It’s an unfortunate reality that in every industry, there are unscrupulous people eager to manipulate the rules for their own ends. The real estate industry is no exception. Real estate scams can be devastating to their victims, the consequences ranging from bankruptcy and damaged credit to loss of one’s home. Anyone can be targeted by these scams at any time, but often they are directed towards low-income individuals and the elderly, who are presumed to be vulnerable. Homeowners in foreclosure are also considered prime targets. The following is a list of the most common and most serious types of real estate fraud homeowners may encounter, and how to safely avoid becoming the next statistic.
Foreclosure and Mortgage Schemes
Foreclosure rescue– People who are behind on mortgage payments or in the process of foreclosure are vulnerable to this scam. Shady companies will typically call homeowners in dire straights and convince them that their home can be saved if they “temporarily” transfer the title of the home to the company. The company will reassure the homeowner that this is just a leaseback and that the homeowner is free to stay in the home an pay rent during the title transfer period. Soon after the title is transferred, the company will sell the home, leaving the original homeowner stuck as a renter in their own home and still on the hook for mortgage payments.
Mortgage elimination– In this scam, individuals or “companies” will contact mortgage holders and offer them a plan to eliminate their mortgage in a very short amount of time that usually involves some sort of fantastical loophole. The plan itself is usually confusing, farcical, and difficult to understand. The promised mortgage elimination never occurs, and meanwhile the individual or company charges a high price for the “service.”
Counselling services– This scam is similar to mortgage elimination, only the services offered are quite real. Companies who engage in this scheme initiate targeted marketing campaigns that offer “exclusive” counselling and advice to homeowners on how to save their mortgage–for a premium fee, of course. What they don’t reveal is that much of this “advice” can be found for free on government websites, or is fairly simple and can be gotten for free from real estate agents or other legitimate sources.
Equity skimming– An individual engaging in equity skimming is pretty easy to spot right off the bat. They will pose as a legit homebuyer and attempt to convince the seller to re-list the property for an incredibly high amount. The scammer will proceed to take out the large mortgage, pay the seller the asking price of the property, and abscond with the rest of the mortgage money.
Equity fraud– An individual perpetrating equity fraud first obtains their victim’s personal information in good old fashioned identity theft. They then use this information on mortgage or loan documents, forge the victim’s signature on one or more property deeds, and steal the equity.
Land and Rental Fraud
Land fraud– In land fraud, a company engages in direct mail and telemarketing to potential property buyers, promising them extravagant benefits and perks if they agree to buy land from the company, usually priced in the range of $50,000 dollars or more. This land turns out to be low-quality and unimproved, which the company originally bought for less than $2,000.
Rental fraud– This type of fraud occurs when a renter files forged “satisfaction of loan” documents with the local court. The scammer forges the owner’s signature, the bank officer’s signature, and bank seals, and is then free to take out new loans on the property. They usually vanish shortly afterward.
Wire and Check Fraud
Wire fraud– This type of scheme involves hacking into the email accounts of legitimate real estate agents and posing as the agent to trick a buyer into a wire transfer. At the last minute, the victim will be informed that there has been an unexpected change to the wiring information, and the hacker will then give the victim their own account information. The victim unwittingly transfers the money directly to the hacker’s account, which is then immediately cleared out to cover all tracks.
Check fraud– Check fraud can be done in almost any industry, but in the real estate business it usually involves a realty company sending an individual a fake check for a great deal of money. Unwitting victims cash the check, at which point the scammer contacts the victims explaining that they mistakenly sent the check and demand to be compensated. The check bounces in a few days or weeks, and the victim must cover it.
These scams can seem frightening, but knowing about them and learning how they work is already half the battle of avoiding victimhood. Never sign any documents that you don’t understand, and learn to distrust any offers that seem too good to be true. If a buyer engages in odd behaviors like trying to convince you to list your property for more money, cut off contact with them. A simple rule of thumb for avoiding real estate fraud is to call your attorney or local real estate agent any time someone makes you feel uncomfortable, or you receive any strange offers from companies or individuals you don’t recognize. Stay alert, stay informed, trust your gut, and you’ll be one step ahead of any scammers who would try to take advantage of you.