There is a saying that if it is too good to be true, it probably is. Even though you do not want to let an opportunity to save money pass you by, you need to be cautious when shopping or applying for a loan. In 2021 alone, the Federal Trade Commission reported consumers lost $5.8 million to fraud.1
One of the most common types of fraud, particularly in the mortgage and real estate industries, is called a bait-and-switch scam.2 Essentially, a company promises you an apartment, product, or mortgage at an unbelievably low price or rate, and then once you’re hooked or beginning your loan process, you’re told the item is no longer available or you don’t qualify for the loan. You are offered another product or service instead at a higher price. It’s an unscrupulous marketing practice aimed at driving business. 3
Here are four signs that a bait-and-switch-scam might be unfolding and what you can do to avoid it.
Too Good to Be True
If you find yourself asking how the company could afford to sell a product or service at such a low price or interest rate, the offer is probably not legitimate. A reputable business does not want to lose money on a sale, and sometimes mortgage companies lure buyers into the loan process with unbelievably low interest rates for which most people won’t be able to qualify.
If you’re shopping for a product online, you may want to ask the seller to authenticate the product by providing you with a barcode or serial number. You can then check the serial number on the manufacturer’s website. On the other hand, if you’re shopping for a loan, ask your lender to lock in your rate and provide you with a breakdown of your fees.2
Difficult to Understand
If you have difficulty understanding all the terms and conditions of the deal, it is likely a sign that it may be a scam. Ask for a copy of the contract or terms, if applicable. You may find the requirements are impossible to meet. Don’t hesitate to ask the seller or loan officer for more information. If the company can’t provide you with the details, move on. It is likely a scam.
Missing Information
Many scam artists try to hide their identity to avoid getting caught. If you do not see any contact information or biographical information about the seller, or if you’re looking for housing on a site that is not reputable, you might have stumbled into a bait-and-switch scam. Leave the website immediately and find a reliable company selling the product or service somewhere else. If you’re shopping in person, you might find the salesperson is unable to communicate clearly or effectively. Do not be afraid to ask questions or say no if your questions cannot be answered.
No Longer Available
If the deal is no longer available when you arrive, this should be an immediate red flag that a bait-and-switch scam may be unfolding. In real estate, especially in the loan process, this practice is harder to discern.
If you find yourself in a situation where you are being pressured to make a quick decision, be sure to have a standard reply ready, even if you are in the process of financing a loan. You may want to say, “I need to think this over first. Let me get back to you.” Or you may want to go for a walk to clear your mind. Whatever your excuse, chances are once you take a break and leave the salesperson, you might find the deal was not as good as you thought it was at first. If it is not a bait-and-switch scam, the deal will most likely still be available after you have taken a day to think it over. Do not be afraid to ask for more time to make a decision.
If you keep your eyes open for a few of these common signs and do not hesitate to ask for more information or more time, you might avoid a scam and protect your hard-earned money.
Footnotes
1New Data Shows FTC Received 2.8 Million Fraud Reports from Consumers in 2021, ftc.gov, https://www.ftc.gov/news-events/news/press-releases/2022/02/new-data-shows-ftc-received-28-million-fraud-reports-consumers-2021-0 2Common Mortgage Scams In 2022 And How To Avoid Them, Rocket Mortgage, https://www.rocketmortgage.com/learn/mortgage-scams
3Bait and Switch, Investopedia, https://www.investopedia.com/terms/b/bait-switch.asp#:~:text=Bait%20and%20switch%20occurs%20when,then%20presented%20with%20an%20upsell
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
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