Detroit, Michigan (PRWEB) October 30, 2014
Federal consumer protection agencies regularly warn consumers about scams involving everything from the recent false Ebola charities to student loan scams. But nowhere are the warnings more prevalent and the loss of citizens' hard -earned money so great, as when it comes to the various cons surrounding real estate and property loans. Because of the high dollar value of real estate, these scams tend to be sophisticated. Those people who consider themselves too smart or “immune” from any real estate scam need only consider the sophisticated schemes like that of the infamous Bernie Madoff. “Successful and smart” investors in his funds are still reeling from their own investment horror stories.
Here are 5 popular real estate scams that cause severe financial distress to unwitting participants:
1. Lease Scraping: The rental market is hot as bank credit has tightened and home sale inventory remains low. The recent "Great Credit Recession" saw millions lose their homes to foreclosure. Con artist take advantage of this high demand for rentals by “scraping” the contact information of legitimate home rental listings and divert rental inquiries to fake web sites and telephone numbers. They take rental deposits on vacant properties that they do not own, from prospective tenants under pressure to secure a place to live. The con disappears once the true home owner returns but not until they've fleeced deposit money and monthly 'rental payments.' Solution: Verify ownership to a property with the county recording office before paying a complete stranger any money.
2. Home Sale Scams. Using the advance technology of the internet, scammers “lift” legitimate real estate agent listings as well as the agent's telephone numbers and license numbers. Similar to lease scraping, con artist target homes that sit vacant for a long period of time such as a foreclosed or a vacation home. They often pose as real estate agents and collect deposit monies from prospective home buyers eager to secure homes priced “below market." Solution: Verify the identity of a real estate agent through their main sales office and write checks to the agent's broker only.
3. Tenant Scams. Homeowners who fail to sell their home may opt to lease their property instead. Pressured for any cash flow, they rent their home to people with substandard credit or choose to ignore documentation that would otherwise be red flags in less hurried situations. Frustration and financial heart ache soon follow once they stop receiving rent. Bad tenants can remain in a home months after they stop paying rent, costing landlords not only thousands in back rent, but on utilities such as water bills, home repairs and legal fees. Solution: Novice land lords should have income and credit documentation verified by a reputable property management company not affiliated with a homeowner's real estate agent.
4. Exacting up front fees for residential loans or mortgage modifications. Scam artists pressure applicants for up front fees to process mortgage loans or for loan modifications. In cases of the former, there are very few exceptions where a loan applicant should ever pay money in advance. Homeowners should never pay for a lender's commitment to lend. In the case of mortgage modifications, federally regulated lending institutions never require monies in advance to process a loan modification request. Solution: When in doubt, loan or loan modification applicants should contact their state's mortgage regulatory agency or state attorney general.
5. Real Estate Seminars. "Free" real estate seminars are back in droves after the Great Recession. They're hosted by “legendary" real estate personalities with captivating stories, purporting to teach house “flipping” to innocent pensioners eager to make “millions” in investment properties. Buy enough of their CD's, books, or coaching classes and thousands of dollars later a student might be lucky enough to have the “expert” invite them to participate in a real estate deal. Solution: Don't attend these seminars with your wallet. Check out local real estate investment clubs that does not require its participants to buy anything.
About the Author: Since 1990, attorney David Soble has represented thousands of consumers, businesses and lending institutions in their real estate and finance matters. His writings are based upon his clients' past experiences.
Disclaimer: You should not rely or act upon the contents of this article without seeking advice from your own attorney.