Real estate is full of opportunities for investors to make a name for themselves. However, as important as it is to keep your eyes open for an opportunity, it is equally important to be weary of potentially fraudulent circumstances. Unfortunately, real estate scams have not gone away. It is important for home buyers, sellers, renters, investors, and agents to be alert and on the lookout.
What exactly should you keep an eye out for in order to protect yourself and your business?
Fake Real Estate Brokers
Fake brokers are reportedly becoming a problem. They put themselves out there in ads, online, and take deposits from home buyers and renters – only to disappear. All real estate and mortgage pros should be licensed, registered, and be working for registered and licensed businesses. This is easy to look up online today. Don’t accept any excuses, and check out everyone before doing business with them. This applies no matter how great their real estate website or marketing looks.
Occupancy Fraud
Occupancy fraud is still a major issue. Renters will use other people’s information to get approved and cheat the system. The tenants landlords take in could be totally different in terms of credit and history. When it comes to lenders, many apply for owner-occupied home loans when they want to invest. Banks will often give better interest rates, terms, and LTVs on these loans. However, they also have a variety of disclosures and legal documents to be signed by borrowers to confirm their status. If there is a default, loan balances can be accelerated and properties foreclosed on. This can be even more challenging when bank reps are the ones insisting that borrowers mistake their reason for getting a loan on their applications.
Rental Fraud
Rental fraud has been one of the hottest and most publicized types of real estate fraud in the media. Craigslist has become a hub for fraudulent activity. In fact, it has become so hard for renters and homebuyers to trust any of these ads. Opportunistic criminals will advertise properties they don’t own, or that may not even exist. They’ll make up really great stories and ask for money to be wired. When the fraud is revealed, renters and buyers can be out of pocket and out of a home.
Property Condition
It is not uncommon for people to cover up the real condition of a property. Major roof, electrical, plumbing, septic tank, health code, and foundation issues can be very expensive to cure. Sometimes they can even exceed the purchase price of a property. This isn’t such a big deal if real estate buyers are aware in advance and budget for it. When they aren’t prepared, it can be catastrophic. It always pays to invest in thorough property inspections before closing.
Claims to Ownership
One of the new scams that has come out of the foreclosure crisis is false claims to title and ownership. After making a purchase, some have received calls or letters from others claiming to have an ownership interest in the property, and demanding the deed or compensation. Always have title searches performed, and get title insurance to stay safe.
Bank Foreclosure Fraud
Even this year, banks are being hit with new penalties for foreclosure fraud and failing to live up to obligations to help distressed borrowers. This is mortgage fraud on a massive, massive scale. Fortunately, many homeowners are finding help in the legal system when they challenge these moves. But the system doesn’t move fast enough for everyone. If you are behind on payments or have defaulted on your home loan for another reason, act fast. Save it if you can, but sell if you can’t. Banks are speeding up the foreclosure process, and you never know how soon they’ll come knocking.
