Two common real estate scams and how to avoid them
Buying a property ranks as one of life's biggest moments. It's the biggest purchase most families ever make, with the median metro house costing $932,000 and the average metro unit costing $649,000.
Unfortunately, for an increasing number of Australians, the dream has ended in nightmare after losing their house deposit to fraudsters.
Real estate scams are happening frequently. Just last year, according to the Australian Competition and Consumer Commission, Australians lost over $2 billion to scammers, and at least $5 million was in the real estate sector.
It doesn't matter if you're a buyer, seller, or a renter. Cybercriminals know we're a nation obsessed with real estate, and they'll deceive any party if the financial incentive is large enough.
Below are two of the most prevalent real estate scams we see, and how you can avoid them when buying or renting a property.
Payment redirection scams
Also known as business email compromises, payment redirection scams are by far the most prevalent in the real estate industry.
They can involve a scammer posing as a trusted agent, such as the buyer's mortgage broker or conveyancer, and fraudulently emailing the victim to extract funds.
The scammer's email address is often almost identical to the real email address, they usually have a professional email signature and send a real-looking invoice for deposit payment.
If you receive an email with a BSB and account number asking for a deposit, always call the sender by phone to verbally confirm all numbers are correct and the request is genuine. You can also check the bank account details match the business name using online registries.
Secondly, cross-check the sender's email address against prior emails to confirm the address is legitimate.
If you can, ask the real estate agent or your conveyancer to move away from email as a channel for conducting transactions! It's time the real estate industry evolved toward new iOS, Android and web channels instead of email to help close the door on fraudsters.
As a recent example, a would-be scammer, posing as our partner law firm, emailed a customer to request immediate payment of $316,000 to a fraudulent trust account.
Given all our previous engagement with the customer was via app and not email, the customer immediately realised something was wrong, contacted us securely via app, and gave the scammer the slip.
Social media rental scams
Leasing scams involve the scammer posing as a property manager and posting fraudulent rental advertisements on social media marketplaces.
The scammer might even meet the renter outside the property and answer questions before offering a false lease agreement to sign and requesting the first month's rent and bond.
The first step to combat this is to avoid illegitimate channels to secure a rental, even when competition on properties is so high during record-low vacancy rates. Use trusted real estate websites, not social media.
If unsure, ask for the property manager's credentials, and depending on state, their registration certificate. Cross-check it with their LinkedIn profile and examine their digital presence on real estate websites.
Finally, if you're asked to pay a bond and the first month of rent to the same account, this is a sign of fraud. Bonds are never paid to the property manager. All states have established bond authorities who are legally required to hold the bond in trust for the duration of the tenancy.
Neither fraud nor Australia's property obsession will be going away any time soon. To avoid nightmare, home buyers and renters must be vigilant when navigating a new home purchase.
Get stories like this in our newsletters.