Fake Luxury Real Estate Buyers: A Nuisance To Watch Out For
Delusions of grandeur, impressing others and free stuff are some of the reasons for the latest "phenomena"
Real estate agents selling in the luxury market find it inevitable that they will have to ward off a fake buyer. There are impostors that fabricate richly woven tale of success and affluence hiding behind the internet in their fantasy world. New York Times wrote, "Caveat Realtor, At the high end of the market, fake buyers are a real problem" And Carol Lloyd wrote for the San Francisco Gate, "Impostor buyers: When looky-loos go psycho".
Real estate agents in the high-end go above and beyond to service their clientele: additional hours put into the job, country club lunches, concierge level of service, little gifts, etc.
Experienced real estate agents don't sell just houses; they sell lifestyles.
That's when fakes and frauds come into play. "There is an epidemic that's been going on in the last few years here in southern California", says Joy Bender, luxury real estate agent with Pacific Sotheby's International Realty in San Diego.
She is referring to fake buyers pretending to be in the market to purchase luxury real estate. "Unfortunately with the emergence of reality TV and luxury real estate, the high-end is primed for fakes, frauds, and posers", adds Bender.
"At least once a month we have an inquiry from someone asking very specific questions about a luxury property who is not qualified. They typically ask intelligent questions about the property so that at first glance it's not always apparent. You wouldn't think a fake buyer would care how flat the two-acre parcel is."
When a real estate agent is newer in the business their hope for a large sale supersedes common sense and due diligence.
After asking for proof of funds, there are cases when the 'buyer' creates false financial statements or letters of verification. It's important to make sure that a banker's name, phone number, and email address are included so that the documents can be validated with someone at the financial institution.
Recommended Read: 10 Scary Real Estate Scams
"I initially always ask them about their business, their financials, and about the other homes they own to help me vet the buyer", says Bender. "I tell them verification of funds will be necessary before a luxury property showing. If I don't hear back from them, I am not concerned. It's my way of vetting them while giving everyone benefit of the doubt. If they get overly defensive or aggressive when asked, it's more likely than not that they don't have verification."
Real estate agents know the importance of keeping fake buyers out of luxury homes to maintain their reputation with their colleagues and also the trust of their seller clients.
On a deeper level, the question is: why would scammers go through the process of creating a fake persona to look at luxury homes?
"It is very hard to understand why there is so much effort put into the charade. Over the past six years, I've been able to conclude why to some extent they go to such grave efforts to pretend to be rich", explains Bender.
What are the top reasons that make them do this? In Bender's opinion there are four, at least:
1. Delusions of grandeur. Some people really believe that they are going to strike it rich "soon" with their book deal, oil well, or future IPO.
2. Impress a significant other, or lead them on that they will have a luxury home one day.
3. Satisfaction on assuming the role and playing make-believe for the day.
4. Looking for free meals, all day VIP tours, and other perks.
Recommended Read: Home Improvement Scams
Fake Luxury Real Estate Buyers: How To Avoid
Most of the experienced real estate agents know how to vet out faux buyers, but for the new professionals in the business Bender has a few tips:
"1. Go on Google and look for the proposed buyer's name, phone number and email address. Many times, known associated physical addresses will appear in the search results. If you check an address and the value in Oklahoma is $250,000 it is highly improbable this prospect can afford a $8M house."
"2. Check their social media profiles. Often you can conclude by someone's friends, social media shares, and posts whether or not they are a multimillionaire. "One of my team members was recently very excited about a $3M prospect. Amongst other red flags, I pulled up her Facebook and saw that she was very active on Facebook. However, there were no lifestyle postings. Someone who posts multiple times a day for attention will likely have evidence of vacations, shopping, parties, proof they live a high-end lifestyle."
"3. Ask for proof of funds, bank statement, letter from their banker or financial advisor, some sort of documented verification in advance of scheduling a showing."
"4. Make sure you verify the validity of the letter. Call or email the banker. We've had prospects in the past impersonate others or create bank statements and emails stating financial validity."
Real Estate Fraud: How To Report
Let your friends and family know about any real estate scam or questionable businesses by sharing their name in the Comments section below. You can also officially report the crooks to the Federal Trade Commission using the link below:
How To Stay Away From Real Estate Scams
If you want to be the first to find out the most notorious scams every week, feel free to subscribe to the Scam Detector newsletter here. You'll receive periodical emails and we promise not to spam. Last but not least, use the Comments section below to expose other scammers.
Verify a website below
Are you just about to make a purchase online? See if the website is legit with our validator: