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Real Estate Fraud…..Don’t Laugh it Could Happen to You

Real Property Crooks operate profitably in the complex world of real estate sales and loans. These crooks use false representations, fine print and obscure procedures to steal the equity in your home or to commit loan fraud. If you believe you have been cheated in real property scam, you should immediately contact a real estate lawyer and the District Attorney’s Office. Here are a few of the more prevalent scams.

  1. Foreclosure Bailout Scam: victims are lured by the promise of help for those who are “upside-down”, [owe more on their home than it is worth]. These homeowners are usually desperate and must either sell their home at a large loss or let the lender foreclose. The “bailout” specialist tells the homeowner banks prefer to take a loss on a loan rather than take the home back on a foreclosure and if the loan is insured by FHA, the bank is spared the headache of reselling the home. The homeowner is told he is being offered an opportunity to arrange for a “short sale” of the house that will not affect his credit rating. The plan is usually for the homeowner to deed his house to the “bailout” specialist for a fee of between $1,000 and $2,500. The “bailout” specialist then either rents out the house or lets the now former homeowner live there for a modest rent. The “bailout” specialist does not arrange for the short sale and does not make payments on the mortgage, resulting in a foreclosure and eviction of the tenants. The “bailout” specialist pockets the advance fee and all rental payments.
  2. Rental Fraud Scams: involve the rental of homes the crook does not own. The crook locates a vacant or abandoned house. It may be in foreclosure or perhaps a vacation home not in use. The crook enters the house, changes the locks and advertises the property for rent, usually below the market rental rate. An unsuspecting tenant pays a security deposit along with first and last month’s rent and moves in. Rent is collected and pocketed by the rental fraud perpetrator. When the fraud is discovered the tenant is evicted, losing his security and rental deposits. Some crooks will even rent the property to multiple tenants, collecting advance rents and deposits and then vanish. Be alert for possible rental fraud when utilities are held in the name of a third person, or when the landlord insists the rent be collected in person without a receipt or if legal notices are mailed or posted on the property and the crook tells you to ignore them.
  3. Home Equity Thieves: People who have built up equity in their homes are vulnerable for crooked scams. High pressure home improvement contractors usually offer elderly homeowners unnecessary and overpriced home improvement on “easy” credit. Corrupt salesmen may offer to refinance the home at “attractive” interest rates to provide cash to the home owner or to pay off bills. Some victims report they were asked to sign blank contracts or they were not allowed to read the contracts before signing or they were not given copies of the contracts. Only later does the victim realize the contract contains terms completely different than what were promised. Too often it turns out the home improvement contract has “eaten up” all of the equity in the home. The homeowner then learns he has signed a high interest mortgage with enormous loan fees. The homeowner may be faced with loan payments he cannot afford. The “attractive” loan payments may cover the interest only. The principal is due in one “balloon” payment after a few years. When the “balloon” payment is due, the homeowner must take out another loan, paying additional fees and costs or risk losing his home through foreclosure. Crooks may commit outright forgery to gain control of loan proceeds contained in a home improvement contract, home sale or refinance.
  4. “Straw Buyer Scammers” find ways to cash out equity of real property entrusted to them using “creative financing”. The crooks look for “straw buyers”, crooked escrow agents, crooked real estate appraisers and crooked notary publics. The crook asks the “straw buyer” to sign loan papers using his good credit. The crook pockets the loan proceeds and does not make the loan payments. The “straw buyer” has his credit ruined and he must pay back the loan amount.

Your best protection is to NEVER submit to pressure and to ALWAYS insist on getting financial or legal advice before you commit to a contract or loan.

Please note by reading the information above & herein, no attorney-client relationship has been created. The information provided herein is not to be relied upon as legal advice for your specific legal needs.

Written by Morton J. Grabel

For more information or to discuss your case please call the Law Offices of Morton J. Grabel, here in Temecula at (951) 695-7700. Mort is a graduate from an ABA & AALS Law School and has been an active member of the Bar of California for more than 20 years. He is presently the President of the Mt. San Jacinto/Hemet Bar Association.

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