Real Estate Fraud - Know how to Protect Yourself

The distressed housing market coupled with high unemployment, has created a fertile ground for Real Estate fraud.

According to the FBI, Real Estate or mortgage fraud is a ‘material misstatement, misrepresentation, or omission relied on by an underwriter or lender to fund, purchase, or insure a loan. It also includes schemes targeting consumers, such as foreclosure rescue, short sale, and loan modification.’ These last three – foreclosure rescue, loan mod, and short sale – are increasing rapidly with new schemes emerging on a regular basis. The hardest hit areas are Los Angeles, Las Vegas and Phoenix.

There are multiple ways these scams are perpetrated against distressed homeowners. However, there are basic commonalities that homeowners need to watch out for.

Loan modification schemes usually involve promises to help homeowners get their loans modified. The homeowner is told to stop making payments to the lender but to make the payments to the scheming company instead. Homeowners are also charged an up front fee sometimes in the thousands of dollars. Once the money is paid, the company is never heard from again. The homeowner is out the money they paid and sometimes end up losing their homes to foreclosure.

To avoid being taken advantage of in loan modification schemes; never pay up front fees, stay current on your mortgage payments, and only make payments directly to your lender. Avoid anyone that guarantees they can get you a loan modification.

There are loan modification counselors who do not charge any fees.

Similar to the loan modification schemes is the foreclosure rescue scam. In this situation, the homeowner pays exorbitant fees, often in the thousands of dollars, to stave off foreclosure or postpone eviction after a foreclosure. The schemer then absconds with the money without providing any aid or provides minimal assistance.

The growing crime threat is the short sale fraud. Short sale fraud usually involves multiple people – typically the real estate agent, the current owner, an investor and possibly an appraiser. The investor makes a low offer on the property. Regardless of how many offers received, the agent only submits the investor’s offer. They co-ordinate with the appraiser or trick him by giving the wrong address to get a low appraisal. At the same time, the investor lists the house for more money. The house is sold to the new buyer for fair market value – netting the investor a quick sum of money – usually $30,000 or more.

Currently, 36 percent of short sales are being resold within the first 30 days of being purchased from the bank. 16 percent are sold the same day, 13 percent in 1 - 14 days, and 7 percent in 15 – 29 days.

According to the Santa Barbara California District Attorney’s office, white collar crimes like real estate fraud are popular because they typically involve large sums of money, it is difficult to catch and prosecute, and even if they are prosecuted, the sentence is usually five years or less. Compare that to drug involved sentences that can be as high as 20 years.

Because of the rise in real estate fraud, the FBI has developed ways to identify emerging trends to detect and fight fraud as early in the process as possible. They are using new investigative techniques to stop criminals before any damage has been done.

If you think you might be a victim of real estate fraud, contact your local police, sheriff or District Attorney’s office. Prepare a complete, detailed written statement. Include an overview of the incidents that took place, names and phones numbers of who you talked to, the dates and times you talked to them, copies of any documents were given to you that you signed, and copies of any checks you wrote. The statement should include as much information as possible. The more detailed, the better.

General rules to follow to avoid being taken advantage of:

· Read any and all documents before signing anything.
· Don’t transfer or sell your house to a ‘foreclosure rescuer’.
· Pay attention to all letters and correspondence from your lender.
· Never pay up-front fees.
· Talk to your lender directly about your foreclosure, short sale, or loan modification.
· Do you research!
· Contact one of the legitimate organizations who provide homeowner assistance
o Department of Housing and Urban Development
o HOPE hotline
o Non-profit Consumer Credit Counseling Organizations

Andee Allen is freelance writer, Real Estate Investor, Business Consultant, and California Realtor (License #01854926). You are welcome to contact Andee at andeeallen@gmail.com or on her website http://www.andeeallen.com

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