The following is a how to guide on avoiding real estate scams for the regular homeowner. 6 steps to protect you and your family. Written by Angela West, with sass and highlights added by Jackson Middleton.
It seems like a month doesn’t go by without a report of a real estate scam in the media. Most of us write them off as something that can never happen to a run-of-the-mill homeowner, as many of them seem to happen to real estate investors. But there are definitely scams out there that prey on both sellers and buyers of homes; here are a few ways to avoid them.
How do you like that Gratuitous RCMP Car Shot... So official. Anyway.
1. Always Get Title Insurance
Many real estate scams can be avoided this way, from sophisticated scams from savvy cons to a disgruntled, divorcing spouse trying to sell a home without permission from the other spouse. Title insurance is inexpensive and can shield you from the liabilities of a fraudulent transaction if the seller is misrepresenting themselves as the sole owner of the home.
2. Always Use a Real Estate Lawyer
A lawyer specializing in real estate is trained and experienced in spotting real estate scams before they happen. Processing a real estate transaction without one is like trying to fly a plane without a trained pilot; the paperwork alone is worth hiring them for. Look for a real estate lawyer who has been practicing for more than five years to get the benefit of experience and a sharper sense for sniffing out scams.
There is tremendous value in using the services of an experienced industry professional to assist you in purchasing a property.
3. Avoid Real Estate Investment Seminars
There are many questionable real estate investments out there, and many of them start with a free investment seminar. A proper real estate investment seminar won’t be free and will be given by a recognized institution, such as a university or a college. That’s the only sort of course you should be attending if you’re interested in getting into real estate investment; a free one will likely be a glorified sales pitch.
Always remember that if it sounds too good to be true, well... it probably is.
4. Don’t Buy a House on Ebay or Kijiji
While you would think this goes without saying, enough people do it every year that it deserves a mention. The scam usually involves lifting the information off a legitimate listing, reducing the price, and asking for a deposit with the offer in order to “secure” it. The scammer will make off with your deposit and leave you with nothing. Always go through the Realtor – This is another case of... if a deal looks too good to be true in the real estate world, it usually is.
5. Get a Mortgage from an Accredited Institution
If you are purchasing a home, it’s always best to do it through the proper channels. It can be tempting if you have poor credit to get a mortgage from an individual, but this does not protect your rights the same way that a proper mortgage does and leaves you open to being scammed. A mortgage broker can help you rehabilitate your credit to get into the position where you can obtain a mortgage at favorable terms. Or if you are self-employed and don't have "the right kind of income" to qualify, a broker in some cases can connect you with lenders that are willing to consider your application with an increased interest rate or a higher down payment. A shortcut around getting a regular mortgage is usually not in your best interest.
6. Use a Mortgage Broker
Just like an experienced real estate lawyer, an experienced mortgage broker has seen enough bad applications to know when something stinks. They can also offer you a mortgage that gives you more flexibility than a mortgage from a bank, and usually at a better interest rate. The key here is to go with an experienced mortgage broker who has been in business for more than five years; those with less experience won’t have the same nose for bad deals.
The bottom line is to trust your instincts, and not the person who is trying to sell you something.
Contact us today if you have any questions about getting a mortgage in Alberta or Saskatchewan; you want our experienced brokers on your team to protect you.
Here is a list First Foundation has compiled of resources helping to protect you from Identity Theft, Scams and the like.