Smart Money podcast: Pet Scams and Buying Different Home Types

Liz Weston: Welcome to the NerdWallet Smart Money Podcast, where we answer your personal finance questions and help you feel a little smarter about what you do with your money. I'm Liz Weston.

Sean Pyles: And I'm Sean Pyles. To send the Nerds your money questions, call or text us on the Nerd hotline at 901-730-6373, that's 901-730-NERD, or email us at [email protected].

Liz: Hit that subscribe button to get new episodes delivered to your devices every Monday. One last plug before we start the episode: We want your feedback. We want to hear from you, dear listeners. So we put together a super-quick, two-question survey.

Sean: You can find the link to the survey in the episode description. So please take all of 30 seconds to fill it out. We're always working to improve the show for you, so this is your chance to help us. All right, on to the episode. This time around, Liz and I answer a couple of listener questions about buying different home types. First, though, in our This Week in Your Money segment, we're talking about scams targeting would-be pet parents with one of our go-to Nerds, Bev O'Shea.

Liz: Hey, Bev, welcome back to the podcast.

Bev O'Shea: Thanks, Liz. Happy to be here.

Sean: So Bev, you cover all sorts of scams targeting consumers, and your latest piece is about pet scams. Can you give us a rundown of what pet scams are?

Bev: Pet scams are either when you try to buy a pet that does not exist or you buy a pet that does exist, but in some way was misrepresented.

Sean: And can you give us an explanation of each of those? Let's start with a pet that simply does not exist at all.

Bev: Those are often sold on the internet. You will see a picture, maybe fall in love with the picture, pay a deposit so that you can get this puppy or this kitten, oftentimes. It's also horses and exotic birds, but you will pay your deposit. As the alleged shipment gets closer, you may be charged more money. You may be told that they need a special crate, that they need some additional vaccinations, something, so that they can leave the area where they are.

Sean: So the scammer starts out by luring you in with a really cute photo of whatever your dream animal is. And then as time goes on, the situation begins to get worse and worse as you are maybe drained of your money.

Bev: Sometimes. Other times, they do a really good job and you even have tracking information. You're close to going to the airport to pick up your pet. And then communication stops.

Liz: I imagine some pets that are in high demand are particularly susceptible to this kind of scam.

Bev: That is right, puppies and kittens in particular. And the pandemic made it much worse because people wanted companion animals and they were a little bit afraid to go to the places like the Humane Society [or] other rescues that might have them.

Sean: One thing that stood out to me in your article is that you cite a statistic from the Better Business Bureau that said that there were 337 pet scam complaints in November of 2020, which was quadruple the number from the year prior.

Bev: That's true. It's just that we were home, we weren't going on vacation and we wanted pets, we wanted companions.

Sean: And in your article, Bev, you mentioned the story of a business owner who was somehow connected to one of these scams. Can you give their story?

Bev: Yes. Derek Huntington, who runs Capital Pet Movers, got a call out of the blue by somebody who wanted to know when their puppy was going to arrive. He knew nothing about this, but the scammer had actually copied his web pages, including his phone number. As the scammer was sending information, Capital Pet Movers was listed as who was going to deliver this puppy. And so when the puppy didn't come, the very angry consumer got in touch with Derek Huntington to ask what was going on. This was resolved, quickly, by the FBI, who had the website down in about 15 minutes. Honest business owners are also victimized by these scams.

Liz: Well, it's interesting the FBI got involved.

Bev: Because of the website, and the deception.

Sean: And the way that people try to take advantage of businesses like Derek's that you mentioned is that they try to co-opt payment apps and use them. So people are sending money through ways that are less trackable.

Bev: You should always be suspicious if somebody wants to be paid in gift cards. Other ways, that are legitimate ways of transferring money like Venmo or Zelle, are hard to get your money back if you give them to somebody who turns out to be a criminal.

Liz: And before we started recording, you were telling us a story that was really heartbreaking of a woman that had a lot of tragedy who was trying to get one of these pets.

Bev: Right. She was just looking to get two kittens. Her husband had died, her son had died. She felt really lonely and sad. So she tried to get two kittens online because kittens are playful and they take your attention. And she lost money and didn't get her kittens.

Sean: That's so sad. Makes me so frustrated about scammers, besides the entire thing of being unethical and awful, is that they just take advantage of people when they are at their most vulnerable and pry their information and their money from them.

Bev: I mean, something that surprised even me was a lot of these have a place for you to fill out your credit card information. They obviously don't take credit cards, really, but they'll log all your keystrokes as you put in all of your credit card information. And then it will say somehow it was rejected. And they'll ask you to use one of these cash apps to get them the money. But then they also have the money and your credit card information so that they can steal your identity.

Liz: Oh, two ways. Wow.

Sean: Well, let's turn now to the other form of pet scams that you highlight in your piece, which is when the pet is real, but maybe not what you thought it was. What happens there?

Bev: Sometimes the pet can be stolen and somebody is trying to sell this through, say, Craigslist. Other times, you will see a puppy or kitten typically that is for sale in a pet store. A lot of states don't allow this, but some states still do. And so you could go and fall in love with this little animal. You ask about it. People do the right thing. They say, “This isn't from a puppy mill, right?” And of course, the pet store tells you, 'Oh no."

Sean: Whatever it takes to get the sale.

Bev: I Interviewed one woman who has a French bulldog. She had done her research. She knew that was the kind of dog that she wanted. She told herself that the reason that she was going into pet stores was to learn more about the breed and to familiarize herself with it.

Liz: We know how that goes.

Bev: We do know how that goes. Those usually go for about $6,000. She told me, she went to the pet store. She'd held this dog. It fell asleep in her lap. And it cost $5,000, that gave her a little bit of pause. She did walk away from the puppy, but she said, she felt like they had a connection. And she went in about two months later and this puppy was still there. And now this puppy had been reduced to $2,500. So it was half-price. She said she was a little bit suspicious, but she wanted to believe everything they told her. They told her it was AKC registered and that it had a registration number. They gave her a big packet of information.

And she took that packet of information home. And she paid for this puppy. She could not take the puppy home for another two days because it had to be spayed. She then took the puppy to a vet. The puppy had kennel cough, and it also had giardia. It took six months to get rid of the giardia completely. But she had called the pet store to see if they would reimburse her for some fairly large veterinary expenses. And they told her they couldn't do that, but they were willing to rehome the dog.

Sean: Oh, no.

Bev: And she was, of course, completely unwilling to let the pet store anywhere near her dog. And with help from the Humane Society, she was able to trace her dog's origins. And it did come from a puppy mill in Missouri.

Sean: Yeah. God, these stories are so heartbreaking because they prey on so many things that are hard to shake. You want to help out a poor animal, you want to cozy companion to call your own. And sometimes when you're in that mode of wanting to get a dog, even if you don't mean to get one that day, it's hard to turn it down. That's how I ended up getting mine from a shelter. We were just going to look. And then next thing we know, we have a dog. So it's hard to not fall victim to things like this. So how do you think folks should avoid pet scams, Bev?

Bev: Get a dog from a rescue or rescue organization. Some of the dogs that are offered are purebred dogs. Chances are they're not going to be a 6- or 8-week-old puppy, but if you're not sure where to get one, go ahead and ask a rescue organization, "Who is a good breeder? Who are the breeders that you trust, that have good reputations?"

If you haven't prepared yourself for a dog or a cat or a parakeet, you don't know what they need, you really need to do your research before you bring the animal home. It's really — I know it's hard not to fall for the eyes, he's not going to be here tomorrow because he's so, so cute — but there's going to be another dog or cat.

Sean: And there are some reputable places where you can scroll through pets online. I used Petfinder when I was looking for dogs a few years ago before I adopted ours. And it can help you scratch that itch of looking at the cutest animals in the world. But the benefit is that they are all local to your area. So you can go in and look at them in person and check them out and realize, "Oh yeah, this is a real dog and not a scam." And they're typically just from your local shelters.

Bev: The thing I like about that particular site is when I've read the descriptions, they're very honest about what the difficulties might be and what kind of home the animal needs.

Liz: Another way, if you are absolutely dead-set on getting a purebred is to, when you see another dog or cat owner with that breed, ask them where they got the animal. That's a way to track down — again, the rescue groups are great — but also if you ask another pet owner where they got their animal, that could help.

Bev: The other advice that I got was you go and see. Go and see where the mother lives, looking at her living quarters, see how well socialized she is, see how her temperament is, see what size she is. If you think that's too much trouble or too far, Derek Huntington, who runs a pet moving organization, says it's really not. You're talking about a family member that you may have 18 years or more. You can drive or even fly to go and make sure that everything's in order.

Sean: All right. Well, thank you so much for talking with us, Bev.

Bev: Thank you, Sean.

Sean: And with that, let's get on to this episode's money question.

Liz: This episode, we have a couple of listener questions about the pros and cons of buying different home types. Here's the first one from a listener who texted us asking, “Can you please cover this topic, buying a new home versus buying an existing home? Thanks.”

Sean: Oh, I'm so glad we got this question because this is a topic I have a lot of personal experience with. So I'm excited to dive in. And joining us in this conversation is mortgage Nerd Linda Bell. So, hey Linda, welcome back to the podcast.

Linda Bell: Thank you so much. I'm glad to be here.

Liz: Linda, to start, can you talk about the pros and cons of buying an existing home?

Linda: Well, when taking a look at an existing home, the price in some cases can be cheaper than buying a new home, and the process can also be quicker. Now, I'm not talking about this current environment when inventory is tight. With a new construction home, you have to wait for the time to build a home from the bottom up. And that takes a long time. And thinking about building a home from the ground up, they're brand spanking new, it's all wonderful — you don't have to replace things like the roof or appliances or things like that. An existing home can be older and requires some maintenance.

Sean: And you may not know what you're getting with an existing home.

Linda: Even if you get an inspection, the home is inspected, it's looked at, OK, maybe you have to replace the roof a few years down the road, or maybe you have to upgrade the appliances, or maybe some things are iffy with the house. So you have to think about that when buying an existing home.

Sean: And I mentioned earlier that I have some personal experience with this topic because I am actually currently in the process of buying a new home. I've been in this process for a long time. And one of my best friends from college just bought an existing home. And I think this really exemplifies the stark difference in experience of buying these two different home types. I put down my deposit on my home back in September of last year, and it's still not done. I still have a month, maybe two, because the closing date keeps shifting around because there is a shortage of lumber, there are all sorts of other things happening with other homes in the area that have pushed my timeline down.

Meanwhile, my friend who just bought her house, she started this process on Christmas Day and closed in late February. But the difference is her house is from the late 1700s. So there's all sorts of other things that she has to consider around maintenance. Her water comes from a well, and they know that the well is getting toward the end of its lifespan. When that gets replaced, it's going to cost them $20,000. So there are all sorts of other things to consider beyond the fact that I'm telling her that it's probably going to be haunted. So you just don't even know what you're paying for a house that's hundreds of years old.

Linda: And plus, she probably needs about like 12 inspections for that home because a home from the 1700s is just, I can't even, it's just, there must be a lot of problems with that house. I wonder if the inspector would even uncover all that stuff.

Sean: Well, that's a really good point because this house that she got wasn't the first one that she wanted. There was another one on the same street that someone else scooped up because they waived the inspection provision, again, on a house from the late 1700s. Can you imagine what you're not learning about because you waive an inspection provision on a house that old?

Linda: And the thing is a lot of people are doing that now in this current environment because inventory's low and they want to be able to grab that house that they finally find and say, I'll waive the inspection, but then that's just going to cost you down the road. I would not advise that for anyone.

Liz: At the same time, the situation with building homes is also fraught because building materials are in short supply. So maybe that's why, Sean, your house is taking so long.

Sean: And honestly, I'm kind of OK with it because of the way that buying a new home has worked out for me financially. I mentioned, I put down a deposit back in September and I've had this many months to build up the amount for my closing costs. So to me, it's super appealing because I'm going in on this by myself. Garrett has his house here in Portland. I'm buying this place in coastal Washington. It's our own deals. So I'm totally on my own for this. And I really appreciated having that time to build up everything.

Linda: Yeah, I was going to say, I think you did it the right way. I mean, I think a lot of people when they're considering buying a home, whether it's a new construction home or it's an existing home, you need to be prepared, you need to come to the whole process, understanding what your budget is and home affordability. Another article I'm working on now is about being house poor and how you can just jump into that whole homebuying process and not realize, "Wow, I have to pay PMI, private mortgage insurance." You have to understand the whole process before you jump in.

Liz: I've got a question for Sean. Did you have to make a lot of decisions in terms of the construction of your house? Because that's always made me a little bit frightened of buying a new house, having to decide everything from the surfaces and materials, all that.

Sean: I actually didn't. I think this is in part because of how my builder operated. They have a handful of models of houses that they're putting up in this little town. And so I chose things like the flooring color, I chose the outside paint color and I chose the countertops. The rest, they don't really let you choose because they want to get these things up fast, which I understand because by the time my house is finished, similar houses on the market are going to be around $80,000 more than mine. I watch Zillow pretty much every day. And I'm seeing houses that are just about the same size for that much more, which means that honestly, if I bought my house now, I wouldn't be able to afford it.

Liz: But wow, you got instant equity. That's pretty cool. And did you have to get a construction loan or was that not part of the process?

Sean: No. No construction loan — it’s just through the builder. They technically own the house until I close on it.

Liz: Linda, sometimes people do need to get construction loans and those are a little bit trickier than regular mortgages, right?

Linda: Yeah, they can be trickier. Just think about when you get an existing home, you get a traditional mortgage, we're talking 30-year mortgage, 15-year, 5/1 ARM, things like that. But then typically, when you're building a home, you have to get a construction loan. And those are more stringent than the regular mortgages that go out, because just think about it, when you have a mortgage property that is existing, but then when you are building a home, the property is not there, it hasn't been built yet, they may require you to put more money down and your credit score to be higher. So, some things to think about if you're building a new-construction home.

Sean: So with a new built home that requires a construction loan, it might be a little bit harder to qualify, but at least you don't have to deal with the maintenance of an older home like what my friend has.

Liz: Yeah, it just seems like with older houses, every time you turn around, they want $5,000 or $6,000 or $10,000.

Linda: I feel so sorry for your friend. I just hear that the cha-ching, dollar signs going up for all the contractors.

Sean: She loves that. She's able to at once have this beautiful, historic home and then make it her own at the same time. So it's the best of both worlds for her own interests. And I think that's what it comes down to as well. It's like, you want to get a house that meets your priorities and that's also available. There's this trade-off there.

Liz: And those older houses have the charm, they have the features that you just can't get in a new build. So, I totally get it. I do.

Sean: It's beautiful, her house. And mine is cute. It's like nothing too fancy. The one thing that makes me crazy is that to make it look a little bit more cute, they put a dummy dormer window over the front of the house and I was like, "Why would you build this window that's not actually a window?" So anyway, it's my first house, I’m going to take it. There's always going to be something that doesn't quite make you happy with your house.

Linda: But one takeaway. Whether you get a new construction home or you get an existing home, nothing is absolutely perfect. Even the house that you say, "Hey, with a new construction home, I can get it exactly as I want." Well, unless you are the one with the hammer and the nail or whatever, that's actually doing everything yourself, you can't get, you usually can't get everything. It's like, you get most of what you want, but just like you said that the countertops or maybe the colors are not what you want, you have to make concessions.

Sean: And it's going to take a while to get what you want. Here at Garrett's house in Portland, when we moved in two and a half years ago, the house didn't have any insulation. In fact, until two months ago, the house had no insulation. So it would get really cold in the winter. And it just had this ancient wall furnace so we were always cold. And eventually, we got that replaced, but it took years to save up enough money to get that done.

Linda: I feel for you because I'm always cold. I'm always cold. So I feel for you.

Sean: Well, I think that we can get on to the other listener question that we got, which is related to this. So they said, they didn't even ask, they said, "Talk about the pros and cons of condos, co-ops, townhouse, duplex, stand-alone house. And what about those HOAs? Thanks." A lot going on here. So Linda, I guess, take any of those home types and then just dive in.

Linda: Well, it's a lot to unpack, but I'll bunch everything together and say with attached housing, you got the co-op, you got the condo, townhouse. Generally, they're cheaper than a detached home, generally speaking, but you know what? You have to think about the HOAs, that they asked about, the HOAs. That's something that really is a sticking point for me because let's say you want to paint your house electric green, not that that's a good choice to make, like, hey, to each his own. Somebody might want it. But the HOA is going to say, ah, no. And even if you just wanted to paint your house a different color of white and maybe your fence you wanted a little bit higher or you want to plant a specific tree, HOAs can be very restrictive. And if you own this, you're like, this is my house. But with attached housing like a co-op and condo, you have to do what they say.

Sean: For me, HOAs are an absolute no-go. If I'm going to be buying a house, I don't understand why you would be paying someone to tell you things that you cannot do with your own property. I was talking with one of my colleagues at NerdWallet who lives in an HOA. They were trying to get some landscaping done and they had to submit a very detailed plan of the number of plants, what type of plant, where they were going to go, all of these different things just to get them approved. And it was in their backyard. It wasn't even going to be visible from the street, but the HOA wouldn't allow it to be done unless they approve the plan.

Linda: One thing about HOAs I should mention, it's not all bad, because the HOA is actually taking care of that communal property, making sure everything looks wonderful and looks nice and making sure you have access to things like clubhouses and swimming pools and tennis courts, depending on where you live. So it's not all bad, but in my opinion, it's too restrictive for me.

Liz: Well, here in California, we have a lot of neighborhoods that have HOAs even though they're detached houses. And they're typically very desirable because of those common areas, because of the common amenities that are provided. But again, if you're not a person that can work within those restrictions, you're going to be unhappy.

Sean: It really does come down to personal priorities. If you don't want to be doing your yard work, you want to make sure that you have things off the sidewalk at the end of the day. Then an HOA might be really appealing to some people. But I tend to be someone who asks for forgiveness rather than permission, and an HOA will not let that happen because they can really come after you. I mean, they can put liens against your house, they can sue you. They have a lot of power.

Linda: They do. Legally, they can definitely come after you just for painting your house a different shade of white. Do you even want to deal with that? Again, to each his own and her own, but it's a lot to deal with HOAs.

Sean: Well, Linda, thank you so much for talking with us about all of these various homebuying options. There are so many to consider. Do you have anything else do you think that folks should keep in mind as they're evaluating what they might want out of a house?

Linda: Well, I would say whatever you're deciding to do, whether it's to buy an existing home or new construction home, make sure you're prepared, make sure your budget is set, make sure you can afford the house. Doing that research beforehand is essential, whether you buy an existing home or new construction home, I would advise everyone to do that.

Sean: Great advice. All right. Well, thank you so much for talking with us.

Linda: Sure. My pleasure.

Sean: And with that, let's get onto our takeaway tips and I can kick us off. First step, no matter what house you buy, know the trade-offs. Buying an existing home may be faster than buying a new home, but you might end up making the repairs.

Liz: Next, either way, you may need patience. Homes for sale are in short supply and building material shortages are affecting new home construction.

Sean: And lastly, mind the fine print of HOAs. You may have some perks like maintained landscaping or a community pool, but breaking the rules can result in passive-aggressive letters or even lawsuits.

And that is all we have for this episode. Do you have a money question of your own? If so, turn to the Nerds and call or text us on the NERD hotline at 901-730-6373. That's 901-730-NERD. You can also email us at [email protected], and visit nerdwallet.com/podcast for more info on this episode. And remember to subscribe, rate and review us wherever you're getting this podcast.

Liz: And here's our brief disclaimer thoughtfully crafted by NerdWallet's legal team. Your questions are answered by knowledgeable and talented finance writers, but we are not financial or investment advisors. This Nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.