Real Estate Scam – Part 1
By Elli Davis, February 14, 2010
What to do by Steve Webster
Real estate scam or real estate fraud is not unusual. Lately, it has been gaining popularity. I’m pretty sure the vast majority of you have heard about that already. Still, I want to briefly summarize some of its types for you.
Just imagine the situation that you bought a new home are very happy about it. On the other hand, though, you have debt and big problems with paying it off. You are quite desperate at some point and are willing to take almost any kind of help. Suddenly, a person who introduces themselves as a mortgage consultant appears with nicely sounding offers to help and save the situation. They persuade you – the desperate homeowner in need, to transfer the ownership to them. You will thus start to pay your monthly mortgage payments to them directly. And despite the fact that the ownership was transferred to “mortgage consultant” you will still owe the monthly payments to the bank or any financial institution lending you money.
This is different than the foreclosure scam. It is a criminal action the aim of which is to somehow fake, omit or simply misrepresent personal information in order to get a mortgage loan. It involves identity theft, employment fraud, shot gunning, fraud for profit, income fraud, cash-back schemes, occupancy fraud or failure to disclose liabilities.
In identity theft, the scammer claims to be someone else (without consent of this person) a uses their fake identity to obtain a loan, which he never pays off.
Occupancy fraud is when someone claims to borrow for their primary residence, but using it as an investment property and occupying another place.
Please pay here by Steven Depolo
Shotgunning occurs when numerous mortgage loans are obtained for the very same property, greatly exceeding its value.
Employment fraud is when a scammer claims to be in a higher position as they actually are, or they claim to own or to be self-employment in a non-existent company/institution just to prove they will be able to pay off their loan.
Income fraud is when a borrower lies about their income, claims to earn more than they do to be able to get a bigger loan.
Failure to disclose liabilities occurs when borrowers hide credit card debt or mortgage loans on other properties to decrease the monthly debt on the loan application.
Cash-back scheme means that a price of a home is significantly exaggerated (not in a legal way) to provide cash-back to the borrower or other transaction participants.
Appraisal fraud is when the value of the home is intentionally overstated or understated. To either get a bigger loan or to get a lower price on a foreclosed property.
Fraud for profit occurs when a group of people that cheats for financial gain. Overstating the value of property is included.
This is just the first article from my real estate scam series. I will continue next week. If you have some cool tips or interesting experience with real estate scam, just leave a comment and I will add them to the article.