Guide to Real Estate Fraud

Straw buyers

Straw buyers. One of the most frequent types of fraud occurs when “straw buyers” are used to hide the identity of the true borrower, who would not qualify for the mortgage. “The perpetrators use a straw buyer because they have good credit and can get the loan,” Fulmer says. Straw buyers may be duped into thinking that they’re investing in real estate that will be rented out, with the rental payments paying the mortgage. In fact, no payments are made and the lender forecloses on the loan. Or, sometimes, straw buyers are in on the scam and are getting a cut of the proceeds. “People may see this as a way to make a lot of money,” Fulmer says. “In one case, a number of straw buyers purchased numerous properties and received boatloads of money back.”

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Who Is Involved?

Almost everyone in the home-buying process is engaged in fraud -the original buyer, the brokers, the appraisers, the title company workers, the straw buyers.

Appraisers – The best line of defense to combat real estate fraud.

Lenders – Usually the injured party of real estate fraud cases.

“Straw Buyers” – are loan candidates who perpetrators use to get hold of home loans, but who usually don’t intend to occupy the properties they’re buying.

Real estate fraud exposed

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Be a hero in the neighborhood: stop real estate fraud.
Stopping real estate fraud requires awareness, consciousness and guts to expose those you know to be fraudulent transactions.

A neighborhood association in North Minneapolis successfully abated the illegal practices of Jonathan Helgason, a licensed realtor and Thomas Balko, a licensed appraiser and owners of several companies.

The neighborhood association became suspicious of the sales conducted by said perpetrators. Soon enough, a member of the Minneappolis City Council reported the matter to federal, state and county investigators thus leading to the fall of the two real estate bad guys.

Be a hero too. Help stop real estate fraud. Don’t be afraid to report any shady deals to the authorities.

Caution to fraudsters

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In their desire to meet or surpass their sales quota, real estate agents help their unqualified clients to qualify for housing loans by manufacturing fake documents such as employment history and credit record.

Fraudsters run the risk of facing rigid punishments. In the above scenario, the buyer, seller and agent can be held equally guilty for collaborating in the execution of real estate fraud. Though the seller may seek remedy by invoking good faith, still his allegation is subject to burden of proof.

Sellers must therefore be cautious enough by making sure the agent and the buyer are not in any way trying to defraud the sale. He can do this by ascertaining the authenticity of documents and other pertinent requirements involved in the said real estate transaction.

Foreclosure Rescue Scam

You’ve probably seen advertisements for foreclosure rescue specialists claiming that they can save your home and if it sounds too good to be true, it probably is. They might appear to be totally sympathetic, but they’re only there to get the title away from you. So-called foreclosure rescue specialists will ask you to sign a warranty deed, quitclaim deed, grant deed, or other sorts of property deeds while making promises that they will be unable to fulfill. They will also claim to know secrets that will stop foreclosure. Remember – you are capable of avoiding foreclosure yourself, and you definitely don’t need a third party to do that for you.
If you come across any of these websites or companies, report them to the FBI, the Attorney General, or your state’s licensing department for real estate.

Trusting Your Realtor

Realtors offer good advice as to what to do to avoid any legal or financial problems. They also provide you with several financing options to make the real estate transaction smooth and efficient, and give you information about the value of the property you are interested in purchasing, the market, and what approaches to take. Unfortunately, people who choose not to hire a realtor get duped into scams made by realtors.

There are still ways where you can avoid becoming a victim of a real estate scam. First, make sure that the realtor you want to hire is a member of your state’s realtor association. Also inspect his or her background by asking for referrals. Referrals will provide you with information about his or her performance and how satisfied his or her clients were. Keeping yourself informed is the best way to protect yourself from a scam.

Mortgage Fraud on the Rise

More and more cases of mortgage fraud are being reported the world over as life gets harder and homes are not selling like they used to. The scam has an individual making an offer for a new home while leaving an existing mortgage to default, filing for a mortgage before it does then allowing full foreclosure of the old home taking the refinancing cash and mortgage loan filed for the new home with them. This leaves the prospective seller losing their investment on the supposed sale, left to deal with the repercussions of their scrupulous buyer who disappears without a trace. Such activities should be reported to the many fraud agencies that are designated to handle such cases so others do not suffer the same fate as you do, making sure to pursue legal action so you can get your investment back in case of a scam.

Insurance Fraud Rages On

Insurance fraud seems to be one of the ways people have found to stem the effects of the recession and sadly the occurrence is a common one in today’s cash strapped ones. People lured with prospects of easy money are drawn into such scams giving them more than they bargained with, leaving them to deal with the law whilst the true criminals who dragged them in escape with the booty. People who are desperate to get some extra cash, with the economic stimulus proving to be not that effective risk having their credit scores damaged due to such fraudulent activities and even end up in jail. Career criminals know when to bail out of such activities when the law gets a tad bit too close, but those who are there due to their last hopes get hooked in, having to deal with the full brunt of the law and the consequences that follow. These people need not suffer should the proper safeguards for an industry that has seen better days have been better and more responsible, hopefully with lessons learned such practices would be outlawed to spare the millions of people out on the streets who lost their homes to the recession for the coming recovery that is still to come.

Metro Dream Homes – Charged with $70 Million Fraud Case

The company promised dreams come true with their catchy “Dream Home Program“, which took in more than a thousand investors. The primary suspects charged had the makings of a Madoff style life, lavish lifestyles, chauffeur driven fleet of cars and to polish their reputations,they make generous donations to charity. The mortgage scam covered a period from 2005 till 2007 that spanned a lot of lavish ad programs in areas the likes of Beverly Hills and other high end hotels. In the end, the true colors shone with the victim investors getting nothing more than a $70 million nightmare. Read the rest of this entry »

Cash back at Closing

Though the action or ploy has been ruled out as illegal for a long time but people simply cannot resist the promise of cash when they do closing deal. The promise of a win-win situation for all concerned is the main bait for such fraudulent activities which is just too good to be true, it often is. The crook can be any of the many players in the home sale game, from the buyer, seller, agent, loan officer and even the lender and the victims can also be either of these individuals. The situation has a seller being called upon by a prospective buyer who gets a loan at a higher rate that what the home is actually worth. Read the rest of this entry »