Avoiding Real Estate Scams

Many people have heard of the “419” scams. The term “419” comes from the Nigerian penal code section of that designation that deals with fraud.

Despite a widespread belief that the people who get taken in by these scams are greedy and stupid, many are not. Many believe they are donating to distressed individuals and/or charities. These scams have spread into real estate as well, targeting house sellers and real estate agents.

The scam usually opens with a bait letter, assuring the recipient that the person contacting them is a) a widow whose husband left her millions that she cannot safely access due to her evil family, b) a high-ranking military official seeking to move money out of the control of their oppressive governmental regime, c) a representative of a mysterious person high up in the government, or d) a person interested in an item that the person is selling or representing.

If the target responds to the letter, the scammer usually replies with thanks and asks for personal information. Often this includes a bank account number, but this is not, as some people think, how the target is scammed. It is used as a gauge to determine if the target is likely to give money in order to pay “processing fees” or other mysterious charges.

Scammers will also provide scans of documents that look legitimate. Many can be stolen from other people or digitally altered. If called on discrepancies, the scammer will blame poor computer equipment.

In nearly all these scams, urgency and confidentiality are emphasized. The scammer doesn’t want their victim to seek outside aid or take time to think things over. They are depending on the “get it now or you never will!” feeling to encourage the victim to send the money – usually through Western Union or some other money wire transfer company. Once the money is picked up, the person who sent it has no way to get it back.

An example of a real estate related scam:

You get an unsolicited email from someone claiming to be interested in your house. They will send you a large check, many thousands of dollars over the amount you are asking for the property. They then want you to refund the extra money.

Or they say that there are “fees” that the seller must pay in their country. In any case, you have to send the money now. Now, because the person interested in your house needs the money to a) come to America, b) pay for their cancer operation, or c) take their sick mother to the hospital.

Sometimes, if you balk at sending a complete stranger thousands of dollars, they may threaten you with “legal action” or enhance the sob story to the point where their sick mother is suffering from cancer, AIDS, measles etc., all at the same time.

Real estate transactions are only one of the targets of scammers. The scammer is not interested in your house; s/he only is interested in the money you can send to finance whatever spurious fees are claimed to be involved with the transaction.

Don’t send anyone any money or cash checks that are sent to you from an unverified institution or individual. Consult with a real estate professional for advice on how to handle offers via the internet. Since many people use the internet to inquire about houses, prices, etc., an email inquiry may be legitimate. Just make sure that the person is legitimate before pursuing a financial transaction.

Act Now to Forgo Foreclosure

Whether you are an investor or a homeowner, if you are facing difficulties with your mortgage, remember that the ultimate goal is to maintain your credit rating. You may be able to negotiate with your lender, you may be able to refinance, or you may be forced to sell your home now in order to buy one in the future, but the sooner you address the issue the more options you will have.

By getting your finances in order you will be able to get on with your life sooner. Don’t add to your stress by ignoring your fiscal situation; follow these steps to getting back on track:

Know the details – go over all your loan documents so that you are prepared for any upcoming resets or changes. When will your payments increase? By how much? Can you refinance? What kind of penalty would you face, if any?

Cut in other areas – can you take a roommate or a second job to help make your payments? You may need to look at significant changes in your spending and lifestyle. Do not make any major purchases at this time, and look at liquidating other assets, such as cars or boats, to help meet your payments.

Contact your lender – You should take the initiative with your lender. Contact them before the problem becomes overwhelming. If you receive calls or letters from your lender, respond to them as soon as possible. Do not wait to get too far behind – lenders are less likely to move quickly into foreclosure if you are proactive. You want to speak to the right people – ask for the loss mitigation or collections department. Be honest with them about your situation and don’t make promises you can’t keep.

Beware of foreclosure “rescue” scams – There are a number of scam artists targeting people in neighborhoods where foreclosure rates have been high. They approach troubled homeowners with promises to help them keep their houses. These “rescues” often come with payments that are out of reach of the average homeowner and result in homeowners being defrauded of their homes, sometimes still owing the original mortgage amount.

Any company that approaches you with such an offer should be checked out through the Better Business Bureau, your state real estate commission and Attorney General.

Do not sign anything without reading it all, get all promises in writing and ask your attorney or a financial professional to review any paperwork before you sign it.

Call a nonprofit group offering free housing advice for more information and counseling. They may be able to help you with your options.

If all else fails, negotiate a short sale – if you have missed more than two payments but your home has not yet gone into foreclosure you may be able to sell it for a price that falls short of what you owe the lender. If your mortgage holder agrees to accept the price and forgive the rest of your debt, they forgo the pricey foreclosure process and you walk away with minimal damage to your credit score.

You can chalk it up to experience, save up a down payment and start over again when the time is right.