Real estate and mortgage scams can cause catastrophic damage to your finances and personal life. Victims of real estate fraud can lose their homes and their good credit, and even end up bankrupt or in debt. By the time you realize you're involved in a scam, the title to your home may already be clouded, which prevents you from using your home equity to bail yourself out of trouble.
Con artists usually aim their scams at elderly people, those with low incomes, and borrowers who are in foreclosure, but anyone can fall victim to a well-developed scam. Here are some of the most common types of real estate and mortgage fraud; if you've become involved in a fraudulent transaction, contact a qualified attorney immediately.
Mortgage Relief Scams
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If you are behind on your mortgage payments and facing foreclosure, the odds that you'll be targeted by scammers increase exponentially. People who are feeling desperate and trapped make perfect targets for con artists, who know that people often cling to hope when it's offered. Some of the scams you might be subject to include phony counselors who charge you a fee or directly collect your mortgage payments, and "forensic auditors" who claim they can find loopholes in your legal documents that will free you from foreclosure.
Another popular foreclosure relief scam is the "leaseback," where a company promises to take over your mortgage and rent your home back to you so you don't have to move. The scammer tries to convince you to sell your house for far less than market value, since you feel secure in the rental agreement. However, if the buyer defaults on the mortgage, sells the house for full value, or raises the rent until you can no longer pay, you will lose your home.
Shady land dealers sometimes buy cheap lots of land and try to resell them to unsuspecting buyers for as much as 50 times what they're worth. These companies might approach you by telephone, buy ads in local media, or send you attractive direct mail campaigns. Often times, they promise huge profits and gifts as a means of pressuring you to commit right away. In the end, you'll wind up with land that has no real value, or even land with hidden legal issues, such as toxic pollution, liens, or easement problems.
"Flipping" properties, or buying a bargain fixer-upper and selling it for a profit after a makeover, is all the rage thanks to television shows that make it look easy. In the real world, property flipping involves a lot of risk and old-fashioned hard work. Con artists change the game by skipping the renovations and producing fraudulent appraisals, or by making minor surface improvements to disguise structural issues.
If you're looking to buy a home from someone who has purchased and renovated it, take the precaution of having a reputable home inspector look it over. If you're approached about investing in a home flipping scheme, make sure you are working with someone who has remodeling experience, reliable references, and solid ethics.
Beware of aggressive lenders who knock on your door, call you on the telephone, or run flashy ads promising loans with no money down or no credit check. Reputable lenders will always require that you have good credit, and usually want you to provide a down payment of 10 to 20 percent to prove your level of commitment and financial solvency. Predatory lenders also charge exorbitant fees and interest rates.
This crime involves identity theft and forgery. The criminal uses your personal information to take out a mortgage and forges your name on the paperwork or deed. This kind of scammer preys on vulnerable elderly or disabled people, and often gets access to the victim's information and signature through false friendship, service professions like home health care, or by taking advantage of family connections.
Real estate and the mortgage industry are both highly regulated fields. Homebuyers and borrowers often feel a lot of frustration in the face of all that red tape, which in turn creates opportunities for scammers and con artists who are looking for people to exploit. In general, if a deal sounds too good to be true, or if you feel pressured to make a quick decision, it's wise to be suspicious. Reputable online resources can help you become more aware of potential fraud, but there is no substitute for having a legal professional look over your contracts and loan documents.