No One Knows the Full Scope of Real Estate Scams Since No International Agency Compiles Statistics
Back in the 1920s one of the biggest real estate scams was selling Florida swampland to unsuspecting investors. It would only be a matter of time before real estate scams expanded overseas to become a global phenomenon.
What facilitates this was the affordability of air flights. Say you live in chilly Minnesota and are looking for a warmer climate to spend your winters in your retirement years. Why not consider buying a condo in Acapulco? If you live in Britain and vacation every winter in Spain anyway, why not save money and invest in a beachfront cottage in Malaga? Or for that matter, reversing seasons, if you reside in the Gulf why not cool off in the summer by purchasing a second home somewhere in Northern Europe?
Distance Reduces Visibility
In 2013, a real estate firm in Detroit found itself in court charged with defrauding foreign investors. According to the lawsuit, the firm acquired abandoned hovels for anywhere between $500 and $5,000 a piece. It then resold them to eager Europeans for as much as $50,000. The only problem was that the homes were entirely inappropriate for human habitation and, thus, unrentable. Of course, the real estate firm knew that beforehand.
The new owners not only accused the real estate firm of issuing fraudulent guarantees about the properties. They also claimed that the firm failed to repair the properties as promised. Moreover, they said the firm lied to them by telling them that some of the units were rented to tenants. In at least one case, an investor who paid the real estate firm for a home later discovered that he didn’t even own it. The money was embezzled. The court ultimately ordered the firm to pay the defendants $625,000. In return, the plaintiffs signed a confidentiality agreement that forbade them from revealing additional details.
Around the world, courts hear similar cases on a regular basis. Nonetheless, no one knows the full scope of global real estate scams since no one single agency is charged with the responsibility to compile statistics. Moreover, victims may be too embarrassed to report their experiences anyway.
Government Action to Stop Real Estate Scams
In 2003, Britain’s Financial Conduct Authority (FCA) leveled a fine of £885,000 on two registered property investment plans for misleading 300 clients. And it also banned them from operating. Two years later, two senior British financial consultants received stiff fines for advising thousands of customers to transfer a total of £112 million from their pension funds into risky overseas property schemes. And in 2017, another British financial adviser received a sentence of four years in prison for scamming £4 million from clients who invested in a Cyprus property scheme. The investors lost all their money. The list goes on.
Based on cases reported in the press, overseas property scams plague Bulgaria, Cape Verde, Estonia, the Indian state of Goa, among other locations.
Warning from the FBI
For its part, the FBI issued a warning of its own to owners of rental housing. The warning concerns a property scam that can affect both Americans as well as citizens of any other country interested in renting homes in the United States. Scammers take ads from legitimate real estate listings, alter them and then re-post them elsewhere online. Quite often, the scammer may even use the real estate agent’s real name and create a fake e-mail address to provide an opaque veneer of legitimacy.
A potential renter who responds will receive an email purportedly from the owner. In reality, of course, the scammer is the one who sends it. The fraudulent “owner” typically writes that he and his wife are doing missionary work in a foreign country and need someone to rent their home while they are away. If the victim is interested, he or she is asked to send money to the “owner” in the foreign country. These funds go directly to the scammer, who promptly disappears. The would-be renter loses his or her money entirely.
Real Estate Wire Scams
Real estate scams of all types are on the rise. Take real estate wire scams as an example. Scammers hack into computer systems of real estate firms, law firms and construction contractors. They then access the details of purchase contracts that have not yet been paid in full. With that information in their hands, they then contact the buyers pretending to be the real estate agents, attorneys or contractors. They direct them to wire funds to an account they control. According to FBI statistics, in 2018 than there were more than 11,300 victims of such scams in the U.S. Losses topped $150 million. Worse yet, that’s a jump of 166 percent over 2017 statistics.
If you think you’ve been the victim of a real estate scam, contact the fund recovery experts at MyChargeBack.