’ll dig into the most common ones I’m seeing in 2023.
How to Avoid Real Estate Scams
While every scam is different, there are two common tactics that will help agents and their clients avoid scams in almost every case: security protocols and independent verification. Make sure you (or your brokerage) establish and abide by standard operating procedures when it comes to data sharing, passwords, and security.
And don’t rush the process when it comes to property and identity verification. Use independent data sources to ensure that what buyers, sellers, and third parties say is true before you or your clients act on that information.
Top 7 Real Estate Scams in 2023
The competitive real estate market has led to an increase in sneaky scams targeting homebuyers, sellers, agents, and more. Everyone involved in a real estate transaction must watch out for these predatory schemes.
1. AI Real Estate Scams
How They Work
They go by many names—vacation rental fraud, “the invisible home,” and Craigslist scams—but now they are being amplified by cybercriminals using generative artificial intelligence (AI) tools such as ChatGPT, Bard, Bing, Claude, Midjourney, and Dall-E. These tools help criminals create convincing fake emails, texts, voicemails, videos, photos, and websites to steal sensitive information and trick targets into responding. AI tools can also erase items from an image or add others. Both can be tricky when dealing with real estate property images.
Cybercriminals use deepfakes—highly realistic false images and videos of people, objects, and scenes—to advertise properties for sale or lease as a short-term or vacation rental. The goal is to urgently convince consumers to make a payment on real estate that doesn’t exist.
And it’s not just fake Craigslist ads either. Deepfakes can also be created to impersonate agents, landlords, lenders, or consumers and make them seem to say or do things they didn’t. In another scheme, cybercriminals can use AI writing tools to craft well-written, grammatically correct fake emails with wiring change instructions that divert a victim’s entire down payment to the scammer’s account. “We must question everything in this new era where computers create content impossible to distinguish from human-made,” said Kim Knapp, broker at Coldwell Banker Vanguard Fleming Island in Florida.
Scott Richard, broker-owner of Richard Realty in Cody, Wyoming, agrees AI threatens to become an exponentially dangerous Wild West that could change real estate permanently. As a tech-savvy broker, he trains his agents about the potential dangers of AI fraud: “It’s important for brokers and agents to remain vigilant and stay up to date with the latest cybersecurity threats and best practices. Be suspicious of every email, text, and—sadly, now—phone call you receive.”
Warning Signs
- It’s nearly impossible to spot AI-created scams. Assume everything could be fake and develop AI standard operating procedure protocols for all interactions. You can get my free handbook detailing solutions to AI and cybersecurity dangers by filling out this form on my website.
Expert Tips to Avoid AI Scams
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2. Disaster Contractor Scams
How They Work
In the aftermath of disasters, dishonest contractors swoop in to prey on desperate homeowners and disaster victims needing emergency repairs. They’ll demand upfront fees and then completely abandon the job, stranding families in damaged, unsafe homes. Some even perpetrate bold scams soliciting fake relief donations.
Warning Signs
- High-pressure tactics to get contracts signed
- Demands for immediate, upfront payment
- Vague responses to questions about license numbers, business insurance, and costs
- Lack of a physical business address
- Out of town phone number or address
Expert Tips to Avoid Disaster Contractor Scams
Agents can stand out and be of service by volunteering after disasters to help clients and others in the community, according to Coni Meyers, president of Crisis Knowledge Management & Preparedness Foundation: “Agents can offer to help check business licenses, research business reviews, review insurance policies, and steer victims to ethical contractors from their sphere.” You can also check out Meyers’ book, “When the Unthinkable Happens… Be Prepared! Be Ready!” as a tool agents can share with consumers to help them create a disaster plan.
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3. Property Donation Scams
How They Work
A property owner donates unsalable land containing contaminants or environmental dangers, or one that’s subject to negative market conditions. After donating, the seller avoids taxes, insurance, and holding costs while getting a tax deduction for the appraised value. The nonprofit victim inherits the need to repair or dispose of the property, often at a substantial loss.
Warning Sign
- An urgent offer from a new donor to donate questionable property
Expert Tips to Avoid Property Donation Scams
Cami C.E. Baker—founder of The REAL Agents of Change, an educational campaign around giving real estate to charities—recommends nonprofits consult real estate professionals to avoid scams. Real estate agents can conduct market research and offer insights regarding property and land value as well as ability to sell.
Baker trains agents to protect nonprofits through her Certified Charitable Real Estate Specialists program, where she includes information on how they can help consumers avoid pitfalls. While donations can mutually benefit the giver and receiver, the nonprofit can and should avoid getting stuck with undisclosed costs.
4. Real Estate Land Scams
How They Work
Scammers call agents posing as out-of-state property owners selling inherited or abandoned land that doesn’t belong to them. Their real goal? To list and sell the property as their own. According to Traci Dowd, an agent with the Colorado Bureau of Investigation’s High Tech Crimes team, these crooks thoroughly research details to appear credible. She said they are also targeting actively owned property now by identifying absentee owners living abroad.
Privacy-seeking consumers also inadvertently assist scams in states like Montana, according to Bryan George, director of sales for Endpoint Utility, an IT company that offers cybersecurity and technical support to the real estate industry. “Out-of-state, affluent investors here prize data protection, so agents struggle getting enough info to vet sellers properly,” he said.
As a seasoned residential expert in Montana, Brandie Kittle can attest to that in her own practice. Initially, Kittle, broker-owner of Trailhead Realty Group, thought she was dealing with a regular seller. They had the deeds, knew the neighbors, and didn’t seem rushed. She even used safety app Forewarn as an extra precaution. Kittle was frustrated when neither party would provide a driver’s license for identification when asked. And after listing the property, the real owner contacted her—it was a scam.
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Warning Signs
Jeri Moon, executive officer of the Northwest Montana Association of Realtors, warns members that potential clients’ refusal to identify themselves is a massive red flag. “If a seller or buyer gets angry or rude with you for doing your due diligence, be very wary,” she said. Here are a few more red flags:
- Refusal to provide identification such as driver’s licenses
- No proof of ownership documentation is offered
- Limited knowledge about the property when questioned
- Inability to confirm the person and ownership of the property
Expert Tips to Avoid Fake Listing Scams
Agents should stay informed about activity around vacant land and property in their area and make a point to stay in touch with the actual land and property owners as a part of their business development. They can advise owners to set up a Google Alert with the address so that they’re notified of any online postings or activity.
Dowd also recommends using tools like Forewarn to help confirm identities as part of the vetting process. The added benefit is that the app also lists criminal convictions, among other information. However, not all criminals have been convicted, so it is imperative to use other methods.
“Independently verify ownership and identity before listing a property,” advised Charlie Lee, senior counsel and director of legal affairs for the National Association of Realtors. Also, trust your instincts if sellers seem evasive or unwilling to provide IDs. He also recommended agents test supposed owners’ property knowledge.
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5. Real Estate Social Media Scams
How They Work
Using social engineering, cybercriminals use deceptive messages to elicit information they can use to steal people’s identities or log into their accounts. They ask for personal information like pet names, first cars, childhood street names—answers that usually lead them to be able to guess passwords. Once they access an account, they can change profiles, erase content, and post damaging material.
Endpoint Utility’s CEO, David Mayer, urges proactive security protocols to avoid social scams. He knows firsthand how hacked brokerage accounts can devastate digital marketing and reputations, especially in the real estate industry. His company recently worked with a real estate brokerage whose social media accounts were hacked, resulting in deleted content and lost followers. However, he prefers to work with brokerages to prevent a breach before it happens.
Warning Signs
- Friends and family receive strange messages from your accounts that were sent without your knowledge
- Getting locked out of accounts due to changed passwords
Expert Tips to Avoid Social Media Scams
Knapp advises her agents to avoid connecting with strangers on social media who post flattering comments and send friend requests. Her brokerage has a social media policy to help prevent scams and fraud.
Here are a few other protocols to follow from Endpoint CEO Mayer:
6. Moving Scams
How They Work
Dishonest movers lure clients with lowball estimates and then jack up prices once belongings are loaded. Under pressure, many consumers may feel they have no choice but to accept inflated costs.
Anthony Booker, a moving consultant for Nationwide USA Movers, notes that these “hostage situations” are against the law and that the Federal Motor Carrier Safety Administration (FMCSA) can impose hefty fines: “The mover will lowball the price and, upon pick up and delivery, request that the shipper pay more or they will not pick up or deliver. Both are now illegal to do.”
Booker notes that whenever there is a shortage of movers, customers may skip some cautionary steps to secure one.
Warning Signs
- Extremely low estimates compared to other movers
- No promise of binding or “not-to-exceed price” in provided quotes
- Requests for large upfront payments
- No company website, address, licensing, or insurance
- Not providing a pamphlet outlining consumers’ rights and responsibilities and the “Ready For Your Move” pamphlet
Expert Tips to Avoid Moving Scams
Booker’s tips for consumers are important for agents to share with any clients who are moving:
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7. ‘We Buy Ugly Houses’ Scams
How They Work
Buyers target desperate homeowners with lowball offers below market value. They then resell at higher prices for big profits. As documented by ProPublica and the Consumer Financial Protection Bureau, some use high-pressure tactics or false promises, such as claiming owners can remain in the home after closing. They often target those in bad financial situations or those with dementia.
Warning Signs
- Unsolicited cash offers with no contingencies at deep discounts
- An urgent demand for immediate acceptance with no time for assessment
- The buyer doesn’t provide information about the purchasing company
Expert Tips to Avoid ‘We Buy Ugly Houses’ Scams
Real estate agents can make it known in their communities that they will provide a free comparative market analysis to help determine a home’s true value before consumers accept cash offers. That way, they’ll never feel pressured to accept a lowball offer. Also, encourage potential victims to report illegal tactics to the Consumer Financial Protection Bureau.
Back to You
Knowledge is power. We create a safer industry by informing ourselves and our clients about real estate scams and frauds. Let’s build an environment where consumers make smart, secure decisions. We can make the homebuying and selling journey positive with open communication and proactive fraud prevention strategies.
What schemes have you seen in your local area? Share your stories and tips to combat real estate scams in the comment section below!
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