Part 2 of 5-part consumer alert series to help navigate housing scams
By the New York State Department of State Division of Consumer Protection
For this week’s “Tuesday’s Tips,” the New York Department of State’s Division of Consumer Protection announced the release of a comprehensive guide with important scam prevention tips for first-time homebuyers. The guide is part two of a five-part consumer alert series to help New Yorkers navigate housing scams, which are a continuously growing risk for consumers.
In the coming weeks, consumers will receive guidance on how to navigate housing scams when renting, buying a first home, protecting their homes, planning a home improvement project or looking for a moving or storage company.
“Buying a first home is an exciting milestone, but with so many steps and different professionals to work with, scammers often look to take advantage of first-time homebuyers who are new to the process,” Secretary of State Robert J. Rodriguez said. “If you’re about to embark on the adventure of finding your first home, make sure to do your research, exercise caution and follow our tips throughout every step of the process so you can recognize a potential scam before it turns into a costly mistake.”
Below are important scam prevention tips to help new homebuyers:
•Research and look for credible resources and referrals. During the homebuying process, buyers are working with lenders, real estate agents, home inspectors and other individuals. It’s important to take the time to do the initial research that will get you started on the right path.
√ Take your time assessing all the people you will work with who will guide you through this important milestone.
√ Check with your local Better Business Bureau to make certain no complaints have been reported.
√ Review our tips on how to verify real estate professionals by reviewing part one of our housing scam consumer alert series.
•Avoid digital mortgage comparison-shopping platforms. The Consumer Financial Protection Bureau recently issued guidance warning mortgage borrowers about digital comparison-shopping platforms. If you’re using these platforms, be aware that companies operating these platforms often appear as if they provide objective lender comparisons, but instead may refer people to only those lenders that pay referral fees to the platform. It’s important to note that these types of financial arrangements that influence or manipulate search results for a monetary benefit are illegal.
•Be wary of up-front fees for mortgage-related services. Paying up-front fees before you get the loan may be an indicator of a scam. Generally, there are fees associated with the mortgage financing process, such as application fees, appraisal fees and other relevant fees. Below are some tips to help differentiate a real lender from a scammer:
√ Real lenders are transparent when it comes to fees, and itemize these fees before closing. You should receive clear, written disclosures about fees that will be charged, and the fees should be tied to services being provided.
√ Scammers, on the other hand, may request an up-front fee before any work is done. Once you provide the payment, they disappear. Be very cautious of anyone who requests advance fees in connection with a mortgage loan.
•Have your own attorney review all contracts and loan documents before you sign. Hiring a real estate attorney is important to streamline the legal transfer of property. It is not a good idea to use an attorney provided by the seller or the lender. Ask your attorney about any provision you do not fully understand. To find an attorney in New York state, search or contact the New York State Bar Association Lawyer Referral Service.
•Avoid home inspection scams. Home inspections are vital to the homebuying process because they can expose hidden problems in the home you plan to buy, such as deferred maintenance, structural issues, mold or faulty wiring that could cause a fire. In a home inspection scam, a provider may hide potential problems with the home to increase referrals or as part of a collusive arrangement. To prevent this type of fraud:
√ Avoid using home inspectors referred through real estate agents or others who may not share your interests.
√ Make sure the home inspector is licensed in New York by searching the New York State Department of State’s public license search database.
√ Check references. Even with an experienced licensed home inspector, it is good practice to ask questions and look for signs of irregularities.
√ Make sure the inspector can access all areas of the property, and make sure you receive a copy of the report.
•Prevent mortgage closing scams. Scammers are increasingly taking advantage of homebuyers during the closing process. When you’re about to close on your new home, scammers posing as a real estate agent or a lender attempt to divert your closing costs and down payment funds by sending last-minute changes to your wiring instructions. Don’t fall for this phishing scam. Before you do anything:
√ Always verify any changes by contacting a trusted representative.
√ Avoid clicking on any links or sending financial information via email. Email is never a secure way to send sensitive information.
About the New York State Division of Consumer Protection
The New York State Division of Consumer Protection provides resources and education materials to consumers, as well as voluntary mediation services between consumers and businesses. The consumer assistance helpline (1-800-697-1220) is available from 8:30 a.m. to 4:30 p.m. weekdays, excluding state holidays. Consumer complaints can be filed at any time at www.dos.ny.gov/consumer-protection. For other consumer protection tips and consumer alerts, consumers can follow the New York Department of State on Facebook, Twitter and Instagram, and check in every Tuesday for more practical tips that educate and empower consumers on a variety of topics. Sign up to receive consumer alerts directly to an email or phone here.