Realty Executives NJ Training
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Realty Executives Exceptional Realtors®
It is a sad fact of contemporary society that some people will do anything to try to cheat another person, and the real estate industry is not exempt. Educating yourself on the types of common real estate hoaxes and scams will help you be more vigilant when trying to purchase or sell a home. Even with consumers’ growing awareness, scams have become more sophisticated and damaging. The housing market bubble crisis in 2008 saw many fraudulent brokers issuing predatory loans to unsuspecting buyers, and when that bubble burst, these same con artists preyed upon individuals facing foreclosure.
According to Forbes, not only have housing scams increased in number, but the cost of getting swindled has risen as well. Some of these scams have resulted in homeowners having their houses flat-out stolen from underneath them, facing bankruptcy, suffering identity theft and damaged credit, and stuck with exorbitant attorney fees.
There are, sadly, numerous types of real estate fraud. Among the most common swindles are:
Rental Scams
Fraudsters will “scrape” a listing, repost it on a different site such as Craigslist, and pretend to be the representative agent. Whereas less experienced con artists will be blatant—asking for an upfront security deposit or their broker fee—more covert, sophisticated scammers will request that you wire funds to “a friend” to prove your ability to pay, and then the con artist will pose as the friend. Another prevalent rental scam is to charge potential clients fake fees for application credit checks. For more information, the Federal Trade Commission website lists rental scam warnings.
Loan Modification Scams
These are particularly prevalent given the ramifications of the recent crisis and that millions of Americans continue to face foreclosure while others are upside down on their existing mortgages. These ruses can take the form of:
Most of these scams start with a cold call and always include a request for upfront fees. In the worst cases, homeowners turn over the deed to their home under the guise of being able to lease it or buy it back in the future.
Mortgage Elimination Scams
These schemes offer borrowers a way out of their mortgage within a short time frame and then charge victims an excessive price for their “service.”
Illegal Flipping
This occurs by purchasing a property and selling it quickly for more than its appraised value, leaving the future buyers financially upside-down from the get-go.
Equity Fraud
One of the more "traditional" schemes, equity fraud occurs when the scammer uses the victim’s identity to refinance a property and then steals the equity.
Equity Skimming
Equity skimming occurs when a buyer convinces a seller to relist his or her house at a very high amount to obtain a larger loan. The buyer then pays the seller the original price and takes off with the remainder of the money. Houses frequently end up in foreclosure as a result.
“Straw Man” Scheme
This involves a con artist using another’s credit history—the “straw man”—to obtain a mortgage and then persuades the victim to sign over the deed in exchange for a small percentage of the sale.
Predatory Lending
These fraudsters prey on the elderly, the desperate, and those without much real estate savvy by promising potential victims loans with no money down and no credit checks; however, the victim ends up having to pay ridiculously high fees and interest and facing foreclosure.
