Each year, millions of older Americans become victims of fraud. Schemes vary, but one type of fraud quite literally hits you where you live: the homeowner scam. Not only could you lose thousands of dollars, but also you could wind up homeless.
Scammers target older adults, in particular, because they assume that their homes are paid for, they’re often too polite to hang up or say “No,” or might not fully understand what they’re signing if they’re experiencing cognitive decline.
What’s worse is that these scams can be tough to spot because they are based on legitimate services, such as home repairs, security system installation and reverse mortgages. However, being aware of how these scams work can help you or an aging loved one you’re caring for avoid becoming a victim.
Here’s what you need to know about scams that target homeowners—especially older homeowners.
[ Read: How Your Risk of Financial Exploitation Increases as You Age ]
Common home improvement scams
If you need to make repairs to fix problems around your house, con artists might try to take advantage of the situation. Be on the lookout for these home improvement scams.
“One day only” deals: Be wary of contractors who knock on your door and offer an unbelievable deal. Sometimes, they’ll say it’s because they just did some work in your area and want to use up the leftover materials. Or, they might claim they’re out “drumming up business” and noticed your deck needs work or your lawn needs mowing. Here’s the catch: It’s a one-day offer, and you must put down a cash deposit—or pay in full—right now.
Reputable contractors don’t push people to make on-the-spot decisions. Even newcomers looking for clients shouldn’t demand cash deposits, especially without a written estimate and a contract. In either case, you’ll probably never see this person again once you’ve handed over the dough. Unless, of course, they plan to…
Find “extra” problems: Suppose the contractor or handyman does stick around. Once they’re in your home (or working outside it), they might “discover” more work that needs to be done. Sometimes, the additional repairs are legitimate, but it’s possible that you’re being tricked into paying for unnecessary work.
In one case, a New Jersey con artist hired to fix a simple water leak kept telling the homeowner about other issues he’d found. Three months and $210,000 later, he was arrested while attempting to extort an extra $15,000 from his 65-year-old victim, according to The Jersey Journal.
A promise that insurance will pay for it: Contractors might ask you to sign an “assignment of benefits” (AOB), which means you’re allowing them to make repair decisions and bill your insurance company for the costs. An AOB can make things easier for homeowners who don’t want to deal with the insurance company directly.
However, it can also let unscrupulous “contractors” wreak havoc. The Insurance Information Institute reports that this is particularly common in Florida, where contractors actively solicit AOBs from unsuspecting homeowners, then “conduct unnecessary or unnecessarily expensive work.”
Post-disaster ripoffs: After natural disasters, crooks descend in droves with “well-rehearsed, predatory practices to exploit stressed disaster victims when they are most vulnerable. As a result, survivors pay these bad actors who do little or no work,” according to the National Insurance Crime Bureau.
How to avoid home improvement scams
The NICB warns against any “contractor” who does one or more of the following:
- Approaches you offering unsolicited business
- Says they’re approved by a government agency, such as FEMA
- Asks to be paid upfront
- Balks at giving references, local and state business license information, or phone numbers and a physical address for their business
- Tells you how you should “interpret” your insurance policy
As they say: If it sounds too good to be true, it probably is. Home improvements should be done by a licensed and bonded contractor after you’ve gotten written estimates from several companies.
Home improvement loan scams
Seniors who want to age in place often modify their homes to make things easier if they develop health problems. For example, they might exchange their bathtub for a walk-in shower and install a wheelchair ramp at one of the home’s entrances. Or, they might just want some cosmetic upgrades, such as new flooring or a kitchen remodel.
If you or your aging parents are planning any home-improvement projects, watch out for contractors who offer to help finance the project with a home improvement loan. This could be a scam.
The home improvement loan scam works like this: A contractor solicits your business and offers to take care of the financing. The crook starts the remodel then pressures you into signing some papers (which may have blank spots). What you’ve just signed is a home equity loan with a high interest rate plus fees and points.
To make matters worse, the contractor disappears without finishing the work or having done a shoddy job. Why should he stick around? He’s probably been paid by the lender.
How to avoid home improvement loan scams
As with other types of home-improvement scams, you should never hire a contractor who actively solicits your business but won’t provide licensing information or references. If you want remodeling done, get estimates from several reputable contractors.
And don’t ever let a worker “take care of financing” for you. Loans, like contractors, should be shopped for and compared to find the right deal.
[ Read: Senior Scams and How to Avoid Them ]
Security system scams
Home security systems aren’t just burglar alarms these days. They can include cameras that let you know who’s at the door (or anywhere else on your property), monitoring of your home’s systems and other high-tech services.
[ Read: Tech Solutions for Independent Senior Living ]
Unfortunately, scammers have learned to prey on seniors’ need for security. Some legitimate companies will go door-to-door to sell security systems. But so do the bad guys.
If you have a sign on your lawn or a sticker on your door that advertises your existing home security company, fraudsters will claim they’ve been sent to upgrade your system. What they actually do is install a new system, from another company, gambling you won’t read all the paperwork before signing off on the “upgrade.”
Other security scammers will say that your existing company went out of business and that they’re helping former customers set up new equipment and contracts. Again, what they’re doing is tricking people into signing up for a new service.
How to avoid security system scams
Before you let anyone in, contact the company to confirm that the work is legitimate. Use the customer service number in your existing contract, not a number that the salesperson provides. (And if the guy leaves while you’re on the phone? There’s your answer.)
Reverse mortgage scams
Reverse mortgages are loans that allow adults age 62 and older to turn the equity in their homes into a source of income. However, scammers sometimes use these loans to take advantage of older adults.
These fraudsters talk a good game, explaining how you could use a reverse mortgage to pay for home improvements, or to invest in an annuity or some other financial product. They might even claim that it’s a solution to all of your financial problems and use high-pressure sale tactics to persuade you, according to the Federal Trade Commission. However, the FTC cautions that you don’t have to buy any financial products, services or investments to get a reverse mortgage.
How to avoid reverse mortgage scams
Deciding whether to get a reverse mortgage is not something you should do on the spot. If you’re being rushed or pressured to sign documents, this is a red flag. You also should be wary if the salesperson can’t adequately explain how the reverse mortgage works and what all of the costs associated with it are.
In short: Don’t sign anything having to do with a reverse mortgage until you’ve talked with a financial advisor, real estate attorney or a reverse mortgage counselor.
It’s illegal for someone to charge upfront for helping you deal with a mortgage problem. Before they can collect a fee, you have to agree to a written offer. Most people don’t know this, which is why scammers can take advantage of people who are desperate to keep their homes.
Mortgage relief scammers may find their victims by hanging signs on utility poles or slipping leaflets into mailboxes. The more sophisticated ones monitor property records or foreclosure notices in newspapers, then use spoofed caller ID numbers or letterheads that suggest affiliation with government agencies or legitimate lenders.
They may identify themselves as government representatives, lawyers, “foreclosure prevention auditors” or “housing counselors,” tell you to make mortgage payments directly to them and instruct you not to call your lender. Typically, mortgage relief scammers will ask for payment via wire transfer or cashier’s check, which makes it tough for you to get your money back.
Or, they might pressure you to sign a batch of “loan documents,” which include a title transfer. If you sign, the fraudster now owns your home. Some even ask you outright to transfer the deed to them, so they can get their own financing to “save” you. Until then, you’ll pay rent to the scammer.
They might also ask you to move out so they can sell the property and split the profit with you. What happens next depends on the schemer: They rent the place to someone else, take out a home equity loan or sell the home and keep the money. The kicker? Selling the house doesn’t transfer the mortgage payment. You, the victim, are still on the hook for that.
How to avoid mortgage-relief scams
If you’re having trouble with your mortgage or have been served with a foreclosure notice, look for a certified housing counselor or other help through these resources:
[ Read: How Seniors Can Protect Their Credit and Identity ]
How to protect someone you love
Older people who are in financial straits, or even just feeling the pinch of inflation, could be swayed by a scammer’s pitch. In some cases, a product such as a reverse mortgage or home equity loan might actually be the answer.
However, these decisions are best made after some research and a talk with a reputable financial advisor or even a trusted family member. If you have aging parents or are caring for an aging loved one, it’s important to keep the lines of communication open with them and to warn them about scams such as those that target homeowners. Then encourage them to talk with you before making any financial decisions.
If you fear that a loved one is vulnerable to financial exploitation, ask for permission to monitor your loved one’s finances. This will allow you to keep an eye out for unusual transactions and signs of fraud. However, it might feel to your loved one like an invasion of privacy, so don’t be surprised if there’s resistance.
A tech-based solution may feel less invasive than having a family member poring over their records. Services such as Carefull will monitor financial accounts, credit and identity, and send alerts if anything unusual pops up. You can name your family member's Trusted Contact so that you’ll also be alerted to any red flags. Explain that you won’t be able to make transactions on their accounts; instead, you’ll just be a second set of (caring) eyes.
Our homes should be a sanctuary, not a source of anxiety. Taking these steps can help protect your loved ones, or yourself, from would-be scammers.
[ Keep Reading: How to Hang Up on Scam Calls ]