July 27, 2013

Be a Savvy Shopper

The housing recovery is underway, but economic conditions don’t impact real estate scams – they never go away.

Homeowners who fall prey to a real estate scam lose an average of $4,000 to $5,000, but even five-figure losses aren’t uncommon for those who have fallen prey to fake loan modifications and other housing fraud.

Forbes highlighted three of the most common real estate scams today:

1. Rental scams: Scammers pull online listing information from an actual home for sale and re-post it as a rental on another site, such as Craigslist. They’ll often ask for money upfront – a security deposit or broker fee – from prospective tenants. Scammers often advertise the home at a low price and collect application fees from several prospective tenants to “hold the property for them.”

Warning signs: Be cautious of wiring money or paying any upfront fee before you’ve met the agent or signed the contract. Also, be skeptical if they can’t show the property when you ask.

2. Loan modification scams: Scammers may offer fake foreclosure counseling, phony forensic loan auditing, nonexistent mass rejoinder lawsuits, bait-and-switch ploys, leaseback programs and fraudulent government modification programs.

Warning signs: Be skeptical if anyone asks for money for foreclosure counseling. Foreclosure counseling is free from agencies like the U.S. Department of Housing and Urban Development. Also, always contact your lender directly to work through a modification process.

3. Workshop scams: An investment guru will host a get-rich-quick real estate investing seminar and have you sign up for a course that is free or low-cost. The investor may then give you actual properties to invest in if you offer up thousands of dollars in advance. They make bold promises that you’ll become a millionaire, but then nothing ever happens. Also, a form you may have signed initially to take the class may prevent you from taking legal action against the instructor to recoup your money.

Warning signs: While not every workshop instructor is a scammer, be sure to check out the program thoroughly before signing up. Check the company’s rating with the Better Business Bureau. Also, find out if it’s linked to a reputable industry association.

Source: “3 Real Estate Scams and How to Avoid Them,” Forbes.com (July 16, 2013)
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