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“Home Sweet Scam”

filed under: Informational posted on October 28th, 2013

If you felt funny when you signed a real estate agreement, your Spidey Sense might have been giving you a warning that you should have heeded. Scammers have found a new target — real estate. According to Bankrate.com, they’ve come up with fraudulent transactions that trick you into giving up your property or your money.

Here are some of the scams that you should be vigilant for:

Identity Theft

Apartment leasing has become a tool for identity thieves. If you see an ad in the newspaper or Craigslist promising a great apartment, and you call and get a “manager” that offers to take your applicaton over the phone, it might be an identity thief. After getting your name, address and social security number, the thief takes your data and starts using it. Of course, once a scammer gets hold of your personal data, he can use your stolen identity in a variety of ways. This can leave you with wrecked credit, months or years of work to clean up your identity, and, still, no place to live.

Some fraudsters go farther and even give you a set of keys to a house that they don’t own. Others will rent the same house to multiple people. When this happens, you lose your money, too. To protect yourself, try to work with reputable landlords and double-check everything. Don’t give any information until you’ve seen the property and researched its ownership.

Home Equity Theft

If you have equity in your home, you’re also a target for scammers, as LA County’s government website points out. Some will offer you home improvement or equity loans that may seem to be good to be true while others bring you refinance offers. It’s because they are too good to be true. The loan you’re signing usually has terms that swallow up all of your equity — and pay it out to the fraudster. Along the way, you’ll get hit with expensive interest that you can’t afford and, when all is said and done, the fraudster will foreclose on you and take your house.

Identity thieves can also use your stolen identity to take out home equity loans against your home. According to Bankrate.com, they’ll walk into a bank, use your information and open up a home equity line. Then, they cash a check against your equity and don’t pay the loan.

Flipping Fraud

Flipping properties can be a legitimate real estate strategy. Buying low and selling high is a time-honored rule of investing, after all. However, some flippers go too far, as the Consumer Protection Division of the Maryland Attorney General’s Office points out. If you are buying a house from an investor that offers to give you a mortgage even if you couldn’t otherwise get one, watch out. Some of these transactions are legitimate, but with others, the flipper is doing this to get you to unwittingly pay too much for the property. Sometimes, he’ll even work with a dishonest lender to get you a mortgage based on fraudulent information and a false appraisal. Here are some ways to protect yourself against a dishonest flipper:

  • Get a third-party appraisal from an appraiser of your choice, to find out what the home is really worth.
  • Have the seller put any promises in writing, especially when it comes to repairs.
  • Review anything you sign for accuracy.
  • Don’t give or take gifts in the transaction that aren’t disclosed on the settlement statement.

Author:  Ralph Peterson
Ralph found his calling as a financial planner who writes on the side about accounting, finance and investing.

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