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Rip-Off Alert: Rising real estate prices increase risk of fraud

Home Sales (MGN Online)

Real estate can be a great investment, but it can also be a great vehicle for fraud.

That's because experts say it plays to the buyer’s emotions, including greed.

John Bravata – profiled on CNBC's “American Greed” – sold real estate partnerships during the last boom, promising a sure thing.

In reality, he was running a scam that cheated hundreds out of their life savings. He drew clients by offering seminars that included a complimentary meal – proving once and for all that there's no such thing as a free lunch.

"Scammers like Bravata tend to do their dirty work when prices are high, like they are now, which means you have to be extra careful," said CNBC reporter Scott Cohn.

Securities fraud attorney Jenice Malecki says do your research before investing.

"A lot of times people don't know they've been scammed until the market declines," Malecki said.

"What kind of experience do they have, and what kind of debt are they in? Has any reputable financial firm or accounting firm audited the returns of this investment?”

Fraudsters often target seniors and immigrants – even their own friends and family who may be reluctant to ask too many questions.

"People are awfully too polite when it comes to investing even though it's a real business transaction that they should be very careful with," Malecki said.

Experts say scammers tend to do their dirty work when prices are high, like they are now, which means you have to be extra careful.

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