How to Spot and Avoid Real Estate Scams

$2 billion dollars. That's how much Australians had lost to scams in 2021 alone. And 35% (or $700million) of this is investment related scams. Sadly, this number is increasing exponentially annually.

With more transactions being moved online and being made electronically, cashless and completed remotely, identifying a scam and scammers is getting harder by the day. Scammers are learning, evolving and becoming more sophisticated as more of their activities are being exposed and modus operandi published.

How can you stay alert and avoid a real estate scam?

Our Buyers Advocates Agency Director, Rayson, taps into his experience as a Certified Ethical Hacker, CISSP Information Security Advisor, to explain some of the most common real estate scams and how they work. We will also show how you can identify these scams and protect yourself from these scammers. It is not meant to be comprehensive bible of scams, as each scam is a topic on its own, if we were to completely dissect each scam. It is meant to provide sufficient information for you to be aware of what these scams look like and how not to be scammed.

What are the types of real estate scams?

Real estate scams are usually related to or originate from a non-real estate scams. As scammers starts to be more familiar with the real estate industry and the property selling and buying processes, they start to exploit loopholes and weaknesses in the processes to their advantage. Scammers and exploiters are usually after 2 things:

1. Money; and

2. Identity.

Money is what they want ultimately, and in order not to get caught and/or get access to more sources of data for scamming, they need to hide their real identities behind someone else's identity. In the case of real estate related scams, scammers usually combine real estate specific scams with other common security exploits or process loopholes to maximise their impact.

Real estate scams take on many shapes and forms. Here are some of the more common ones; and one of them is so common, not many people can immediately identify:

1. Real Estate Rental listing scams

2. Real Estate Sales listing scams

3. Payment redirection scams

4. Man-in-the-middle hack

5. Identity thefts

6. Phishing scams

7. Property Investment Scams

1. Real Estate Rental Listing Scams

In a tight rental market like Melbourne, scammers are actively taking advantage of the low rental vacancies and scamming desperate renters.

How does a Rental Listing Scam work?

Rental listing scams start with having a fake rental listing or a fake rental advertisement. The property address is highly likely to exist, as it is too easy to verify an address. But it may or may not actually be ready for rent. What is certain is, the advertiser is a scammer, hiding behind a fake identity. We see a lot of such scam ads in free listing sites like Facebook groups, Facebook forums, Facebook Marketplace, Gumtree, Whirlpool, etc. Essentially, most scammers exploits the free advertisements platforms to their advantage.

How do you identify a Rental Listing Scam?

Some characteristics of a Rental Listing Scam includes:

1. people looking for housemates

2. refusing to allow in-person inspection of property/room

3. lower than usual rentals

4. asking for renters details prior to inspection, even if you are not keen

5. asking for inspection deposit prior to inspection

6. offering you to move-in ASAP, in exchange for a fee/early deposit

7. Insisting on a few months rental payments before accepting your interest. In Melbourne (and many other states in Australia), it is illegal to accept more then 1 month's rent. Legitimate agents knew this. Scammers don't.

How to protect yourself from a Rental Listing Scam?

1. Always check to ensure the person listing the ad is a real person. Call to speak to the person.

2. Check the person's real estate licence, if he/she is a licenced real estate agent. Check against your state's real estate agent register.

3. Check the address. Google the address. See if the property is actually exist. Check if the property specs tallies with what's describe in the ad. Check if the property is actually bring listed by someone else, somewhere else, etc. Redflag, if it is.

4. Avoid making any payments before you inspect. Licenced agents do not collect payments for inspections.

5. If you have to make any payments, ensure it goes into the real estate agencies' Trust Account. NOT to any other bank accounts or even the person's personal account.

2. Sales Listing Scams

How does a sales listing scam work?

Sales listing scams are similar to a rental listing scam. It starts with having a fake sales advertisement. Just like the rental listing scam, the property is likely to exist, but it may or may not actually be ready for sale. The advertiser is also likely going to be hiding behind a fake identity. We usually see a lot of such fake listings in free listing sites like Facebook groups, Facebook forums, Facebook Marketplace, Gumtree, Whirlpool, etc.

How to identify a Sales Listing Scam?

Some typical characteristics of a Sales Listing Scam includes:

1. people looking for quick sale

2. refusing to allow or tries to delay in-person inspection of property

3. lower than usual asking price

4. asking for buyers details prior to inspection

5. asking for a payment / deposit prior to inspection

How to protect yourself from a Sales Listing Scam?

1. Always check to ensure the person listing the ad is a real person. Call to speak to the person.

2. Check the person's real estate licence, if they are selling a property that's not theirs. They must be a real estate agent if they are selling on behalf of someone else. Check against your state's real estate agent register.

3. Check the address. Simply Google the address. See if the property is actually exist. Check if the property specs tallies with what's describe in the ad. Check if the property is actually bring listed by someone else, somewhere else, etc. Redflag, if it is.

4. Avoid making any payments before you inspect. Licenced agents don't usually collect any payments for inspections.

5. Do not make any offers or payments until you receive the contract of sales and vendor declarations (Section 32 in Victoria) for the property.

6. If you have to make any payments, ensure it goes into the real estate agencies' Trust Account. NOT to any other bank accounts or the agent's personal account.

3. Payment Redirection Scams

How does a payment redirection scam work?

This is very similar to the payment redirection scam in the non-real estate world. It usually involves the victim receiving a notice for payment / invoice, usually from legitimate source. A source which they are expecting. However, the legitimate notification has been compromised and banking details replaced with the scammer's banking details. Someone has gained access to the company / agency / agent's billing system or email system.

The payment notice / invoice is real, and the victim is expecting the payment notices / invoices, but, the hacker / scammer has compromised the notices / invoices, replaced the legitimate bank details with the hackers' bank details. When the victim makes a payment, the payment goes to the hacker, hacker sends the victim a 'receipt', to fool them into thinking the payment had been received, while an email could be sent to the real agent, asking for a longer payment timeline or similar reasons for delay. This buys the hacker time to transfer the fund to a different (usually offshore) account, and give the hacker time to shut down the scam.

How to identify a Payment Redirection Scam?

There isn't a lot of telltale signs for this, unfortunately. But we can try our luck to identify poor english, spelling mistakes, etc. In some cases, these "mistakes" are intentional, so the hackers / scammers can identify who or where the money should be sent to.

How to protect yourself from a payment redirection scam?

The best way is to look up the agent / agency's contact number from the agency website, and call the agent / agency, to verbally confirm the payment details. Note: DO NOT USE the phone number provided in the invoice / payment instruction. If it is a deposit for a house, marketing expense, rent, also ensure the payment is sent to the agency's trust account, not anyone else's personal bank account.

4. Man-in-the-Middle Hack

How does a man-in-the-middle hack work?

This is essentially similar to the payment redirection scam above. The hacker intercepts the email / message / webpage, and replace the legitimate information, eg bank account numbers, with the hacker's information.

How to identify a Man-in-the-Middle Hack?

No usual telltale signs. But as per the payment redirection scam, watch for bad english, spelling mistakes. Again, as per the above, some of these bad spellings or bad english is intentional.

How to protect yourself from a man-in-the-middle hack?

As with the payment redirection scam above, the best way is to call the agent / agency, to verbally confirm the payment details. If it is a deposit for a house, marketing expense, rent, ensure the payment is sent to the agency's trust account, not anyone else's personal bank account.

5. Identity Theft

When the scammers are scamming their victims, they would definitely not reveal who they really are. They need legitimate identities, in order to scam their next victims, and thus they have to either illegally access secured IT systems to download their customer base, or get their innocent victims to provide their real identity.

How does Identity Theft work?

This can happen in any way, shape or form.

1. You could come across some free lottery for some attractive prices. These are popular channel for data sellers to collect real information. Everyone wants to win, and they are more than happy to submit their real name and contact details for the lucky draw.

2. You could come across an interesting invite to decrypt your horoscope or foretell your fortune / future, usually in social media sites.

3. You could also have lost your bank statement or utility bills in your mail. Someone has stolen these statements and bills from your letterbox.

4. Sometimes, you may not even realise your identity has been hacked until it is too late. Like the major Optus and Medibank hacks in 2022 m.

How to identify an identity theft?

As above, they can happen anywhere. Be vigilant. Always trust this:

Nothing is free. If it is free, you are the product being sold.

In the real estate context, some of these could come in the form of asking renters / buyers for excessive information, claiming these are needed for verification or needed for your application. If you need to provide anything more than your name, email address, contact number to register for an inspection, be careful.

How to protect yourself from identity theft?

Be vigilant, do not be too liberal with your identity and data. Be wary when someone were to ask for your identity. Disclose your personal data only on a need to know basis.

6. Phishing

Phishing is another scammer tool to steal your identity. It usually involves an email or webpage that looks like a legitimate email / webpage. The victim will then be prompted to provide their personal data or login in user ID and password to access their account.

How does Phishing work?

The phishing starts with the attacker sending out an email, creating a sense of urgency for the victim to take action. This victim will then be sent to a website that looks like a legitimate website, but is fake. Recall the so-called emails from your banks NAB, Commonwealth Bank, ANZ claiming your account or credit card has been frozen or blocked, asking you to click a link or call a number to verify your details? Or your Amazon, Netflix subscriptions being renewed for some obscene subscription fees? That is the hackers call-to-action for you to access their fake webpage or fake contact centre where they will ask you for your personal details and credit card numbers, so they can "verify" your details and billing records.

How to identify a Phishing Scam?

Identify these phishing scams are usually easy. These days, they usually come via emails. Emails are free. Phishing scams are so rampant, it is very common and very easy to set up. When you receive an unexpected email, it probably is fake. Other tell tale signs includes spelling mistakes, poor grammar, a sense of untidiness, etc. Some of these mistakes / errors, might seem like an oversight, but some are intentional so the hackers / scammers / attackers know who originated these, and where the victims were supposed to be directed to. Phishing websites are designed to look very similar to a legitimate website. So similar that even the URL for the website is similar. eg, instead of commonwealthbank.com.au, it could be c0mm0nwealthbank.com.au. Or instead of raywhite.com.au, it could be raywh1te.com.au or raywhile.com.au

How to protect yourself from Phishing Scam?

As mentioned above, phishing scams are so rampant and common these days, that when you receive an unexpected email / call, it is likely a scam. Delete the email. Hang up the call.

If you believe the email is legitimate and want to verify it, do not click on the link provided in the email. Manually type in the website on your web browser. EG, if you want to verify your amazon subscription, or NAB account, type amazon.com.au or nab.com.au on your browser. Do not use the link provided in the emails. If the emails are part of a phishing attack, the links provided in the email will be fake. Clicking on these fake links will bring you to their fake log-in pages where your log-in user ID, passwords, personal data and billing records will be collected and misused / sold. That's usually how your bank or subscription accounts get compromised.

And what is the most common scam in real estate?

7. Property Investment Scams

This is, by far, the most common scam. In fact, this is so common that no-one actually thought they would be scams. Most investors will not even realise it is a scam, if you are not in the industry. These scams (or misinformation, as some prefer to call it) masquerade themselves as investment planning advice, selling you a dream. But these dreams are no more than marketing bluffs. Look for the disclaimers. it is usual that these investment plans or sales talks are hidden behind 3-4 pages of disclaimers, in fine prints. One such organisation has a disclaimer (in fine prints) that is 5-8 times longer than the email!!

How does a property investment scam work?

Promises of financial freedom through property investing. Investors were promised outstanding investment properties, extremely high yield, zero-dollar deposit, guaranteed rental returns for x number of years. But these spruikers / scammers are no more than a property sales person, (most are not even appropriately licenced, or they might claimed that licensing is not necessary as they are "operating under someone else's licence"). They are doing nothing but selling properties which the developers have problem selling. These are usually sub standard properties in over supplied locations.

How to identify a Property Investment Scam?

These scams are usually more elaborate than other scammers.

1. Be wary of free seminars / webinars or "training sessions". Spruikers / scammers usually organise free seminars and webinars, to provide "updates on property markets", "free property investment course" or teach you how to retire early. Some tried to create a sense of exclusivity, by claiming their sessions are "by invitation only", while some openly advertise them on social media platforms such as Facebook, Instagram, Linkedin, etc. All you need to do, is sign up with your name, email, and phone numbers, and you will receive an invitation to attend.

Attending these seminars and webinars is the start of their "education" campaign. Some call this a brain washing campaign though. You'll be promised how, with a very low deposit, you can replace your income, be financially free and retire in as little as 3 years. Simply ask for their financial planning licence, if they claim they can build a plan for you. if they cannot show it, they are just sales persons or scammer, selling properties.

2. Watch out for these common telltale sales pitch:

1. they said they had just bought one, a few houses away.

2. they said the customer, seated 2 tables away had just bought 1

3. a nearby property was sold for x times more.

4. there're only 2 houses left, and you have to buy one soon, if you do not want to miss out

5. disclaimers that are over a page in length, and in fine prints. These disclaimers are sometimes 3-4 pages or more in length.

How to protect yourself from a property investment scam?

1. Verify Real Estate Licences: check to ensure these sellers are licenced real estate agent. Anyone selling real estate must be licenced and insured. And this include the person you are dealing with. That's right, he / she needs his / her own licence, not his boss's, his friend's, his uncle's licence.

2. Verify Financial Planning License: check to ensure they have the appropriate financial planning licence. Anyone claiming to build your personal investment plan must be a licenced financial planner. It it vital that the person you are interacting with must be licenced, not using his / her boss's, aunty's / uncle's / friend's licence.

3. Conduct Independent Due Diligence: Take charge of your investment decisions by conducting thorough due diligence. Verify the information provided to you and separate facts from fiction. These spruikers are experts in mixing facts with fiction. While some facts might appear to be true, you will often find that they are not applicable to the property they are selling to you. We had come across a group which used the good Melbourne property market average annual growth rate of 7% while promoting a rural Queensland property (!!). Or they may use the 7% growth rate for a typical Melbourne house, for the apartment they are marketing. Apartments in Melbourne (and in most areas throughout Australia) are money losing purchases.

4. Beware of Catchy Business Names: They have catchy business names promising freedom through property investment, claiming to be able to help propell your investment plans, or selling you a next property to help iron-clad your goldfish properties. Scrutinize their claims, conduct research, and rely on reputable sources before making any investment decisions.

This scam is so common and widespread and has claimed so many victims that the Australian Consumer Watchdog, ACCC, has issued this scam advisory.

Conclusion - how to prevent being scammed.

Scammers are forever trying to stay one step ahead of any detection technology and education. In order to prevent ourself from being scammed, we will need to:

1. stay alert,

2. keep yourself updated of scam activities,

3. never click on emails or links which you are not expecting.

4. check the real estate agent's personal licence, not their bosses', uncle's, partner's.

5. check the investment advisor's personal licence, not their bosses', uncle's, partner's.

If you are buying your property and want to be safe and avoid being scammed, you can also engage a licenced pro-buyer real estate buyer advocates to help with your purchase. Our licenced buyers advocates have over 20 years of real estate investing and buying experience, and we are more than willing to assist to help you buy your home or investment properties. Our agency director, Rayson is a certified ethical hacker and cyber security advisor. He has seen these and newer scams and would be able to help our clients verify and avoid them.