October 18, 2010

Red Flags for Detecting Short Sale Scams

Posted by martikilby under Short Sale | Tags: , , |
Leave a Comment 

Last week I wrote about the scam of collecting upfront fees and the scammer absconding with the money without performing any services for the homeowner.  As I mentioned, there are other scams that can occur at virtually any phase of the short sale process.  Because the decision to sell short is often full of emotion, and the process itself is long and confusing to home owners, the short sale transaction is highly vulnerable to scams. 

According to the California Association of Realtors, here are some red flags that may indicate fraudulent activity.  Be wary if someone does any of the following:
• Gives an unqualified promise, such as to obtain short sale approval, stop foreclosure, or other assurances;
• Is unconcerned about the sales price, possession of the property, and other significant terms of sale;
• Is unconcerned about the short sale seller’s financial situation;
• Is involved in a sales transaction where the seller is not the current owner of the property;
• Is involved in a sales transaction where the property owner has purportedly given someone an option to purchase;
• Represents that the buyer is an entity (such as a trust or LLC), rather than an individual person;
• Creates more than one sales contract for the same property;
• Asks for something to be done immediately without delay;
• Asks for a power of attorney;
• Asks for a transfer of title or an interest in the property outside of escrow;
• Asks for signatures on a grant deed or deed of trust;
• Asks for signatures without giving a lot of time to review the documents;
• Asks for signatures on a document that has lines left blank;
• Fails to provide copies of documents signed;
• Refuses or fails to provide written confirmation of an oral promise;
• Instructs the seller, listing agent, escrow officer, or someone else not to contact the short sale lender;
• Instructs a client not to discuss his or her situation with a housing counselor, banker, accountant, attorney, family, friends, or others;
• Has an answer for everything; and
• Engages in “shop talk” that sounds glib, but doesn’t in fact make sense.

If you have any questions or concerns about any part of the transaction, make sure you consult a professional before signing anything!

Advertisement
 

October 15, 2010

Short Sale Scams and Upfront Fees

Posted by martikilby under foreclosure, lenders, mortgage, Short Sale | Tags: , , |
Leave a Comment 

We all know the old adage, “If it sounds too good to be true, it probably is.”  Well, anyone facing foreclosure or considering a short sale should keep that in mind as there is a new breed of scam artist on the street.

Short sale scams are perpetrated at many different points in the process and can involve, knowingly or unknowingly, the homeowner, the real estate agent, the negotiator or other third party, and/or the buyer; basically anyone who is a party to the transaction. A few types of scams include fraudulent short-sale flips, negotiator scams, bogus short-sale packages, improper payments and upfront fees.

Let’s start with upfront fees, as that is the first scam that an underwater homeowner is likely to face.   To the person unable to pay their mortgage, possibly facing foreclosure, a fast solution is exactly what they are looking for.  The scammer often poses as a negotiator or real estate agent who guarantees a short sale approval in as little as two weeks.  To reinforce credibility of the claim, the scammer might say that they are related to someone on the inside, such as a bank vice president or negotiator…..some sort of relationship that gives them an insider’s advantage.  The scammer then asks for an upfront fee which could range from $1000 to $5000, and he/she might even ask for the required documentation such as pay stubs and bank statements.  At this point, the scammer has the money and proceeds to do little or nothing to work with the bank.  Two weeks later he tells the homeowner that he is sorry, but the bank will not approve the short sale.  The scam might vary, but the basic idea is that the scammer does nothing, and the home owner is not only out the money, but has lost precious time. 

Here are a few ways homeowners can protect themselves from upfront fee scams and make sure they are hiring someone who can help versus hurt their situation: 

  • Check the credentials of the individual or company that would provide the service.  If they are licensed, such as a real estate agent, check the status of their license with the department of real estate, www.dre.ca.gov
  • Ask for references, and follow through by carefully checking them.
  • Thoroughly read all documents before signing anything.  Make sure you understand everything and do not sign anything with spaces left blank, especially if told they are inconsequential.
  • Get as much information as possible and consult other professionals, family and friends before making a decision.
  • Refuse to pay any upfront fee or provide credit card information.

Check back and we’ll look as some additional red flags for short sale scams.