In the world of commercial real estate, you can find numerous opportunities for lucrative deals and profitable ventures. In fact, the commercial real estate industry generated a whopping $1.2 trillion in 2022, as reported by the CFA Institute.
Unfortunately, where significant money exists, some people will try to profit through dishonest means. Scams in the commercial real estate market can be sophisticated and sometimes hard to spot. Knowing the most common types of scams helps you avoid becoming a victim.
Too good to be true deals
One common indicator of potential fraud is a deal that seems too good to be true. If a property’s price falls significantly below market value without a clear, logical reason, be cautious. Scammers often tempt victims with unbeatable deals and then vanish after receiving an initial deposit or payment.
Fake listings and phantom properties
Watch out for listings that use stolen or stock photos. Scammers might craft fake listings for non-existent properties or properties not available for sale or lease. Before committing to any deal, always visit the property in person to confirm its existence and availability.
In title fraud, a scammer fraudulently transfers the title of a property to themselves without the owner knowing. They might then take a mortgage out on the property or even try to sell it. Always check the authenticity of titles and deeds before finalizing a transaction.
Escrow wire fraud
In escrow wire fraud, a person pretends to be a legitimate party involved in the transaction, such as an escrow company. They might ask you to wire funds to an alternate account, often making it seem urgent. Always verify wire instructions with known, trusted parties using previously confirmed contact details.
Rent and lease scams
If you’re looking to lease commercial spaces, be wary of people claiming to represent properties they have no affiliation with. They might take a deposit or first month’s rent and then disappear. Always make sure the person or company you’re dealing with is legitimate.
The commercial real estate sector offers many opportunities, but it also has its risks. By staying alert, doing thorough research, and verifying every step, you can confidently and securely navigate this market. If something feels off or too good to be true, it might be. Always trust your instincts and do your homework.