Would You Recognize Real Estate Fraud If You Saw It?
Are you a real estate investor? It’s a great way to make money if you know what you’re doing. But would you recognize real estate fraud if you saw it? If not you could lose everything in just a single transaction. “Real estate investors need to be vigilant,” says Ken Collis founder and CEO of TLK Fusion Marketing. “You need to look carefully for red flags before you cough up any cash to buy homes or buildings.”
What should you look for?
Smart real estate investors look for clues that may signal that they are in the midst of a legal matter that involves real estate fraud. There are certain things that will tip them off. One of those clues is fact-patterns provided by potential clients that don’t seem to add up. You would think that when facts are provided they are substantiated by proof. But other times these facts are completely unsupported by the documentation presented.
In some cases, the clients are not to blame. They may actually be the victims of a real estate scam. And other times they may be consciously participating by creating and initiating the real estate themselves. There are unscrupulous individuals and they can do unbelievable things with personal information. Their actions can range from relatively minor infractions to life-destroying scams.
Attorneys for real estate investors often have to become detectives when they find that their client’s explanations of events or circumstances do not seem to jibe.
Do we smell fraud? Looks like it.
Can you imagine, as an attorney, discovering a trusted client may be involved in a scam? How do you think he or she will handle a situation like this?
The first step is familiarizing themselves with the types of real estate fraud that are popular with this type of scammer. The next step is a bit intense but it’s a step that can’t be skipped.
Ken Collis, founder and CEO of TLK Fusion Marketing of Los Angeles California, says as tedious as it may be, the only way to get answers is to follow the paper trail to get to the bottom of the situation. “The attorney may find that there are several perpetrators, some of whom are fully aware of what’s going on and other unwitting participants.”
Scammers on the team may extend far beyond the investors themselves. The list may include mortgage brokers, Ken Collis adds, and also loan officers. In on the scam may be closing attorneys, buyers and sellers. Surprisingly bankers and title companies have also committed real estate fraud.
Real estate scams can and do ruin lives. People have their houses stolen from under them. Some are forced to file bankruptcy. Their credit reports are often irreparably damaged and their credit ratings drop.
Worse than all of this is the astronomical attorneys fees they are forced to pay to help them get free of the tangled web of a real estate fraud, warns TLK Fusion Marketing
The scam may cloud the title, which could prevent the seller from being able to sell their house. They might also have problems taking out another mortgage or equity in the current house to use as collateral for a new home.
Who is targeted by these scams?
Anyone may fall prey, but the groups most targeted by real estate scammers are the same targeted by almost every scam: usually the elderly. Also targeted are homeowners in distress because their homes are already in foreclosure, and individuals with low incomes.
There may be legitimate real estate transactions that have similar circumstances as the scams, but an attorney must perform due diligence to determine whether anything is fishy. If fraud proves to be the case, the attorney needs to quickly inform the client and be sure he or she understands what he or she is getting into. The best choice would be to get out of the transaction immediately.
Here are a few things to be aware of:
Companies that prey upon desperate people who are behind on mortgage payments and whose mortgage company has commenced foreclosure proceedings. They tell the homeowner that they can save their home if the borrowers enact a “temporary” title transfer to the Rescue Company, and promise that the owner can stay in their home and pay rent during the temporary title transfer. But the “rescue companies” often sell the homes once they obtain the title.
These programs offer borrowers a quick way out of their mortgages by convincing them of loopholes that will allow the borrowers to escape the mortgage. These companies charge a premium price for their “service”.
Home Improvement Fraud
This type of scam involves realtors or other people who get home improvement loans in the names of fictitious people. The agents can also use personal information of unsuspecting victims to obtain these loans.
Most people are familiar with real estate flipping with all the programs on TV. Flipping means buying a property cheaply and then quickly selling it at a price that is well above its appraised value. Flipping for a profit is legal but there is also illegal flipping. Every state is different.
When a person files false documents with the local court they are committing rental fraud. In order to file the paperwork, the renter has to forge signatures of the owner and the bank officers. The criminal can then take out new loans on the property. Shortly thereafter, they are nowhere to be found.
Sadly, many homeowners do not know about any of these common scams. Never sign documents you do not understand, reminds Ken Collis. “Always get details in writing. If something seems suspicious, ask questions and proceed with caution.”