Note: This article was originally published by the North Carolina Real Estate Commission in their December 2022 ebulletin.  The original article can be found here.

By Tiffany Ross- Consumer Resource Officer & Bruce Rinne- Information Officer

 

The North Carolina Real Estate Commission has been receiving an increasing number of calls about fraudulent buyers and sellers attempting to scam innocent people, attorneys, and lenders out of due diligence fees, properties, or mortgage payoffs. These scam artists can be located anywhere in the world, yet claim they are local. Here are a few recent examples of calls we received, red flags to alert you to a potential scam, and potential action you can take to reduce risk.

 

FSBNO – For sale by NOT the owner

 

A neighbor was driving by a parcel of land adjacent to their own and noticed a For Sale By Owner sign but did not recognize the phone number on the sign. Suspicious, the neighbor, who knew the property owner, called the owner with the phone number the neighbor already had and asked if they were selling. The owner said ‘No’ and called the police to take down the sign and investigate.

Action you can take:

1.  If your client is interested in an FSBO, while you may not be able to verify that the phone number on the sign is correct, you can look up the owner of record on the county tax website and/or register of deeds website. You can also ask the purported owner for photo identification to ensure it matches the public record.
2. If the purported owner will not identify themself, or they get angry or rude with you for your due diligence efforts, this is a red flag that a scam may be in the making. You can report your concern to local law enforcement (Sheriff/Police), and advise your clients to beware, make further investigation, and/or move on.           

 

Fake Seller Contacting Listing Agents

 

A listing agent received a call from the purported owner of a vacant lot located in a new subdivision about listing their lot. The listing agent did their due diligence by pulling the deed to verify that the names matched, and then sent the listing agreement for digital signatures. Once the signatures were received, the agent put their sign in the yard. As luck would have it, again a neighbor was suspicious. After calling the rightful owner, the listing agent learned that the property was not for sale. The rightful owner showed up, called the agent on the sign and had the sign removed 3 days after the listing was posted.. Later that day the property was relisted with another broker who put their sign in the yard. Again this second listing broker was alerted to the fraud and removed their sign. The property owners now look daily to see if the property is listed for sale either on the MLS or on various websites.

Action you can take:

1. If you are contacted by someone claiming to own land, take steps to verify the person you are communicating with matches the person on the deed. Ask for photo identification and get a copy for your records.  (See #1 and #2 above). 
2. When listing a property, check the history and contact the previous listing agent/firm if something seems strange about the listing (short time on market, sudden withdrawal) to see if there may be fraud or material facts that need to be disclosed.
3. If you encounter a property owner that has been a victim of multiple attempts to sell their property without their consent, encourage them to contact the following:
   1. FBI – to report the fraudulent activities and get assistance in stopping the perpetrator.  https://www.fbi.gov/how-we-can-help-you/safety-resources/scams-and-safety
   2. NC Attorney General – Fraud Hotline (877) 5NO-SCAM.  https://ncdoj.gov/

 

Fake Buyer Dodging Due Diligence Fee Payment

 

A homeowner receiving a job transfer listed their home for sale. The seller received a full price offer the first day with a quick closing. The seller contracted to sell the property and immediately contracted to purchase a home in their new town and submitted a Due Diligence fee equal to the amount of Due Diligence payment they were to receive from their home sale. The buyer made one excuse after another and the Due Diligence payment never came. The seller was told that the buyer was sorry and offered to raise the price $25,000 if the seller would wait until the closing to get the Due Diligence fee. When the seller went to the attorney’s office to sign the settlement documents, the seller learned that the buyer wasn’t real  and was trying to get the attorney to wire the proceeds of the sale to them. The seller was unable to purchase their new house, lost the Due Diligence fee they had paid, and was in serious danger of losing their job because they did not relocate. With the loss of the Due Diligence fee on the new home, the seller also was unable to make their next few mortgage payments.

Action you can take:

1. As a real estate broker, part of your job is to advise your client about their options to help protect them in their real estate transaction. While you cannot force a client to take your advice, recommend best practices for their protection, preferably in writing. A prudent real estate broker would recommend the seller-client ensure they have the due diligence funds in hand before spending additional money  on a new property.
2. A prudent broker would be careful to ask for proof of funds, or prequalification information for the seller’s consideration prior to acceptance of an offer. If unable to verify, the broker should inform the seller and warn them of the possible outcomes if the buyer cannot perform.

 

Fake Seller Disappears After Receiving Due Diligence Fee

 

Someone claiming to own a property listed the property for sale and got multiple offers during the ‘Coming Soon’ period. A buyer went under contract and delivered a large Due Diligence fee that was wired to the seller’s account. The “seller” was never heard from again.

Action you can take:

1. Verify the seller/client’s identity as mentioned above. While it is the listing agent’s duty to take reasonable steps to verify the identity of their client, if a red flag arises as to an owner’s identity, buyer agents can help protect their buyer client by requesting proof of seller identification from the listing agent, and verifying the name(s) against public records.
2. While brokers should not be involved in the transfer of funds, they should make every effort to educate clients on the dangers of wire fraud. 
3. Be aware that there are specific, intentional, and targeted attacks against buyers and sellers happening more and more frequently. Educate your clients and explain why you are taking more precautions for their safety and protection as well as your own. If you suspect something may be amiss with either the buyer or seller, do more investigation. A broker may wish to verify the identity of their client or the other principal by making sure they have the proper ID to be able to close. Available tools for this include a Google search of their name and the address, researching the obituaries, contacting neighbors, and checking social media sites like Linked-In and Facebook.

• As always, protect your principal’s personal information, such as social security number or bank account numbers.

 

Other Red Flags or statements to look out for:

1. The buyer/seller is traveling on vacation (sometimes abroad), claims they cannot meet in person, and has to do everything by email.

2. The seller has a family emergency, needs a quick cash sale, and will accept substantially less than full price if they can close in a very short time.

3. The email address or phone numbers are from another country. Of course, there are legitimate buyers and sellers who live overseas, but this does raise a flag that should be checked.

4. The photo IDs, such as drivers’ licenses or passports, are barely legible.

5. The Seller does not require a Due Diligence fee and/or low or no Earnest Money combined with a quick closing (in order to obtain quick proceeds before a scam is discovered).

6. The buyer/seller makes constant excuses, is not able to perform the terms of the contract, or is not returning paperwork.

7. The buyer/seller gets very angry at the broker as the transaction gets closer to closing and applies pressure on the broker to make sure the deal goes through. Sometimes they offer an incentive such as commission bonuses or promising other opportunities to buy or sell.

 

Remember to protect yourself and your client by asking questions and doing research when faced with red flags.