Real estate scams on the rise

January 11, 2007 | Real Estate | 9 comments

With any hot market comes the leaches that will attach themselves to anything that is left unprotected. The real estate market is no different. The past 5 years has attracted so many new agents and loan officers riding the wave that industry ethics and the qualifications of these individuals has hit an all time low. As a result, the con artists that know how to capitalize on sloppy agent work and unsuspecting homeowners are making a killing. With the slowdown and the pressure to keep up these numbers are only on the rise.

There are multiple ways that a homeowner or home buyer can be victimized. It can be the result of agents that divulge inappropriate information to con artists. Again, with so many new agents and a tight market there is an increased level of desperation and these agents can unknowingly assist a con artist in acquiring the necessary info they need to pull off a scam.

The largest offender of fraud in the current market is occurring on the mortgage side of the business. Loan officers have been fraudulently qualifying borrowers for mortgages that they shouldn’t be able to attain. Filing under stated income is the #1 offense. There are standards the lenders use to prevent homeowners from ending up in a loan they can’t afford. However, a loan officer who knows how to use whiteout and is willing to commit fraud can get a loan through the system without the borrower even knowing the fraud was committed. If a person is intent on stealing from you they will find a way. It is our job as homeowners to know enough to protect ourselves.

Tomorrow we will continue this topic and shed some light on other scams to watch out for.

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Reader Comments

W W on March 15, 2007 at 7:36 pm

i was scammed by a real estate broker who by the way was a trusted relative they sold my house which i owned for only 5 months -as advised by them -for over one hundred and ten thousand profit and scammed me out of the money. They the relocated to Florida and cannot be contacted. Beware!

Tom Voli on March 15, 2007 at 8:16 pm

I am sorry to hear that. It amazes me at the lengths people will go to scam people rather than make legitmate use of their time and skills.

Pang on April 4, 2007 at 9:52 pm

I was scammed by my loan officer. He was giving my husband and I all the good information about paying interest only. He told us that there will be a defer and my husband asked him, where does the defer go? He didn’t answer my husband’s question and went to another source. Finally, my husband asked him again that does the defer interest rollover to add that new interest. The loan officer said yes that’s correct. When it was closing time, he said we’re going to pay the interest, plus insurance, and escrow for $1,320.00. We paid for 4 months and I saw -$770.00 defer every month. I was confused why there’s a defer. I read below and it said it will add to my principal and I still didn’t understand. I didn’t let that bother me until we were planning to have our neice and her husband assume our mortgage, our loan officer locked us in 3 years. Thank the Lord that my neice told us we or them will be paying the mortgage very very very high in the future because of the defer interest. My husband and I was shock and we called the loan officer immediately and he said yeap, that’s right. My husband and I thought that he never explained that to us. It’s a long horrible story. What should I do now? Should I go ahead and pay that loan and later end up losing my home or should I get an attorney? That loan officer didn’t want to talk to us.

Tom Voli on April 5, 2007 at 6:23 am

The loan you were sold is not interest only…it is negative amortization. These loans have 4 payment options each month:

1) Minimum Payment (usually 1 - 2% amortized) This payment will defer interest to the principle balance.

2) Interest Only Payment: No defered interest here but you are also paying no principle. Your balance stays the same.

3) 30 Yr Amortized Payment: If you pay this payment every month you are paying principle and interest at a 3o yr amortization.

4) 15 Yr Amortized Payment: Same as 30 yr but with 15 yr amortization.

You have the option to pay as much as you want each month. The MINIMUM payment will defer interest to the principle balance but you do not have to pay the minimum payment….in fact…you should not be. If the minimum payment is all you can afford then you can’t afford the home…period. If you pay the interst only payment there is no interest deferred.

I am sure the loan officer was very vague in his description of the loan but unfortunately there are documents you will have signed indicating you understood the loan and knew what you were doing. Seeking an attorney will not get you anywhere.

Again, make the interest only payment, not the minimum payment. If you can’t afford this sell the home because you can’t afford the home. No other loan has the low payment you are paying now without negative amortization. If you can afford the interest only payment you should still get out of that loan as soon as possible…the interest rate continues to rise on those loans making it harder to keep up with the interest only payment.

Call me at (949) 290 1795 if you need help getting out of that loan, I may be able to help you.

LORI on June 16, 2007 at 9:43 am

I was scammed going into forclosure, bad credit, so a friends tried to help but left out many details, I am still trying to verify the notary of the grant deed, we were told to put house in this lady’s name that we did not know, we did , we were promised that the house would be put back in our names in 4 mon. making pymnts it never did. the broker had did the house as a sell which we were unaware of until we received closing papers from the title co. and those are the only papers received. We sstopped making pymnts for a short time they were going to auction due to default so we paid $18,000 and the broker promised to put property in our name at that time, which has still has not happened, the broker has agreed to deduct 50,000 off the second which he had to purchase back himself, (so he said) due to something wrong that he had done we just have’nt figured it out, now the 1 st lender is trying to sell the home , we can’t get any info because we are not on the loan and had no idea what kind of loan new owner was getting they just told us it would be at a lower rate due to her having good credit so we had no say so or copies, the 1st lender did somehow manage to inform us where to send the $18,000 to stop the sell/auction. They had no problem accepting our cashiers check. Does anyone have any information that can help in this matter/nightmare.? We seem to be getting no where and attorney fees have put a financial strain on us not to mention our health. Iam aware that the loan is an LLC Agent co. with a beneficiary and trustee.

Tom Voli on June 20, 2007 at 8:53 am

Lori,

I would talk with a real estate attorney.

Many states have exact procedures that a buyer must follow when purchasing a home that is in foreclosure. In California for example there is a CIVIL CODE 1695 that has very specific forms and procedures that must be followed or the original homeowner can dispute the transaction. From what you describe I would say that there are violations that exist but this depends on the state the property is in and the laws in that state.

Check with an attorney.

Marcia on August 14, 2007 at 6:20 am

Would this constitute as a scam? My husband and I are trying to sell an investment property to an interested buyer who wants to “unofficially” assume our commercial loan. He’s willing to give us our profit upfront, make our loan payment through an escrow account for 9 months, and then at the end of 9 months make a balloon payment that would finish paying off our loan. We had an addendum written that the buyer would agree to pay $10,000 per day that balloon payment hadn’t been made after the 9 month period, which of course the buyer thought was exhorbant; however, our credit is on the line! Our agent doesn’t see anything wrong with the deal, yet the whole thing smells fishy to me. Comments? Is this a scam waiting to happen?

Tom Voli on August 14, 2007 at 7:52 am

This could be a good deal if the escrow account also holds a sufficient payment deposit…say 6 months. This will insure that if the loan payments are not made you can process eviction and re-rell the property without an unreasonable risk.

The other thing that concerns me is whether or not this new owner has the right to further encumber the property. You would not want to agree to a deal like this, get your profit up front, only to have the buyer take out another loan on the property to suck out all the remaining equity and then default on your loan. In this scam they have an appraiser and lender willing to help push an inflated value through underwriting so that they can remove this ‘fluff” equity.

I would set up the agreement to where the buyer is not added to title till he secures full financing. IMHO

casey on March 27, 2008 at 2:18 am

I am selling my property FSBO, and have posted it on the internet. I have an interested individual that wants the home; however, he states that he is out of the country at the moment, but wants to send a certified cashiers check to me. This check is for the deposit, but he is also sending $8,000 extra. He wants me to send the $8,000 to his broker. I have never sold a home FSBO and am leary of all of the scams going on. What do you think???