4 Common Types of Real Estate Fraud

For many investors, putting money into real estate feels safer than putting it into stocks. In the eyes of some, securities seemingly exist only on paper, whereas real property is an asset that you can see and you can touch.

Yet, it would be a big mistake to view real estate as an inherently safe investment. Not only can real estate prices be incredibly volatile, but, sadly, real estate is frequently used by fraudsters to ‘draw’ unsuspecting investors into their real estate fraud schemes.

At the Sonn Law Group, our real estate fraud lawyers have seen many different types of scams over the years. If you have been the victim of real estate fraud, we can help you seek fair compensation for your losses.

Of course, we would much prefer it if you were able to spot and avoid the scam in the first place. To help you protect yourself and your hard-earned life savings, our team has put together a list of some of the most common real estate fraud schemes, as well as some tips for recognizing them.
 

Common Examples of Real Estate Fraud

1. Phony Real Estate Seminars

In recent years, there has been a considerable increase in the number of ‘real estate seminars’ or ‘house flipping seminars’ being offered to the public. Indeed, these ‘courses’ are often advertised everywhere from the internet, to radio and even flyers on telephone polls. Often, these seminars will make big initial promises, almost crossing into the territory of a ‘get-rich-quick’ scheme. Sadly, the lofty promises simply cannot be delivered on.

Most often, the real estate fraud scammers will try to ‘upsell’ you into investing your money on a losing proposition. The bottom line: Avoid fly-by-night real estate seminars. Real estate investing is extremely challenging and requires substantial start-up capital. Do not believe the false promises of easy riches. Further, remember, if you are being misled into investing, you are a victim of fraud and you can take legal action.
 

2. Rental Scams

In our market, rental scams have become a very serious problem. Sometimes, scammers use internet services, such as Craigslist to commit direct rental fraud by listing a fake property or a property that they do not even own to unsuspecting tenants. In other cases, the rental fraud schemes are far more complex. Some other common examples of rental-based fraud include:

• ‘Renting’ empty properties;
• ‘Renting’ properties that have been foreclosed on; and
• ‘Renting’ properties that are for sale by the owner.

In some cases, rental scammers even try to find ways to get investors involved in their schemes. If you are renting a property for yourself or your loved one, please be sure to do your due diligence and see the place in person. If you are seeking to invest in rental properties, please do extensive research into the person or company offering you that investment opportunity. If it seems too good to be true, walk away.
 

3. Real Estate Ponzi Schemes

Real estate Ponzi schemes are a major problem, especially in desirable/speculative housing markets like South Florida. Real estate is often used as the ‘hook’ in a Ponzi scheme. A Ponzi scheme is a type of (fake) investment opportunity that uses its hook as a tool to make incredible promises to investors. Of course, there are many legitimate real estate investment opportunities out there, but you always need to be aware that you could be dealing with a Ponzi scheme.

Your guard should be up if you are being presented with a very complex, difficult to understand real estate investment opportunity. Some specific warning signs that you might be dealing with a Ponzi scheme include:

• Promises of guaranteed returns;
• Promises of consistent returns that are well above the market rate;
• Strong pressure to ‘reinvest’ your gains;
• Lack of access to vital information and records; and
• Trouble getting your money out of the investment.

 

4. Real Estate Investment Trust (REIT) Scams

A Real Estate Investment Trust (REIT) is a type of security that is made up of investments into many different properties. Once again, an REIT can be a wholly legitimate investment opportunity. That being said, REITs are notoriously illiquid, and are certainly not suitable for all investors. If your broker or broker-dealer is trying to push you into investing in a Real Estate Investment Trust, they might not be looking out for your best financial interests.

In fact, if you are a retail investor, most non-traded REITs are simply unsuitable investments for your circumstances.

Contact an Real Estate Fraud Lawyer Today

At the Sonn Law Group, our team has extensive experience handling real estate fraud claims. If you lost money investing in real estate, and you believe that you defrauded or misled, we can help. Please do not hesitate to contact our team today at 844-689-5754 to request your free case evaluation.