What are Fake Real Estate Buyers (+ 10 Ways to Spot them)

Fake property buyers are individuals or entities interested in purchasing a property without genuine intention to complete the transaction. These may include casual browsers, home inspection scam, real estate scams or scammers aiming to commit real estate fraud, or competitors of property management companies trying to gather market intelligence.

Fake Real Estate Buyers and Common Real Estate Scams

fake real estate buyers

In the complex world of real estate transactions, the introduction of fake buyers has become a troubling trend. You might be wondering what someone stands to gain from pretending to be a serious buyer. Here’s how the scam typically unfolds:

As part of the buying process, they agree to deposit earnest money—a good faith deposit proving the buyer’s commitment to the transaction. However, the trickery begins when the fake buyer intentionally sends a check amounting to more than the agreed earnest money.

For example, if the agreed earnest money was $5,000, the scammer might send a check for $10,000. Once this check is deposited into the seller’s trust account, the fake buyer contacts the seller claiming a mistake was made—they “accidentally” wrote the check for an extra $5,000. They then urgently request the excess money be returned to them.

Driven by a sense of responsibility and urgency, the seller might wire the $5,000 back to the scammer. However, the catch lies in the fact that the original check was fraudulent and never clears the bank. By the time the seller realizes this, the scammer is long gone with the $5,000, and the seller is left with a depleted trust account and a non-existent buyer.

Another common scam involves deed fraud, where fake buyers may attempt to unlawfully transfer from the property owner, borrow money using the property as collateral, or even sell the property without the owner’s knowledge. This emphasizes the importance of vigilance in protecting one’s property rights.

Why Do Fake Buyers Exist?

fake real estate buyers

Realtors often encounter a spectrum of potential buyers. While many are genuine, there is a notable percentage of what the industry has termed “fake property buyers.” These individuals, though sometimes merely harmless window shoppers, can pose real challenges to real estate professionals.

Another predatory scheme is the loan flipping scam, which targets homeowners, especially the elderly, convincing them to refinance their mortgages repeatedly, accruing high fees and diminishing their home equity, often without their full understanding of the consequences.

Potential Scammers or Fraudulent Activities

Identifying real estate scams

Identity Theft

Some fake real estate buyers have more shady intentions. They might gain access to personal information about the seller or agent by expressing interest in a property. This personal or financial information can be used later for identity theft or other forms of real estate fraud.

Casing the Property

There have been instances where individuals pose as potential home buyers to scope out homes for potential burglaries. By becoming home buyers, they can plan a robbery by assessing the home’s layout, security measures, and valuable items.

Financial Scams

Some real estate buyers may engage in more intricate real estate scams. For instance, they might present fraudulent bank pre-approvals or participate in fake bidding wars to inflate the property’s price. Their end goal is to manipulate the system for financial gain.

Inexperienced or Non-committed Buyers

Unclear Intentions

A segment of fake property buyers might genuinely be interested in purchasing a home but need clarification on their priorities or financial capabilities. They might express interest in various properties without a clear idea of what they want or can afford.

Fear of Missing Out (FOMO)

The real estate market can induce a FOMO response. Some buyers might jump into viewing properties, fearing missing out on a good deal, even if they’re not genuinely ready to commit to a purchase.

Financial Unpreparedness

Many first-time buyers must know the financial implications and prerequisites of buying a home. They might be enthusiastic about homeownership but have yet to take concrete steps, like securing a pre-approval mortgage, to qualify as serious buyers genuinely.

Common Signs of a Fake Real Estate Buyer

Common signs to check for real estate scams

You might notice some things that could be more consistent in their story or documentation. Here are common warning sign signs that you should check to make sure that you’re transacting with a legit buyer and avoid real estate scams.

Details Matter

A genuine buyer typically has a consistent story regarding their purchasing reason, current living situation, or timeline for moving. Fake property buyers might offer conflicting details over time or need to be more specific about essential aspects.

There could be noticeable gaps or inconsistencies in the paperwork they provide. For instance, the name on a pre-qualification letter might not match their identification, or they might give different addresses on various documents.

Reluctance to Provide Financial Proof or Get Pre-approved

A genuine buyer understands the importance of due diligence and getting pre-approved. It strengthens their offer and shows the seller they’re serious. A fake real estate buyer might continuously delay this process or provide excuses for not having the necessary documentation.

Frequently Changing Requirements Disrupting Real Estate Transactions

Today, they’re looking for a two-bedroom condo downtown, but next week, they’re insistent on a four-bedroom suburban home. Frequent, dramatic changes in preferences can suggest a lack of serious intent.

A common real estate scam is that a buyer constantly asks to see new listings, always looking for something better, but never making a move on any property, regardless of how well it fits their stated needs.

Lack of genuine interest in property details or hesitation to commit to viewings

While genuine buyers often have in-depth questions about the property’s history, maintenance, utilities, neighborhood, and more, fake buyers might stick to generic questions or show no curiosity.

Impact of Fake Buyers on the Real Estate Market

Understanding these impacts is essential in navigating the complex real estate brokerage transactions and ensuring a better business bureau and competitive real estate market.

Wasted Time and Resources for Agents and Sellers

They may request multiple property viewings, ask numerous questions, and even negotiate offers, all without any genuine intention to purchase.

As a result, both agents and sellers expend valuable time and resources catering to these fake buyer inquiries, diverting their attention from other legitimate buyer prospects.

Potential Security Concerns for Home Showings

Inviting strangers into your property is a common practice in real estate. However, when fake buyers with ulterior motives gain access, it can lead to security risks.

These individuals may use showings as opportunities to scout homes for criminal activities, posing threats to the safety and privacy of homeowners.

Delays in Genuine Sales Processes Due to Diversions

Their constant inquiries and indecisiveness can lead to delays in finalizing transactions. This delay can frustrate sellers eager to close a deal and legitimate buyers genuinely interested in the same property.

Possible Lowering of Asking Prices Due to Perceived Lack of Interest:

Properties with online reviews that attract many fake buyers but fail to secure genuine offers can create the impression of limited interest in the listing.

In response to this perceived lack of interest, sellers may be inclined to lower their asking prices, potentially undervaluing their properties. This can result in financial losses and missed opportunities for sellers.

Networking and Industry Best Practices

One of the critical aspects of networking among licensed real estate agents is the ability to share information about known fake buyers, helping protect the community from potential real estate scams, mortgage fraud, and such wasted resources.

Importance of Networking

Information Exchange

Networking allows agents and professionals to share insights, experiences, and knowledge about current market conditions and encounters with fake buyers. This information exchange can prevent others from falling into the same traps.

Identification of Patterns

Fake buyers often leave behind clues and patterns that experienced agents can recognize. Networking helps professionals identify these patterns faster and more accurately. Sharing such insights can be invaluable in curbing fraudulent activities.

Best Practices from Experienced Real Estate Professionals

Screening and Pre-Qualification

Seasoned real estate agents emphasize the importance of thorough buyer screening for a successful real estate transaction.

This step helps weed out real estate scam artists and buyers who are reluctant to provide genuine proof of their intent and ability to purchase.

Trust Your Instincts

Trust your gut feeling when dealing with potential buyers. If something feels like it’s a real estate scam or if their behavior seems inconsistent, take the time to investigate further. Experienced agents have honed their instincts over years of dealing with various clients and common real estate scams.

Set Clear Boundaries

Establish clear boundaries when dealing with buyers. Be upfront about your expectations for property showings, including the necessity for pre-qualification. Genuine buyers will respect these boundaries, while fake ones may hesitate or attempt to bypass them.

Leverage Technology

Utilize technology and online resources to validate what’s a real estate scam and what’s not. Vetting tools and platforms can help verify their identity and interest in a property.

Documentation

Maintain thorough documentation of all interactions with buyers. This serves as a reference point and protects in case of disputes or fraudulent claims.

Recognizing Fake Buyers Matters

Identifying fake buyers is not just about sending money and saving time. It’s about safeguarding your assets. These individuals may have various motives, some of which can be harmful.

10 Steps to Protect Yourself Against Fake Buyers

Now that we understand the significance of identifying fake buyers, it’s essential to take proactive steps to ensure a smoother selling and home-buying process:

  1. Document Everything – Keep records of all interactions, which could be critical if you need to verify the legitimacy of the transaction later.
  2. Pause Further Interactions – Take a moment to assess their credibility before proceeding.
  3. Consult with Colleagues – Discuss your suspicions with peers who might have had similar experiences or could offer advice.
  4. Background Check – Utilize online services to verify the identity and financial status of the prospective buyer.
  5. Request Further Documentation – Ask for more detailed financial proof or references from past transactions.
  6. Implement a Two-Step Verification for Viewings – Confirm the buyer’s details and intent before scheduling property tours.
  7. Report to Authorities – If you suspect fraudulent activities, report them to relevant authorities.
  8. Update Security Protocols – Enhance the security measures for showings and protect personal information.
  9. Educate Your Clients – Inform sellers about potential risks and encourage them to be vigilant.
  10. Reflect and Adjust – After dealing with a suspected fake buyer, evaluate the experience to improve your future practices.

Real estate professionals and sellers must be aware of their rights when they suspect fraudulent activity. Understanding the legal recourses available for victims of deed fraud is essential, as title insurance plays a critical role in protecting against involuntary property ownership transfer.

Additionally, employing escrow accounts can significantly mitigate the risks associated with escrow wire fraud, emphasizing the importance of using reputable escrow services to safeguard transactions.

Contracts and Clauses

Earnest Money Provisions – Ensure that the terms regarding earnest money are clear and stringent. This can include stipulations that funds must clear before they are credited or specific conditions under which they are refundable.

Non-Performance Penalties – Include clauses that impose penalties for non-performance or withdrawal without just cause, providing a financial deterrent against frivolous offers.

Demand comprehensive identification documentation and proof of funds before proceeding with any transaction. This might include requiring notarized statements or bank letters.

Also, keep all records of communications and documents exchanged, as these can be invaluable in a legal dispute.

Regular consultations with a legal expert specializing in real estate can help preemptively identify potential legal pitfalls and tailor contracts to protect against specific types of fraud.

Employing preemptive legal strategies can significantly reduce the risk of falling victim to fake buyers.

  1. Title Insurance

Encourage the use of title insurance, which can provide an additional layer of security against fraud and ensure that property titles are legitimate and undisputed.

  1. Escrow Accounts

Utilize reputable escrow services to handle financial transactions. This ensures that funds are only released when all conditions of the sale are met, protecting both parties.

  1. Legal Recourse Actions

Understand the specific legal actions available in your jurisdiction for dealing with fraud, such as filing complaints with regulatory bodies or pursuing civil litigation for recovery of damages.

Educational Workshops and Seminars

Conducting or participating in workshops and seminars on legal protection in real estate transactions can be an invaluable tool for agents and sellers. These forums provide updated information on evolving real estate laws and common fraudulent schemes.

Wrapping Up

In real estate, identifying and handling real estate scams is not just a matter of convenience. Identifying the warning signs is crucial to making or breaking a real estate deal. Fa real estate buyers come in various forms, from time-wasting tire kickers to potentially fraudulent actors. Recognizing them early can save you precious time, resources, and security, and avoid real estate scams.

The significance of recognizing fake buyers is important. For real estate agents, it means avoiding wasted hours on real estate scams and dedicating more time to genuine buyers ready to make an offer. For sellers, it translates to a smoother selling process, reduced stress, and a better chance of securing the best deal for your property in the home buying process.

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