Month: November 2023

Buying, selling, and owning real estate is often the most expensive transaction many individuals will undertake in their lives. Hundreds of thousands of dollars are involved and dishonest tricksters and scammers are out there hoping to take advantage of those involved.

Con artists may use several methods to swindle you in one of their schemes. Foreclosure bailouts, home equity fraud, home renovation scams, rental fraud, and deceptive timeshare scams, are just a few types of real estate fraud that may be performed. Here are three of the most common:

Foreclosure Bailout

A foreclosure rescue scheme is a type of fraud that takes advantage of homeowners who have fallen behind on their mortgage payments.  The fraud perpetrator approaches the homeowner with promises of paying off the delinquent mortgage and helping the homeowner stay in the property. 

There are many variations of a foreclosure rescue scheme.  Some schemes require the homeowner to unknowingly transfer the property title to a third party.  Other schemes will promise homeowners that if they transfer the title, they can continue to rent the home and repurchase it at a future date.  The purchaser of the property, sometimes the foreclosure rescue artist, is now free to refinance the property or to sell the property to another party.  Sometimes the foreclosure “rescuer” charges the borrower high ‘service fees’ up front and then disappears with the money without providing the promised service. 

Home Equity and Home Renovation Fraud

According to the Council of Better Business Bureaus, home-remodeling contractors ranked slightly behind car salespersons and auto mechanics in generating the most consumer complaints. Be very careful when using your home or your home equity as security for a home improvement loan. Fast-talking salespeople will offer to refinance your home at a lower interest rate to provide cash to the homeowner, the cash can be used to pay for home improvements or to pay off bills. Victims are frequently asked to sign blank contracts or contracts that they were not allowed to read before signing. Later, the homeowner discovers that they signed a contract that contains terms in contrast to the originally promised terms. This results in the loss of equity in the victim’s home, and they have signed a mortgage in which they have incurred considerably higher interest rates. The homeowner is now faced with a higher mortgage payment, one that they may not be able to afford.

Rental Fraud

Rental scams occur when the victim has a rental property advertised and is contacted by an interested party. Once the rental price is agreed upon, the scammer forwards a check for the deposit on the rental property to the victim. The check is to cover housing expenses and is, either written in excess of the amount required, with the scammer asking for the remainder to be remitted back, or the check is written for the correct amount, but the scammer backs out of the rental agreement and asks for a refund. Since the banks do not usually place a hold on the funds, the victim has immediate access to them and believes the check has cleared. In the end, the check is found to be counterfeit and the victim is held responsible by the bank for all losses.

Another type of scam involves real estate that is advertised online. The scammer duplicates postings from legitimate real estate websites and reposts these ads, after altering them. Often, the scammers use the broker’s real name to create a fake e-mail, which gives the fraud more legitimacy. When the victim sends an e-mail through the classified advertisement website inquiring about the home, they receive a response from someone claiming to be the owner. The “owner” claims they’re unable to show the property without payment because they are either out of town or out of the country. If the victim is interested in renting the home, they are asked to send money and shortly thereafter the property is no longer available.

The Bottom Line: Be suspicious of unsolicited email or telephone offers. Scammers often find victims through these spam emails. They may send tens of thousands of those emails, hoping to find a handful of individuals who will respond. With advanced technology and interacting digitally with victims, it can be challenging to avoid real estate scams. However, it’s important to stay vigilant about protecting your personal information and bank accounts. Only work with qualified professionals you trust and familiarize yourself with some of the common warning signs. If you believe you’ve been involved in a real estate scam, make sure to contact the authorities immediately.

Usually, when someone puts their home on the market, the goal is to reach as many potential buyers as possible via one of the Multiple Listing Services (MLS). These listings are shared by brokers and list all of the local homes that are currently up for sale. However, some property owners prefer to manage their home sale quietly, through a pocket listing. Pocket listings aren’t included on the MLS or real estate websites like Trulia or Zillow, either. Basically, there won’t be a for sale sign, the listing will stay in the realtor’s metaphorical “pocket”. He or she will share the home through word of mouth and with a small number of clients or colleagues. There won’t be any contracts signed between the realtor and the seller.

Benefits of a Pocket Listing:

• If the seller wants to maintain their privacy for their home sale this is a good way to go. This prevents the sharing of too much personal information with strangers online, as well as showings and open houses. The pocket listing narrows the buying pool to a much smaller audience and reduces public interest in the home. Instead of showings to people who can’t really afford the home to buy, only serious contenders will come through.
• The homeowner may not want to negotiate the price and may not “have” to move so this option will allow them the ability to test the market and see what buyers are willing to pay.
• With a pocket listing, the seller is able to analyze and experiment by seeing how this smaller group of vetted people react to the property. After the initial launch, the seller can adjust the sale price based on what they and their realtor learn.
• A seller may want to get the word out about his home but delay putting it on the MLS due to repairs and improvements needed.

Cons of a Pocket Listing:

• The biggest negative to a pocket listing is less exposure means fewer people will come through the home and there will be less competition. If the owner must sell, it could come at a lower sale price due to a lack of competitive offers. In desperation, the seller might end up having to make concessions on a sale.
• Pocket listings will take longer to sell due to the lack of visibility. The seller is relying on the word of mouth of the one realtor they are working with.

The Bottom Line: If you are a seller who, for whatever valid reason, wants to use the pocket listing method, the one thing for sure is you’re going to need the very best realtor to handle the job. Who you hire should be connected and involved in the local community and should have a long, positive selling history.