Buying a new house for the first time is a huge accomplishment. It’s a major milestone worthy of celebration. But before you start throwing parties, it helps to be aware of common scams targeting first-time homeowners.
If you are new to the process of researching, buying and maintaining a new property, scammers are likely to take advantage of your lack of knowledge and experience to trick you into a trap.
While scammers have a wide array of tricks up their sleeves, there are several ways to look out for and avoid such scams. To help you stay out of trouble as you begin a new journey towards buying your first home, we rounded up the most common first-time homeowner scams.
Ever see a dream home listed at a surprisingly affordable price? It may be a fake listing. Purported agents may advertise a perfect-looking home that either doesn’t exist or isn’t on sale. They may ask you for a deposit or an advanced fee to show you the property. But once you wire the money, the agent disappears.
Such scams have become so common the Federal Trade Commission website has a whole section advising people on how to protect themselves against such frauds.
If someone asks you to deposit money before you look at the property, you are likely dealing with a scammer. If the property seems large, spacious and situated in a prime location but is listed for a very low price, that is a huge red flag.
The best way to protect yourself from this scam is to refuse to send any money (even a small amount) before you physically see the property and research whether it’s actually for sale. This is where due diligence with your real estate agent and title insurance company comes in handy.
Fake warranties or home insurance
While there are several legit warranties and home insurance policies for first-time homeowners, scammers have come up with fake plans to scam you into paying hefty fees for services that just don’t exist.
You may receive an offer for a lucrative warranty or insurance policy with several benefits and little costs. But don’t be tempted to sign any papers just yet. It helps to contact the company directly and read online reviews to see if it’s a real company offering genuine services. You don’t want to be paying monthly premiums to a fake agent who disappears with your money when you need to cash in your policy.
To avoid this, buy warranties and insurance plans from official providers such as banks, government schemes and reputable service providers who have been working in the industry for decades.
The packers and movers scam
Let’s say you got lucky and found a genuine agent who got you a great property at a decent price. Now it’s time to move in. You contact a local packing and moving business, get your stuff loaded into a truck and, if it’s a scam, one of two things happens:
- They give you an estimate but inflate the costs later.
For example, they give you an estimate of $5,000. But once your furniture is moving in their truck, they may say, “Oh, the bill will be higher. We need to charge $10,000 for moving all these goods.”
Now you have already sent your furniture away. They can hold your stuff hostage and demand more payment before it reaches your new home. This can also happen with home maintenance services like duct cleaning, where renters or homeowners are offered services at a low cost but are then surprised when they receive a much higher bill.
- They ask for a deposit and then disappear.
Packers and movers may ask you for a deposit. But once you pay the amount, it’s possible they never show up to collect your furniture. Their phone will suddenly be unreachable, and it’s likely they won't have a physical office you can track down. Your money is just gone.
Fake bills and fees
If it’s your first month in a new house, you are likely not familiar with the types of bills and fees you have to pay. Scammers take advantage of this and might send fraudulent or inflated bills to trick you into paying more.
You may receive an email with a real-looking email address and the real company’s logo, making it easy to believe the document is real. But nowadays, it’s quite easy to generate fake bills and email addresses online.
You may be asked to pay random fees or an unexpectedly high utility bill, perhaps from an overdue account by a previous owner or tenant. If you encounter this, contact your service providers and confirm they really sent the document. You can inquire why you have to pay certain fees or why your bill came out so high.
If you are dealing with a genuine company representative, you will get a proper response. Scammers will ignore you or offer vague answers with threats to cut your electricity/water off if you don’t pay on time.