How To Avoid Real Estate Fraud

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

Land Flips
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

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Foreclosure schemes. These are particularly evil because they prey on people with big enough financial problems that they’re in danger of losing their home. A homeowner in the early stages of foreclosure may be contacted by a fraudster who says he can help the homeowner get rid of his debt and save his house for an upfront fee, which the fraudster takes and then disappears. In another scheme, a homeowner is approached by a con artist who offers to help them refinance the loan. “They sign all these documents and find out later that they actually sold the house — to the fraudster. Then they face eviction.

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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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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.

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.

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.

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.

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.