There are a lot of religious communities in the world today. These local communities, that share ties of trust, belief and love, will usually go out of their way to help and cooperate with one another. Unfortunately, this trust is also used by unscrupulous individuals to con and steal from their fellow men. In real estate terms, it’s called affinity fraud, where someone uses their position in a religious community to build faith with investors. The people responsible for such scams are usually people who have a high-standing, or are looked up to and respected in their community. Affinity fraud is very devastating to the individual and to the whole community, oftentimes, because of the large number of investors, resulting in hundreds of millions of dollars scammed. This is especially tragic in light of the fact that most investors are regular workers, who may have lost not only their trust, but also their life-savings.
Well, there is a saying that goes: There are two kinds of people on earth: one who fools and one who allows himself to be fooled.
Alas, there are wily realtors and finance officers who are real experts in perpetrating frauds. They know how to hide their guile under the cover of beautiful words, attractive terms and benefits. Too late that after you had signed the credit papers, you would find out you had been trapped in a pitch of deceit.
You don’t have to be very smart to sense that another person is trying to defraud you. Though you may not be knowledgeable about contracts and realty transactions, there is a way to protect yourself from being a victim. For one, you should never sign a document without consulting a trusted lawyer or expert. This should stand as the cardinal rule when entering into any contract.
In Las Vegas, a former real estate agent was found guilty for participation in a real estate fraud scheme. Linda Marie Knot who schemed people that netted more than $10 million was sentenced by Judge Kent J. Dawson to serve a total of 70 months in prison, An additional 5 years of supervised release plus a $3.9 million forfeiture. The scheme was simple but very effective. It happened 6 years ago and it involved 13 new homes. Kot caused material misstatements to be placed on loan applications, so she can make large commissions. Kot had three other co-conspirators, Hugo Coutelin, Jeff Thomas and Michael Perry. They all plead guilty for scheming. Coutelin and Perry were each sentenced to 15 months in prison. Thomas was sentenced to the time he had already served.
This incident should serve as warning to people who are in the process/considering to buy real estate. Scams are done everyday without being noticed so take extra precaution.
A straw buyer is employed to acquire a property for a shareholder who may not have qualifications for a loan due to numerous property loans. Alternatively, the investor has the purpose to resell the property within months for profit. While the property flipping scheme had legitimate and legal intentions, the investor faces fraud charges for the deception used to purchase the real estate.
There are 2 type of mortgage fraud.
- Fraud to get a property
- Fraud to make a profit
The first is were someone lies about facts to get a loan to buy a property.
The second is where someone lies about facts to make a profit.
Fraud is committed by falsifications in the following ways:
1. Loan application fraud. Where an applicant lies about their income or their job. Perhaps the down payment they are making was given to them by the person selling them the home and the value of the home inflated to cover it.
2. Exaggerated appraisals. Appraisal is an art, not a science. Who can really be sure just how much a better view, or a swimming pool (for example) adds to the value of the property? The buyer wants the house, the seller wants to sell the house, the real estate broker wants to make the commission, the mortgage broker wants to make a commission. There is a lot of pressure on that appraiser to massage the figures a little to create a value that makes all these people happy.
Not to mention the possibility that a crooked appraiser could be in league with a crooked seller or borrower to give appraisals that are grossly exaggerated.
3. Falsified or fake credit reports. It’s really not that hard to use modern technology to “clean up” a credit report by copying it and “losing” some bad stuff.
4. False income. Applications can give the phone number, not of the company where the person supposedly works, but of a friend. The answer, look up the phone number of the employer in the white pages. Listen out for tell tale sounds, like children in the background in a supposed office setting.
5. Forged tax returns. Easy enough to fake using products like TurboTax ® etc. The answer, ask the borrower to sign Form 4506 and get a copy direct from the IRS. Click here for a copy for form 4506.
6. Fake title insurance.
There are so many greedy, conniving people in this world that you always have to be extra careful so that you don’t get cheated. Specially when it comes to investments. Some people can be gullible and trustworthy and they end up in a tight spot. So, do not allow yourself to be a victim. Here are some things you need to think of before you give your full trust to a person.
Make sure that you know every single detail about the person and company you are dealing with. Do a lot of research! ASK EVERY QUESTION POSSIBLE. Do not be embarrassed to do this. Every customer has the right. Ask for an NBI clearance and General Information Sheet to check the credibility of the real estate company. Also, make sure you get your own lawyer in on it too. Everything has got to be written down and made legal.
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. Read the rest of this entry »
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.
Other Red Flags
While the above “red flags” are frequently used there are many other indicators that you need to be aware of:
“Rebates” on Sales Price
“Rebates” on Broker’s Fee
Overly Inflated Sales Prices
Commission Based on a Sales Rice
Amended Contract to lower Than What is in Contract
Reflect New Purchaser
Multiple Transactions Between Agreements to be Performed
A “Friendly” Appraiser Affiliated Parties “Outside or After Closing”
The use of Inappropriate Comparables (mixed use vs. commercial zoning, urban vs. rural)
Increased Value as a Result of renovations with High Dollar Soft Costs (architect fees, engineering fees, consulting fees, management fees) vs. Hard Costs
Mortgage Fraud is truly an epidemic. It may sound like a physically powerful word, but after bearing in mind the most recent figures on real estate fraud and foreclosures, you may feel the word quite strong enough. The Mortgage and Real Estate Industry is driving down the same road back then. It’s alive and well because of willful blindness.