In our last blog, we talked about methods for cleaning out unwanted items and turning them into cash. Craigslist and eBay are two of the most popular “middle men” for matching sellers and buyers, but each has its share of scammers. Here are a couple of the tactics they employ:

Craigslist

The most common Craigslist scam I’ve seen goes like this: you are contacted via email or text message by a person claiming to be interested in your item. Unfortunately they cannot meet you in person to pick it up, but they are willing to offer you 10 or 20% more than your asking price for holding the item for them. They will mail you a certified check and you can mail them the item once the check clears.

Sounds pretty good right? Most people don’t realize that checks can be deposited into their bank accounts even if the check is fake. The process of verifying the check’s legitimacy can take several days, and in the meantime your bank account will reflect the new deposit, making you think the money is there even though it isn’t. The Craigslist scammer is relying on you not realizing this and mailing them the item before the check actually clears your bank account.  

Unfortunately this scam has been very successful, and I have encountered someone trying to use it on me every single time I’ve listed an item on Craigslist. The best way to protect yourself is to only deal with people in person who pay cash. Do not mail anything, do not accept personal checks, certified checks, cashier’s checks, money orders, or any form of payment that isn’t cash. 

eBay

eBay offers buyers and sellers some protection from illegitimate transactions, but tends to take the buyer’s side if a dispute arises. Internet forums are filled with complaints about buyers claiming an item is defective and demanding a refund. When the seller will not issue a refund, eBay will step in and automatically deduct the amount from the seller’s account to force the refund. As you can probably imagine, this opens the door for bad actors to pretend their item is defective and then demand a refund. If you as the seller can’t prove the item is in working condition, you’re going to be out of luck and the buyer can potentially keep the item (which probably does work) and their money.

While there is no way to completely insulate yourself from these situations, there are a couple of things you can do to protect yourself. First, take detailed photos of the item you’re selling for your eBay listing, including any imperfections like dents or scratches. Second, take another set of photos as you package the item for shipping after someone has bought it. Finally, pay extra for tracking and insurance when you ship. If something does go wrong, you’ll have documented proof that the item worked before you shipped it and that should make the insurance claims process a bit easier. I also make a point to tell my buyer that I’m taking all of these steps so that he/she knows I am somewhat knowledgeable on popular scamming tactics. 

There will always be bad guys out there trying to take advantage of you. Stay informed on popular scam tactics, take steps to mitigate the risks, and don’t do anything that makes you feel even the slightest bit uncomfortable.

The above article is for informational and educational purposes only. Neither the information presented nor any opinion expressed constitutes a recommendation or endorsement by Gore Capital Management nor Cantella & Co., Inc. of a specific investment or the purchase or sale of any securities. 

Submitted by Ben Sadtler - 2018 CFA Program Level III candidate