Real Estate Scams

The Full Scope of Fraud May Never Be Known Since No International Agency Compiles Statistics

Having succeeded in selling off Florida swampland to unsuspecting investors beginning in the 1920s, it would only be a matter of time before the same types of scams would expand overseas and become a global phenomenon.  The affordability of air flights has facilitated this.  If 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 a Gulf state 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 was sued for defrauding foreign investors.  According to the lawsuit, the firm acquired abandoned hovels for anywhere between $500 and $5,000, which it then resold to eager Europeans for as much as $50,000 knowing that the homes were entirely inappropriate for human habitation and, thus, unrentable.  The firm was also accused of having made fraudulent guarantees about the properties, failed to repair them as promised and even claimed to have rented some of them out to tenants who turned out to be fake.  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 firm was ultimately ordered to pay the defendants $625,000, but received a confidentiality agreement that forbade them from revealing additional details.

Similar court cases have been filed around the world.  The full scope of overseas real estate scams, however, may never be known, since no one single agency is charged with the responsibility to compile statistics.  Victims, moreover, may be too embarrassed to report their experiences anyway.  When you are victimized by fraud, however, you are generally entitled to receive a refund or, in certain circumstances, apply for a chargeback.

In 2003, Britain’s Financial Conduct Authority (FCA) fined and then banned two registered property investment plans £885,000 for misleading 300 clients.  In 2015, two senior British financial consultants were fined and fired after their company advised thousands of customers to transfer £112 million of their pension funds into risky overseas property schemes.  And in 2017, another British financial adviser was sentenced to four years in prison for having scammed £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 have now moved to include Bulgaria, Cape Verde, Estonia, the Indian state of Goa, among other locations.

Warning from the FBI

The FBI has warned owners of rental housing about 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 have been  known to 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, but which in  reality, of course, is sent by the scammer.  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, and 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 who hack into computer systems of real estate firms, law firms or construction contractors are able to access the details of purchase contracts that have not yet been paid in full. They then contact the buyers pretending to be the real estate agents, attorneys or contractors and 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. who lost over $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