Red Flags That Mean It's a Real Estate Scam!

You’d think after everything that has happened with the housing economy (and the economy in general) that everyone would lay off the scams.  Well they won’t.

Real  estate and mortgage fraud are vast.  An estimated $4 billion to $6 billion in annual losses result from it according to FBI reports.

Entire communities can be damaged, as we’ve seen recently.  Real estate and mortgage fraud can lead to foreclosures, lenders raising rates and fees to compensate for losses, and spiraling home values.

What is scary about this is that the crimes are usually complex and they usually involve more than one party, many times one that seems official, only they’ve duped a logo of a legal entity.

Here are the 5 red flags that a real estate scam is going on:

1.  Short Sale Scams

The Scam: A homeowner owes more than the value of their home.  So instead of paying the mortgage, they fake their financial situation and stop making their mortgage payments.  A friend comes in with a low offer on the property and a short sale agreement.  The lender agrees to the short sale, unaware that it was premeditated. 

The property is sold at a very low price and the new homeowner lists it for sale at the true value, thus flipping the house without adding value to the property to sell to you at top dollar.

Red flag
Unfortunately the only red flags can be distinguished from the lender’s side.  Usually the homeowner suddenly appears with an offer in hand without having contacted the bank about financial hardship.  This scam often includes cash back offered at closing.  Sneaky, huh?

2.  We can save your home from foreclosure scam
The Scam: This one is notorious and everyone has heard of it.  It is absolutely despicable. 

These saviors ask for upfront fees in all different forms such as obtaining a new loan on behalf of the owner or having the owner sign over the deed and then rent the home until they can repurchase it.  In the end either the bank takes the home back or the company “representing” you does.

Red flag: Do NOT fall for anyone trying to “:help” you with your mortgage, sign your deed over to anyone, stop talking to your lender, become renters of your own home, or send mortgage payments to a third party.

It seems logical, but judgement can become clouded when the mortgage payment is looming! 

3.  Loan documentation fraud
The Scam: The buyer on a property plans to livein the home when they actually intend to rent it.

Red flag: If you’re thinking of doing that, it could cause issues for you.  Be careful, a lot of work is going into cracking down on this area.

4. Illegal property flipping scam
The Scam: Believe it or not, people are still able to purchase properties and resell them at inflated rates.  The property is refinanced or resold right away, the buyer usually knows the flipper and lets the home go into foreclosure soon after.

Red flag: I haven’t seen this happen, but obviously it could hurt your property value if you live in the neighborhood. 

At the end of the day, these scams only help the person who is engaged in the fraud.  It usually hurts property values around it.  So be careful and watch out for false promises.  If something sounds too good to be true, it usually is:(

SEE SCAM-FREE HOME IN SAN DIEGO!