Robbery rings of open houses have always been around but now more elaborate scams are on the rise with this declining market. Mortgage fraud, title fraud, and foreclosure scams are becoming more common and that’s not cool.
The Mortgage Bankers Association cites that the number of suspicious activity involving mortgage fraud rose from 3,515 in 2000 to more than 28,000 in 2006. A common mortgage fraud that I’ve personally witnessed in the past year is artificially inflating the price of a home and having the additional money given to the buyer as a renovation credit, decorating allowance, etc. I’ve had numerous buyer agents and mortgage brokers ask me to increase the price in the MLS to pull this off. After consulting with my broker, I had to stop entertaining these types of offers although I would be giving up a ton of potential income.
Title Fraud occurs when a fake purchase contract is written to obtain a loan for a home in order to get the mortgage money dispersed to a title company that just steals the money and never closes on the loan. This fraud usually begins with a phone call to a home seller from a supposed real estate agent that has customers who saw a home on the internet and wants to make an offer but needs an appraisal done. The appraisal is needed to obtain a loan from a mortgage company with the fake contract. Always ask for the appraiser’s name and license number and find out who the real estate agent is before allowing them into your home.
With the burgeoning sub prime crisis, numerous American households face foreclosure and susceptible to foreclosure scams. A supposed investor approaches a homeowner facing foreclosure and asks them to quit claim deed their home to them so that they can negotiate a “short sale” with the bank on their behalf. Homeowners in this situation need to understand that the lender has to agree to the short sale. In this scam, the supposed investors pays off the loan at a less amount than what the lender agrees to. Then the lender goes after the homeowner for the difference even though they do not own the home anymore.
So beware of things that sound too good to be true, especially in real estate. The Mortgage Fraud Blog is a great resource to find out about the latest scams in real estate to avoid.