Beware of These Scams Targeting New Homeowners
Buying a house can feel like finishing a marathon--or maybe a triathlon. You've spent months hunting for the right property, convincing someone that you're responsible enough to be loaned an epic amount of money, and navigating a host of scams designed to separate you from even more money. Now that you've closed on the property and moved in, you're free from scams, though, right? Maybe not. In fact, definitely not.
Every aspect of the real estate transaction you just completed is public record, and you can count on scammers swarming you with a wide variety of fraudulent attempts to steal your money--and sometimes literally steal your house. Here are the key scams you need to be wary of after you've bought your house.
Home warranty scams
Home warranties aren't scams in and of themselves--plenty of legitimate companies offer home warranty programs, and a home warranty can fill a gap left by home insurance, which typically doesn't cover accidents and appliance breakdowns. But after you've moved into your new home, you might receive some official-looking letters marked URGENT and TIME SENSITIVE concerning your home warranty, whether you actually have one or not. The language in these letters varies--sometimes they imply you're required to purchase home warranty protection, sometimes they claim you already have a warranty (or that the previous owners had one that's about to expire) but you must pay the premium immediately. Often these letters come on official-looking letterhead, and because your home purchase is public info, it will often mention your lender and other details to convince you it's legit.
None of this is true. You're never required to purchase a home warranty, and if you want one, you should always do some research and contact companies with good reputations. All those URGENT letters? Can be thrown in the trash.
This is a scam that may reappear over and over again once you're settled into your new home. Someone wearing a uniform and/or a badge of some sort may come to your door claiming to represent your utility company and tell you that there's a concern with your bill. They'll ask to see your latest bill to confirm the information, or they might simply ask for your account details. Either way, once they have your account information, they'll change your electricity and gas supplier--often to a shady company that charges far more for both. You can always change them back, but you might be out a fair bit of cash if you don't notice for a few months.
Shortly after closing on your new house, you might receive a letter from a company claiming to be a "partner company" associated with your mortgage lender. The letter will claim they need additional information to finalize the terms of your loan, and that failure to supply them with these details might result in the loan being rescinded. That's kind of terrifying, and the legitimacy of the letter is bolstered by the inclusion of your loan details.
It's a scam, though. If you're sitting in your new house, your loan went through at closing, and your lender has all the information they need from you. If you're at all uncertain about something like this, your best bet is always to contact your lender--not the "partner company"--and simply ask them.
Refinancing a mortgage can be a great idea when interest rates go down or you have a lot of equity built up in a property and want to cash some of it out. But be wary of companies that urge you to refinance very soon after closing on your home, or that urge you to refinance repeatedly. They're often seeking to make money via exorbitant fees on these loans, and can saddle you with a much higher interest rate than you currently have. It's always best to research the best lender for a refinance instead of responding to a cold call or mailing.
Another scam you might encounter involves a company contacting you and trying to change aspects of your mortgage. For example, a company might offer to set up bi-weekly payments in exchange for a fee. Bi-weekly payments are a good idea--they split your monthly mortgage payment into two, which means you wind up kind of painlessly making a thirteenth payment every year, which pays off the loan faster. But you don't need anyone's help to do this--just contact your lender. Or you might receive a legit-looking letter informing you that your mortgage has been transferred to a new lender, and instructing you to send your mortgage payments to a new destination. This one is easy to believe, because mortgages are often sold off to other lenders--but if that's the case, your current lender will inform you, not some shady third-party company.
In this scam, you're not technically the victim in financial terms, but you'll suffer in other ways. Essentially, a scammer will scrape all the photos and description text from your new home's real estate listing, create a fake rental listing using the information, and rent your home to an unsuspecting person. Sometimes they even schedule viewings that they cancel at the last minute, just to shore up the illusion. Once they have several months' worth of security deposit and rent in hand, they vanish, and you're left dealing with some angry and confused people who thought they'd rented your house or condo. If you're not a full-time resident of the property (if it's a vacation home, for example) you might even have to get the law involved and evict people who have actually been living at your house!
This one is hard to defend against, but you can take a few steps:Ask your real estate agent to remove the listing once you've closed on the property. Do some quick internet searches for your address for a few months after moving in, looking for fake listings. If you're going to be away from the property for an extended period of time, arrange for someone to house-sit or check on the property regularly to ensure no one can pretend to be the owner.
One of the most insidious scams that can afflict a new homeowner is title fraud. This involves a forged deed to your property, which is used to transfer the title to someone else's name. They then use their "ownership" of your house to take out loans, which they then do not pay back. The worst part is that you may not even be aware of this process as it unfolds--at least not until your home is foreclosed on by a lender you've never heard of.
There are really just three things you can do to prevent this kind of scam:Don't ignore mail that comes to your house with someone else's name on it. This might seem like nothing more than an irritation, but it could imply someone is claiming to own your home. Check the property records in your local municipality at least annually. This doesn't take long, though there might be a small processing fee involved. Title theft is often part of a larger identity theft scam, so following best practices to protect your private information is a good cornerstone to prevent it.
Tax reduction scammers
After buying a house, you'll often be deluged with mailings from companies claiming they can help reduce your tax burden. They'll cite new laws or special programs for first-time buyers and offer to cut your property taxes drastically in exchange for a fee. Often these scams cite the Homestead Exemption, which is a real thing in many states that reduces the taxes on a property you actually live in (instead of a house you rent out or simply invest in).
The truth is, if these tax-reduction opportunities are real, they're very easy to apply for on your own--you don't need anyone to handle it for you. Often the forms involved are a single page that can be downloaded from the internet and submitted for free.
"We Buy Homes"
Finally, after you've owned your home for a bit you might start to receive solicitations from people who claim to buy homes quickly, and for cash. The temptation here is a quick cash-out with no waiting or paperwork. It's particularly tempting if you're struggling to cover your mortgage or some other life situation is pushing you to move ASAP.
Many of these scammers don't actually buy your house--they try to convince you to let them manage it as a rental, promising big income streams instead. What happens then is that you move out but you're still responsible for the mortgage payments and upkeep of the property, and you get little if any actual income from the deal. Or, in some cases, you're merely pressured to sign over the deed before you get paid in order to facilitate the deal. Once the scammer has the deed, they don't need you--and they don't need to pay you anymore.
Buying a house is a tense process, but once you close it should be a joyous occasion. Just be aware that the attempts to scam you out of your money and property don't end just because the mortgage process is over.