Unfortunately, the real estate market is plagued by scammers. New homeowners, the elderly, immigrants, veterans, and those having problems refinancing their mortgage are especially vulnerable to these threats, as was evidenced during a scam in Florida in 2017.[1]
This is why real estate professionals constantly give tips to avoid scams and protect people’s investments. But even professionals themselves can become a target.
Realtors in the state of Florida were the target of a scam in mid-August 2017 when several agents and brokers received letters asking for payment of a $225 fee and threatened loss of license if they failed to pay: “failure to respond with your 2017 Agent Board Listing may lead to closure of board listing.”[2]
It is the second time Florida Realtors have been faced with the scam. In early March 2017, the same letters started circulating[3].
The scammers seem to be very sophisticated and have made an effort to make themselves look legitimate. The letters were sent on behalf of a fake group calling itself The Florida Board of Realtors. They even went further and created a website, http://floridaboardofrealtors.org/, which is no longer online. The letters[4] also appeared to be authentic, credible, and professional.
Some realtors in Florida have already issued a warning to its members across the state and has alerted the FBI.
Scammers usually try to pass for trustworthy organizations in order to lure people in. As such, it is important that real estate professionals beware of potential scams and know how to avoid them to protect not only their investments, but also their clients.
Homeowners that are undergoing renovations in their home are a frequent target of scammers and may even end up forking out thousands of dollars to shady contractors, for example.
While the vast majority of contractors are trustworthy professionals, the fact is that home improvement fraud has become so common that at least “33% of homeowners worry about fraud when hiring a contractor.”[5]
However, most fraudsters can be easily avoided by following these tips:
1. Avoid paying large sums of money up front.
While it is true that most contractors insist on an upfront payment as a way to make sure that the client is serious about the project, they usually do not charge above 10%. A contractor asking for a higher percentage – or even the full payment – is a red flag. They may either be under financial difficulties or there is a great chance they will just take the money and disappear.
2. Sign a contract.
This one is very important. A contract means that the contractor is liable for the completion of the project and to stick to the budgeted costs.
Even though the client and the contractor may have reached a verbal agreement or shaken hands on it, without a contract there is no protection or few options for the client to fight extra costs.
3. Make sure the contractor is licensed.
If the contractor says they can charge you less because they do not need to pay for a license, it is better to avoid the deal altogether. This is because it is possible that they either have not been state certified or that they have lost their license.
4. Make sure they have a permit.
If you hire a contractor who does not have the proper permits, you risk exposing yourself to a possible fine from local authorities.
All construction or remodeling projects require a state permit to make sure they comply with safety standards.
By making sure the contractors get the permits themselves, you can keep taxes in order and have someone external inspect the changes.
5. Research the contractor.
Find a contractor who you know has a good reputation or who has done other remodeling projects near your home. Do not underestimate word-of-mouth reviews. People will not hire or recommend anyone who does not do a good job or charges too much for extra fees. Beware of contractors with a bad reputation or very few completed projects.
There are many ways unscrupulous individuals can use their position to take advantage of and scam people. As fraudsters become more sophisticated and try to pass as trustworthy individuals, even real estate professionals can fall prey to scammers and shady practices. This is why it is so important that homeowners be educated in telling scammers apart from hard-working people and know how to avoid getting ripped off.
[1] https://www.ftc.gov/news-events/press-releases/2017/05/ftc-florida-halt-massive-debt-relief-scam
[2] http://narnewsline.blogs.realtor.org/2017/08/07/scammers-turn-sights-on-realtors/
[3] http://realtormag.realtor.org/daily-news/2017/03/06/scam-letter-alarms-florida-realtors
[4]http://c.ymcdn.com/sites/www.orlandorealtors.org/resource/resmgr/images_oro2/FakeNoticeCropped.jpg
[5] https://www.investopedia.com/articles/personal-finance/091914/how-not-get-scammed-contractors.asp
Eric Lawrence Frazier, MBA
President and CEO
NMLS #461807 CalBRE #01143484
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