Real estate scams are a lot more prevalent than you may think, and California is home to four out of the top ten zip codes ( and ten out of the top 25) when it comes to real estate criminals and fraudsters.
In fact, each year, billions of dollars are siphoned off illegitimately by criminals who set out to sham the real estate, mortgage, and housing system.
The FBI reports that guilty parties include Realtors, mortgage brokers, loan officers, lenders, appraisers, underwriters, accountants, attorneys, land developers, investors, builders, bankers, escrow and title employees, and plenty of landlords, renters, and plain old lawbreakers.
In part one of this series, we exposed five common real estate and mortgage scams, In this blog, we bring you scams no. 6-10.
6. Last minute closing scam
This scam takes advantage of the stress, confusion, and time-crunch many home buyers feel towards the end of their transaction. The first step is for hackers to tap into the email account of a real estate agent, broker, transaction coordinator, or title company (that’s a lot easier than you think!)
Next, they get the names, addresses, contact numbers, and other pertinent information for the homebuyer in the transaction. The night before the closing - or at some critical juncture at the 11 1/2 hour before the home closes – the buyers will get a phone call at home from someone from the title company.
They inform the buyers that there's been some minor change or some bit of accounting needs to be cleaned up. Maybe they have to submit a new deposit, closing cost amount, or even were overcharged and will be getting a refund check back, but either way, the caller gives them new wiring instructions or gets their bank account information.
The only problem is that the title representative on the phone actually was the con artist, and by the time the buyers call their real estate agent or title company the next day to check in or get an update, their bank account has been cleaned out and their purchase funds are long gone. Ouch!
7. “I’ll sell your home or buy it myself” scam
I’m sure you’ve seen signs saying just this – usually on the side of the road or a corner in a marginal neighborhood. While the real estate agent/company making this offer may not be trying to steal from you per se, they know the offer is a glorified scam because no one is ever going to buy your house themselves…never…ever.
Instead, they use it as an unscrupulous marketing gimmick just to get more listings and home buyers.
When you call the number from that sign, you probably won't even reach a licensed real estate agent. But if you do, they'll come out to your house and have you sign an unusual listing agreement that includes an asking price determined by the agent which home buyers would NEVER agree to, nor would it appraise.
They will also have you sign off on pre-determined price breaks and a contract that you will use this agent only to buy a house – and maybe even a house only from a pool of the company's other listings.
Very quickly, that dream offer turned into a nightmare for home sellers.
8. Renting a vacant house
This one of the oldest and most prevalent real estate scams, and its attraction for criminals is its simplicity. The con artist will drive by a vacant home, whether it's foreclosed, already for sale by an absentee owner, a vacation home, or just unoccupied. They kick in the side door or come in through a window and then change the locks immediately.
Now that they have possession of the home, they only need to change the sign in the front yard to "For Rent" with their number, as well as list in as a rental on Craigs List. They advertise the home at a discounted rent to create a lot of interest, and take scores of applications.
The plot thickens when every one of these applicants gets a call back with the good news that the house is theirs to rent – but they need to come up with the first month's rent and security deposit ASAP to hold it.
Hypothetically, with twenty applicants giving $3,000 each, you can see how the con artist can produce a large amount of cash in a short time. Of course, when the renters – all twenty of them – show up to move in, they'll find the house vacant again and the criminal long gone with their phone number disconnected.
9. Title fraud
While it may be less common than simple rental and real estate scams, title fraud is one of the most dangerous – and costly – of all housing crimes. In this scam, the con artist falsifies documents to prove that they are the legal and rightful owner of a home or plot of land. It's not hard to do, as public records will supply all of the information and documents they need to replicate, and a computer with Photoshop will do the rest.
Once they have these new title documents, the fraudster can use them in a variety of ways to commandeer cash. Many times, their scheme entails applying for a mortgage loan for the property such as a Home Equity Line of Credit, cash-out refinance, or private "Hard Money" loan. Of course, they'll take all of this cash, but leave the rightful owner confused and shocked when they get notifications for payments overdue.
10. Foreclosure bailout scams
There are many grifts, rackets, and hustles that fall under the wide umbrella of foreclosure bailout scams, which spread like wildfire during the real estate crash and Great Recession.
These can focus on the mortgage side of home ownership, like shady mortgage renegotiation companies that collect big amounts of up-front money but get little or no results, bogus forensic loan audits, or other loan assumption scams.
There are also plenty of criminals and unlawful firms that will take advantage of stressed and desperate home owners who are facing foreclosure. Often, these scammers pretend to be affiliated with a legitimate governmental foreclosure agency, like HUD, NeighborWorks, the Home Affordable Modification Program (HAMP) or the Home Affordable Refinance Program (HARP). Just by sending letters on their letterhead, sending emails or cold calling these homeowners – all easily trackable on public lists of defaulting mortgages – the con artists have an opening.
From there, they may entice the trusting homeowner into offering fees for service, making mortgage payments to them directly, offering a short sale that is really just another scam, or even signing over the home.
They also may claim to have an angel investor or foreclosure bailout program that will buy the home from them and then lease it back to them, which the homeowner loves because it means they don’t have to move and can win back their home. However, after six months to a year of making high monthly lease payments, they realize that the home is still going to foreclosure and the “investor” did nothing more than pocket their funds and not make payments to the bank.
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The bottom line is that you should be informed, verify who someone is when they contact you, stay in very close communication with your legitimate Realtor, loan officer, and title company, and report any activity that seems fishy! Contact us if you would like any more information about real estate and mortgage scams – and how to avoid them.
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