Spotting Real Estate Fraud: 10 Red Flags

AMA4-13-13Housing scams come in so many forms that it’s hard to catch them all. Scams are constantly evolving to take advantage of changes in the landscape, frequently targeting the most vulnerable. As we’ve seen in this week’s intermittent series of posts on real estate scams, fraudulent practices harm not just individual victims but the housing market as a whole, with ripple effects into the economy.

Because these schemes can so easily trap the unwary, we’ll wrap up this series with a rundown of the Federal Trade Commission’s warning signs of real estate scams:

1.Demands to send a deposit or down payment sight unseen to secure a property. Many scammers post listings stolen from legitimate sites and repost them to marketplaces like Craigslist. Interested

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buyers are told to send a payment or deposit to lock in the deal – then the scammer pulls the ad and vanishes.

2. Requirements to put up money to get money. This is a hallmark of scams like the Nigerian money transfer. Adapted for the housing market, it often asks potential victims to open an account, deposit a fraudulent check and send funds to the scammer to “cover the costs of the transaction.”

3. Pressure to act immediately. This is a feature of most scams. Would be victims are warned of dire consequences or the loss of a good deal if they don’t respond right away, take too long to read paperwork or fail to send money.

4. Instructions not to consult anyone. Fraudulent companies promising mortgage relief often demand that consumers cut their lawyers, lenders or credit counselors out of the loop and work only with them.

6. Requirements of an upfront fee before any services are actually rendered. This is a direct violation of the FTC’s MARS (Mortgage Assistance Relief Services) Rule. Some scammers also demand that mortgage payments be made directly to them.

7. Extravagant guarantees to get results in all circumstances for everyone. This is common in mortgage relief scams, but it’s also a feature of short sale “brokers” and other offers of assistance to get loans or close sales.

8. Lack of paperwork or documentation on the deal. Some scams urge would-be victims to go ahead and send money or sign paperwork, promising that titles, deeds or other documentation are being processed or on the way but they never appear.

9. Offers and propositions initiated outside the country. These, such as the Nigerian scam, involve an individual in trouble, who has a lot of cash on hand ready to invest in a property. Although foreign investors are legitimate, these scams typically demand money from the victim in order to complete all or part of the transaction.

10. Demands to transfer a title or deed. This kind of scam often targets seniors, with promises to handle all aspects of a mortgage on their behalf, or to arrange a sale for them.

The Federal Trade Commission and local entities such as California’s Real Estate Fraud Task Force take and investigate reports of real estate scams. Reporting suspected fraud helps to protect the housing market, but also renters, homeowners and investors applying Jason Hartman’s investment strategies to build wealth through income property. (Top image:Flickr/GoldBeach)

The American Monetary Association Team

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