May 10, 2015

Con artists follow money. Given that money is regularly changing hands in the real estate industry – and that this industry is rife with desperate and struggling homeowners (and others), it’s probably not a big surprise that there are a lot of common real estate scams out there – and that these scams can be financially devastating to people.

In this blog series, we’ll take a look at some of the most common real estate scams, as well as the some red flags associated with these scams. While the discussion herein can help you protect yourself against common real estate scams, don’t hesitate to contact Denver Real Estate Lawyer Thomas E. Downey when you need the best representation – and protection – for your real estate legal matters.

Don’t Get Tricked by these Common Real Estate Scams

1 – Foreclosure Rescue Scams

A trusted Denver real estate lawyer discusses some common real estate scams and warning signs to be aware of. Contact us for help resolving any real estate legal issues.

A trusted Denver real estate lawyer discusses some common real estate scams and warning signs to be aware of. Contact us for help resolving any real estate legal issues.

With these types of scams, some company will “promise” to rescue a homeowner from foreclosure. Generally, the company will require the homeowner to pay some upfront fees, and either:

  • Try to take out a home loan on behalf of the owner
  • Have the homeowner sign over the deed to the home to the company and rent the home from that company until the homeowner can buy it back.

These scams typically always end in the owners losing their homes, as they are either foreclosed on or the company takes ownership of them.

Warning signs of this real estate scam can include (but are not limited to) companies:

  • Asking you to sign over the deed to your home
  • Telling you not to contact your lender
  • Telling you that you need to rent your home
  • Having you send mortgage payments to some third party.

2 – Appraisal Scams

These scams usually involve overstating the value of a home to generate false equity. Typically, appraisal fraud is linked to other types of mortgage fraud.

Warning signs of this real estate scam can include (but are not limited to) companies/individuals:

  • Overstating the property characteristics
  • Falsifying appraisal documents
  • Manipulating comparable properties.

3 – Loan Document Scams

With these types of real estate scams, borrowers generally provide false or inaccurate financial information to lenders to try to get better loans (e.g., better interest rates, more favorable terms, etc.). In some cases, this type of real estate scam can also involve borrowers claiming that they intend to live in a home when, in fact, the home will be a rental.

Warning signs of this real estate scam can include (but are not limited to) borrowers:

  • Using P.O. Box addresses on loan documents
  • Accumulating assets that don’t match their incomes
  • Not having any credit history
  • Not signing and/or dating loan documents.

More Common Real Estate Scams to Avoid

4 – Short Sale Scams

Understanding these common real estate scams can save you from serious financial losses, an experienced Denver real estate lawyer explains.

Understanding these common real estate scams can save you from serious financial losses, an experienced Denver real estate lawyer explains.

With these real estate scams, borrowers who are underwater on their homes may try to feign financial hardship to get lenders to agree to short sales. After lenders agree to short sales, then a partner of the borrower will buy the property for a significantly reduced price, after which the property will then be resold by the borrower and partner at a profit.

Warning signs of this real estate scam can include (but are not limited to) borrowers:

  • Defaulting on mortgage payments without participating in workout discussions with lenders
  • Selling homes for far less than the current market value
  • Receiving cash back for short sales, with these payments being made under the false pretenses and not being disclosed to lenders.

5 – Rental Scams

These types of real estate scams can take many forms, only a few of which include:

  • Renting empty homes, such as homes belonging to people who are on extended vacations or may be working abroad
  • Renting foreclosed homes, which can be carried out by homeowners who may be losing their homes or by third parties
  • Renting homes that are actually for sale.

Warning signs of this real estate scam can include (but are not limited to):

  • Being asked to make deposits or sign contracts without seeing the inside of the home
  • Being pressured into making a decision regarding a rental ASAP (and without seeing the property)
  • Getting mail from “past” owners or occupants.

6 – Property Flipping Scams

These real estate scams generally involve “flipping” properties by reselling them at grossly inflated prices. Commonly, flipping scams are associated with appraisal scams, as the fake appraisal documents are used to try to justify the inflated home price. Once the home is sold, it will typically be refinanced by the “straw” buyer (who works with the flipper); eventually, the home is allowed to go into foreclosure.

Warning signs of this real estate scam can include (but are not limited to):

  • Immediate refinancing of properties after their sale
  • Suspiciously high home appraisals
  • Properties being listed at significantly lower than market value following a foreclosure
  • The name on the appraisal/title of the home not being the same name as that on the sales contract.

7 – Real Estate Seminar Scams

These scams are about real estate, but they don’t actually involve real property. Instead, with these scams, people are promised some gift or “insider” real estate knowledge that will help them become “millionaires” or “rich” soon.

Warning signs of this real estate scam can include (but are not limited to) companies:

  • Promising you the world for “no upfront cost”
  • Telling you that you have to take more classes
  • Not providing you with any real useful info in the first “free” seminar.

Denver Real Estate Lawyer at Downey & Associates, PC

When you need help resolving any real estate legal matters, you can turn to Denver Real Estate Lawyer Thomas E. Downey. Since 1983, Thomas Downey has been providing individuals and businesses in the Denver Metro Area and throughout the U.S. with the highest level of legal service for their litigation, property tax and real estate legal issues.

To learn more about your rights and options, as well as our various services, call us at (303) 813-1111 or email us using the contact form on this page. From our law offices in Centennial, we serve clients throughout Colorado and the U.S.

Categories: Real Estate Law