How To Avoid Real Estate Scams
Real estate dealings usually happen face-to-face, but many of the biggest scams are conducted online. According to the FBI, in 2011 there were more than 92,000 suspicious activity reports filed in relation to mortgages. So how can you protect yourself from these predators? One way to ensure your identity is never used for shady online deals is to invest in identity theft protection or a similar service. Prevention is vital, too. Know what to look for, and you can avoid becoming a victim.
Online sites such as Craigslist and eBay are great places to find real estate deals. Unfortunately, these marketplace sites attract swindlers, as well. These sites are great for consumers because they are free to list and search. However, that opens up the platform for anyone to list or say whatever they want. Look out for red flags such as:
- Missing information
- Incomplete address
- Minimal or no photos
- No former client feedback
- No MLS number
- Odd or complicated instructions (meet off property, sign checks, give your bank account number up front, etc.)
How this Scam Works
The con man pulls legitimate listings of homes off an online real estate site, and re-posts them on eBay or Craigslist as if he owns these properties. When he has an interested buyer, he requests a down payment or deposit to hold the property until the potential buyer can inspect it. He will sell this property as many times as he can before he disappears with the deposits he has collected.
This kind of scam also works as a rental property as well. For example the scam artist will find properties for sale and simultaneously advertise it somewhere for rent. The rental rate is typically to good to be true and will attract a number of interested parties. The scammers goal is to get the potential tenant to send them their first month rent. Often times the scammer is able to get money out of multiple people. They try to pull of this scam by asking legitimate questions of the potential tenant. When the tenant asks similar questions a tenant may normally ask, the scammer is all to helpful in being ultra cooperative. They will go along with almost any request the tenant has including allowing things such as smoking, pets and other things that not all landlords would allow. The goal is to get your money at all costs.
Avoiding this Scam
Avoid this scam by being on guard if someone requests a down payment or deposit from you on property listed on marketplace sites. Check the photo of the property against other reputable real estate sites such as Zillow or Trulia. Does the photo match the information on all sites? If the property lister comes up with excuses for not meeting at the property or they want you to sign something without seeing the place, these are major red flags. Walk away immediately. For a rental property never ever send money to someone without meeting them first face to face. You want to make sure they actually show you the property, proving that they are actually the owner.
Every stage of real estate transactions offers the opportunity for a scam. Just the complexity of purchasing property opens the door to one of the grayest areas: third party brokers. These third-party people or companies market mortgages and collect borrower information for applications. They work as a middle-man and are often scrutinized because they don’t hold responsibility for a mortgage all the way through. They perform their service, collect their fee and then move on without any liability. Third-party brokers are also called:
- Financial Manager
- Mortgage Originator
How it Works
They offer to help you find buyers and the best mortgage, and assist with any aspect necessary to complete a sale. Of course, there is a fee for their services. Because they only deal with issuing a mortgage on behalf of a lender, they often over-price their services or sell a mortgage to a buyer who cannot afford it. If they wrongfully advise a client and that client defaults, the third-party originator is not held accountable.
Avoiding this Scam
While some of these brokers are legitimate and genuinely want to help, many unfortunately take advantage of their position. In the majority of cases, you do not need their assistance. If you decide to use this type of service, make sure you investigate accordingly. Be wary if he requests money up-front or abnormally high fees.
Assistance with Refinancing
Following the housing collapse, homeowners fearful of losing their homes tried to find help. Private lenders and the government created refinancing programs to assist them. This provided another opportunity for con men to take advantage on unsuspecting homeowners.
How it Works
These con artists request an upfront fee, offering to broker the refinancing deal and find the best refinancing options available. Sometimes they require the power to act on your behalf and renegotiate your mortgage. They will go so far as to convince a homeowner that they need to place the property in a trust to deal with the refinance company that completely relinquishes power of the deed.
Avoid this Scam by Finding Help Elsewhere
The refinancing programs that the government sponsors are free. Additionally, there are consumer advocates available to assist you at no charge.
The Short Sale Scam
A short sale refers to selling property for less than the amount owed on the mortgage. The mark for this scam is usually desperate homeowners who need to escape the debt of their property.
How it Works
One type of short sale scams that takes place is when there is fraud committed against the short sale lender by efforts of both the Realtor selling the property and short sale investor who wants to buy the property. An example of this type of fraud would be a having short sale that is listed for $200,000. A Real Estate agent receives an offer from a couple that wants to buy the home for $185,000.
Instead of submitting the offer to the lender, the agent calls up an investor friend and has them submit an offer for $150,000. The agent does not let the lender or seller know about the $185,000 offer on the table but instead submits the investors offer of $150,000 to the lender instead.
The investors offer of $150,000 gets accepted and the investor turns around and sells the property to the couple who was willing to pay $185,000. Folks this is what is known as MORTGAGE FRAUD! The other term for this practice is known as “flopping”. Someone caught doing this will find themselves in Federal Court. It has been one of the more common real estate scams over the last eight years or so during the time that short sales have been in vague.
Most lenders are now requiring a full appraisal before a resale can take place. They are also requiring short-sale buyers sign statements affirming the transactions are arms length, with no hidden buyer-seller relationships, and that there are no agreements to resell the property behind the scenes.
Firms such as Bank of America and others have language in their short sale approval letters that prohibit the flipping of a property and after closing they will audit transactions to identify “flips” or “flops”. With some of these fraudulent short sale these con men will even assist the homeowner with roughing up his property to make it undesirable, facilitating a cheaper sale.
If Caught, a Mortgage Scammer Faces Substantial Punishment
Rebecca L. Konsevick of Roslindale, Mass., received a sentence of 30 months incarceration, followed by two years of supervised release, for money laundering and bank fraud. Konsevick committed real estate fraud from 2006 to 2008 and caused settlement statements from HUD-1 to be submitted to the same lenders.
Real Estate Workshop Scam
The workshop scam can best be described as those crazy adds you see on late night television or sometimes in local radio advertising where some self proclaimed guru tells you how you can make it rich by buying and selling property. The scam artist makes his money by getting you to sign up for an initial event where you will come and learn the tricks of the trade. The initial meeting is usually either free or costs very little.
They rope you in by asking you to pay for their secrets either through coming to additional seminars or by paying for their advanced courses. This guru magic they sell you can cost upwards of $10,000. It is veiled in secrecy with only hints are what you will ultimately be paying for which is not much but a bunch of hocus pocus. These con artists are smart too because when you shell out your hard earned cash to buy their get rich quick scheme you will sign a disclosure filled with small print that essentially says you can not come back and sue them when you don’t make jack! This is why this particular scam always seems to hang around longer than others.
The only people who typically make money are the ones selling the courses. This is not to say that there are not any legitimate real estate course out there on how to flip homes and make money. There certainly are some very good ones where they teach you real life ways on how to build a business based on renovating and re-selling property. The key is to be able to identify which ones are real from the phonies.
Some of the legitimate companies will actually have their own properties that they are in the process of renovating and then flipping. These are more than likely the ones who are legit and not scam artists looking to make a buck selling dreams.
The take home message is to make sure you keep one the look out for any of these types of Real Estate scams when trying to buy or sell a home or other property!
Home Improvements During A Move
The to-do list during a move is long enough. Most residents have a hard enough time balancing the mental, physical and financial hurdles associated with a move. Few have time to step back and consider potential upgrades for their new home. Whether you install a security system or remove popcorn ceilings, pre-move in upgrades can add value to your home and enhance your life.
If all goes well, you’ll enjoy your new residence for years to come.
Add A Security System
Even with rapid advancements in the home security industry, most Americans don’t have a security system. AT&T Mobility and Consumer Markets President and CEO Ralph de la Vega noted that just 20 percent of homes have security systems, citing an article by New York Times. Even if nothing ever sets off your home security, the property (value) boost and peace of mind it provides offsets the costs.
Security companies can offer various levels of protection, including home surveillance, motion detection and mobile alerts, but these services are expensive and possibly out of the price range for the average mover. Luckily, other options have emerged. As SecurityCompanies.com notes, DIY systems, offer wireless protection at a discounted cost. Basic do-it-yourself kits start as low as $100. They don’t offer all of the bells and whistles of conventional security systems, but even a little security can go a long way.
Remove the Popcorn Ceilings
If your home is built before 1980, you’re probably familiar with the bumpy surface known as popcorn ceiling. Between 1950 and 1980, homeowners turned to this unsightly material to cover ceiling blemishes. Today, popcorn ceilings drive property values down and endanger residents. A few able-bodied workers can remove popcorn ceiling from a home in a day at little or no cost. All you need are a few water sprayers, putty knives and ladders. Spray the surface with water to remove popcorn surface. Scrape the surface to remove the unwanted material. If properly soaked, the popcorn should come off in large sheets.
IMPORTANT: Before you start, submit a popcorn ceiling sample for lab testing. Some of this material contains asbestos. If the sample comes back clear, continue with the project. If not, consult a professional.
Add Ceiling Fans
Modern properties provide the comforts of home while remaining energy efficient. A classic home appliance can do both while boosting your property value. Ceiling fans offer cheap air conditioning. It usually costs $1-$4 to run an AC unit for an entire day. That amounts to $30-$120 for the month. A ceiling fan, on the other hand, can run for six hours a day and total $0.90 for the month. The average ceiling fan costs less than $100, and handy homeowners can handle this project. Lowes has a handy guide for reference.
Paint a New Coat
A new coat of paint can give even the dingiest fixer-upper a fresh new feel. Real-estate firm HomeGain reports that the average price to interior walls ranges from $500 to $750, while that new paint job increases the value of a home by $1,500 to $2,000. Many homeowners give up on the chance for a new paint job by moving their stuff too soon and increasing the hassle. An empty house is the ideal state for a new paint job. Start with a fresh coat before you move and you’ll increase the value of your home while livening the walls. ScotchBlue Painter’s Tape is your greatest ally when tackling corners and edges.
Check the Outlets
Unless you just finished building your house, chances are that new place isn’t perfect. Whether it’s a hole in the wall of a bum outlet, small problems gain a little bigger when you add all of your possessions. Avoid a subtle inconvenience by checking all of the outlets before you move in. A dead outlet can compromise appliances is the kitchen or lighting in the living room. It’ll be easier to fix if you catch it when the house is empty.
Waterproof Your Home
Consider this potential nightmare: You’re enjoying the comforts of your new home when a storm hits and water starts leaking through the basement floor. Waterproofing a basement is not something you are going to want to think about after you have already moved in! Taking care of a water problem before it impacts your home is a great move.
Maybe you noticed an old stain on the ceiling near a skylight. The last thing you want is to come home to a house that has a water issue. It may not be your first on your list, but make it a priority to waterproof your home during the move. Search for cracks in the ceiling and replace old seals on your doors. If the gutters are hanging off the edge of the house, it may be time to upgrade. Planning ahead of water is a very smart move as it can cost countless thousands in damages if not addressed.
These are just a few of the home improvements you should consider when making a move!