Selling real estate can be a profitable undertaking, but the high profit margins also make it an industry that’s at high risk for fraud. This is why real estate agents and sellers should be especially careful when vetting buyers because even a small mistake can cost thousands of dollars.

One of the most common risks agents face is a buyer’s inability to close. Some unscrupulous people just want you to commit to a deal so they can then make you renegotiate the contract, and others simply have eyes bigger than their stomachs.

You should always get proof of funds before you agree to sell, and you should also have some sense of your buyer’s financial stability and creditworthiness. Not only will your buyer need to meet the down payment and final price through financing, but he or she may also have to cover other costs along the way. If the buyer can’t pay, you’re both in trouble.

Seller Beware

One of the worst-case scenarios when it comes to buyers’ inability to pay is a contract calling for lump sum payments over time that cannot be met. In this situation, you could end up with squatters in your home (who nevertheless have financial interest in it) and a broken sales contract, which is not a mess you want to be involved in.

The risk of fraud is another unfortunate reality for real estate agents and property owners. Sometimes, buyers will try to lower the price of the property by using shady inspection companies or trying to negotiate large closing credits. Scam artists may also make offers just to obtain your personal information; then, they’ll use that information to open loans and mortgages against the property.

While malicious actions are always a possibility when buying and selling property, there are fortunately plenty of measures you can take to protect yourself against these actions.

Assemble Your Team

Using a good attorney, escrow agent, and title agent can save you a lot of time and trouble in the event that you’re faced with fraudulent behavior. Wherever money is involved, always use good contracts and reputable organizations. If you’re selling a high-value property — or if you have any doubts — consider investigating any realtors, home inspectors, or other suspicious people who may be working on your property at any given time.

It’s also important to protect yourself against shady practices by other real estate agents. If an agent is facing financial difficulty, he or she has the knowledge and ability to alter contracts and loan documents to cheat the seller out of thousands of dollars.

In rare circumstances, agents have been known to modify the amounts in contracts to create a difference between the amount the lender sends and what the property is selling for. They then pocket that difference and hope nobody notices the discrepancy.

Investigate Your Buyer

One of the simplest scams is characterized by a highly motivated out-of-country buyer who’s eager to put a deposit down and secure the property — often at a higher price than asking. The scam reveals itself when the buyer sends a check that is somehow in error and then asks you for a refund. It usually turns out that the original check is bogus, and if you refund it, you're just giving a stranger thousands of dollars — at which point they disappear.

This is why you should always investigate your buyers. Whether they are scam artists looking to steal money or personal information or are simply in over their head, the more you know, the smoother the closing process will be.

If you’re unsure whether your buyer is legitimate, find a professional who can help you investigate. Conducting an in-depth identity verification and asset search using private investigators is less expensive than you might think — especially when compared with the cost of fraud, a sullied title to your home, or the expenses of a contract falling through at a late stage.

Understand Legal Regulations

Today, anyone who wants to list a home on the open market can do so for free (or for a small fee) on the internet. But there are many legal regulations sellers need to keep in mind when putting a home on the market.

Different states have different laws, and selling property today is more complicated than ever before. Many states require the sellers to report any details about the property’s condition that affect its value, and there’s also the appraisal process and home inspections to consider. Watch for suspicious behavior at every stage — if shady buyers try to manipulate that information, it can result in wasted time and money as well as legal ramifications.

The bottom line is that scams and fraud are avoidable if you exercise caution and know the risks involved. Although most real estate transactions are executed lawfully, the law can’t protect you from everyone. If you sense that you might be dealing with a dubious buyer, it’s always wise to investigate — it could save you thousands of dollars and countless headaches.