As much as buying a home is a personal journey, there are a whole lot of rules and regulations at hand. Federal entities like Freddie Mac, Fannie Mae, and the Housing and Urban Development department may be involved, along with insurance companies, attorneys, SEC-accredited banks, and state and local governments. With so much oversight, a buyer couldn't possibly get scammed anywhere in the homebuying process, right? The answer might surprise you. 

While you can and should feel confident as you prepare to buy a home, you'll want to be aware of potential scams and threats to look out for. 

Too-Good-to-Be-True Prices

If a home is listed much lower than other comparable homes in the neighborhood, take a moment of pause before putting in an offer. 

Don’t let your emotions direct the process. Instead, think critically about why that home might come with such a low price tag. There could be something seriously wrong with the property, such as issues with the foundation, electric, or plumbing—or maybe all three. Any one of these would result in a failed inspection and costly repairs.

However, if the home is a known fixer-upper, you might feel more comfortable proceeding. The FHA 203(K) loan assists buyers who choose an older home or one in need of repairs. By working with an FHA 203(K)-approved lender, you’ll receive not only the money you need to buy the home, but also the money to do renovations.

It also usually includes contingency funds if a renovation ends up costing more than planned and can be tailored to include a few months’ worth of mortgage payments if the home is uninhabitable, meaning you can live at a different residence while you do the renovations.

Condition Cover-Ups

A close cousin to the too-good-to-be-true potential scam is the “cover-up,” says Cincinnati and northern Kentucky-area Realtor Eric Sztanyo.

“This scam occurs when the seller knows there is a major material defect with the home, such as mold or water intrusion,” he says. Instead of repairing the issue, a seller will make a simple cosmetic repair to conceal it. “Then, they will lie on the property disclosure statement and hope the buyer will never find out until it’s too late.” 

While a home inspector may not be able to catch something a seller has gone to extremes to conceal, a professional, quality inspection can lessen the odds you’ll fall victim to a cover-up scam.

The cover-up is the scam Sztanyo has come across most frequently in his career. Moreover, he even experienced it personally in the purchase of his first home. A few months into living at the house, Sztanyo and his wife received a letter stating they owed $11,000 for a sewer assessment, he says.

“As a newly married young couple with limited funds, this was a terrifying experience. There was no mention of the assessment in any of the disclosures from the sellers, and we ended up hiring an attorney to help us go after both the seller and the seller’s real estate agent,” he says. “Ultimately, we ended up splitting the costs amongst several parties.”

So, how can you avoid the cover-up scam? Sztanyo implores buyers to hire an experienced home inspector who can spot potential issues. While a home inspector may not be able to catch something a seller has gone to extremes to conceal, a professional, quality inspection can lessen the odds you’ll fall victim to a cover-up scam.

“Never buy a home without a full home inspection,” Sztanyo says. “You don’t want to end up with a stack of home repair bills you weren’t planning on.”

Low-Scrutiny Loans

While it might be a turnoff to work with big banks, the truth is, you’ll have a legitimate interest rate and can feel confident in the terms of the life of your loan. Not so with a low-scrutiny loan from a little-known lender. If a lender is offering to provide a mortgage to anyone at all, without any pre-approval, think twice before accepting. A low-scrutiny loan almost always comes with a high interest rate that could add up to hundreds of thousands of dollars over the course of a mortgage loan.

If you’re worried about getting approved for a loan, you’d be better off pausing your home search and taking time to improve your credit score and find a steady job. In the long run, you’ll save money by working with a reputable lender and going through the traditional pre-approval and underwriting steps.

Rent-to-Own Fake-Outs

A rent-to-own arrangement means a homeowner has promised to sell the property to a tenant within a certain amount of time. Usually, it also means that at least a portion of rent payments will go toward the purchase price or closing costs of the property. This is a potentially beneficial arrangement for the renter, who can easily transition from renter to owner if they don’t have cash for a down payment.

If you’re considering a rent-to-own property, however, you’ll need to make sure it’s actually available to own. Partner with a certified real estate agent to help you navigate the legal ins and outs before you move in to one of these types of homes: Owners have been known to not actually sell the so-called rent-to-own property. 

Title Tricksters

Part of closing costs include the use of a title company to handle the transfer of title. Some sellers might say they have a home clear of any liens or legal issues and will urge you not to use a title company. Don’t listen. Pay for the title company.

Similar to inspection finding any issues, the use of a title company will ensure you’re working with the legal owner of the property (who may or may not be the seller), and you’ll learn of any legal issues or liens associated with the property. Again, working with a real estate agent will ameliorate concerns like these: They’ll have your back and make sure each and every step of your home purchase is above board. 

A High-Wire Act

Never, ever wire funds or pay cash to someone offering property for sale. Remember the Nigerian prince email scam? It’s like that. Save wiring and cash for legitimate closings, where attorneys are present. The internet is a two-sided coin, Sztanyo says.

“There have never been more resources for buyers to access to help them avoid scams. Then again, there have never been more powerful marketing tools available to scammers than now.”