Foreclosure Scams on the Rise!

By
Managing Real Estate Broker with Broker (The Watz Team) Exit Real Estate Partners

Foreclosure Scams on the Rise! (Please comment about the scams you have encountered to help others avoid these bad companies and same pitfalls)

This weekend alone I encountered 2 local Real Estate Companies that scammed homeowners into telling them they would buy their homes.  One of them  presented a short sale offer so ridiculously low that the bank didn't take the offer, then the Real Estate Company told the homeowner they will look for other investors and get her the number needed, but NEVER listed the house on the MLS, no SIGN, no ads even on their own website..NOTHING!  This poor lady is getting foreclosed on this week!  I called the owner of the Real Estate Company twice and emailed them...no response.  Don't worry I'm notifying the State!

The other Real Estate Company writes a short sale offer, doesn't disclose they are the investor writing the offer, makes up a fictious Real Estate Company as the buyers agent, because Short Slaes do not usually allow dual agency and then they tell the buyer the bank wants her to sign a promissary note made out to them for 10 years to repay $25,000 of the $50,000 she is short.  OMG!!!  Repay the money to THEM!!  This is the second time I have encountered this scam. 

Foreclosure scams

So please pass this on the information below to your home owners!

This info comes from a book I co-authored with Tim and Julie Harris from the Harris Real Estate University.

Foreclosure Scams are on the rise because of the increasing number of foreclosures. It's very important you educate the homeowners so they know about these scams..

Common Foreclosure Scams

 

1. EQUITY SKIMMING:

You are approached by a "buyer" that offers to buy your home at full asking price. The potential buyer claims he will solve all your financial problems by "promising" to pay off your mortgage. He claims to take over the existing mortgage and give you a sum of money after the property is sold. But in order to do so, he suggests that you move out right away and deed the property over to him. So you move out and assume the "buyer" will continue to make the mortgage payments. However, the "buyer" collects rent for the next 6 - 8 months and does not make any mortgage payments. The lender has no choice but to foreclose and all the while you have no idea what's happening because you've moved out.

2. THE BAIT-AND-SWITCH:

Very similar to taking over "subject to", but the acclaimed buyer is only after the equity. The buyer tells the homeowners he will bring the mortgage current and tells them they can stay in the home. But in order to do so, he must have a few documents signed that protect his interest and gives him ownership of the property. Then a few weeks down the road, the homeowner receives an eviction notice. 

3. THE BAILOUT:

Again very similar to the previous two, where the homeowners sign over the deed with the assumption that they will be able to remain in the house as a renter or lease it back from the buyer and eventually buy it back over time. The terms of these types of scams are so harsh that they make it nearly impossible to buy-back which was the plan to begin with. The homeowner is left with nothing and the buyer walks off with most or all of the equity. 

4. PHANTOM ASSISTANCE:

Typically these are online companies claiming to have the magic touch in stopping the foreclosure auction. They know all the ins and outs and what to say to the lender to stop the auction. Then these companies charge outrageous fees for simple phone calls and paperwork the homeowner could have completed themselves.

5. COUNSELING AGENCIES:

Some groups, most of them online, calling themselves "counseling agencies" may approach you or ask you to submit your information for a personal consultation to review your situation. They then proceed to offer certain services for a fee. Most of the time these "special services" you are paying for are FREE, such as negotiating a new payment plan with your lender, working out a forbearance, or lowering your interest rate. These are all things your lender will assist you with at no charge. Be careful giving ANYONE money online that claims they can assist you out of foreclosure. There are dozens of good, non-profit organizations and free counseling agencies that are ready and willing to assist.

6. SHORT SALE COMPANIES:

This is the newest breed of companies to avoid. Here is the bottom line, they make all their money from the fees you pay them at the start of the process. In other words, they have little to no incentive to get your short sale actually accepted and closed. You should NEVER have to pay a company up front.

NOT A SCAM: One of the largest foreclosure assistance programs right now is 888-995-HOPE. This is available to any homeowner in America having trouble paying their mortgage. It is provided free of charge by the Homeownership Preservation Foundation, a nonprofit dedicated to preserving homeownership.

Here are a few things you can do to avoid foreclosure scams...

* DON'T SIGN any papers that you don't fully understand, or you could make bad   matters worse.

* DON'T SIGN any papers that you feel pressured into signing. Take your time.

* DON'T MAKE mortgage payments to anyone other than your lender.

* DON'T SIGN over the deed without some closure or agreement for your protection. Talk to your attorney or title company if you need help.

* DON'T EVER pay anyone who claims to stop foreclosure. You can stop the auction yourself.

Consult a Real Estate Attorney if you are unsure of anything!

 Posted by Vicki Watzlawick, Broker Owner, Exit Platinum Realty, Lake In the Hills, IL www.vickisdreamhomes.ocm

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Foreclosures
Foreclosure Help and Prevention
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Anonymous
Jeff

I totally agree, we just ran into a few other companies down here in Kendall County who claim to do some or all fo the above.  These people and their compaines give RE a bad name.  Short Sales can be a win/win for everyone involved if handled in the correct manner. 

Aug 11, 2008 10:41 AM #1
Rainmaker
128,609
Vicki Watzlawick
Broker (The Watz Team) Exit Real Estate Partners - Algonquin, IL
Illinois Foreclosure Expert, The Watz Team

Thanks Jeff,  I just wish there was something we could do to stop them.  These poor people have no clue that they are being taken advantage of.

Aug 11, 2008 11:01 AM #2
Ambassador
834,405
Steve Shatsky
Dallas, TX

Hi Vicki... GREAT advice.  Like you said, Consult a Real Estate Attorney if you are unsure of anything!  So many people could be spared the difficulties they face if they just followed that advice BEFORE signing!

Aug 11, 2008 11:14 AM #3
Rainmaker
272,826
Gene Allen
Fathom Realty - Cary, NC
Realty Consultant for Cary Real Estate

I don't do short sales but thanks for the tips.  Maybe it will help me someday.

Aug 14, 2008 07:58 PM #4
Rainmaker
128,609
Vicki Watzlawick
Broker (The Watz Team) Exit Real Estate Partners - Algonquin, IL
Illinois Foreclosure Expert, The Watz Team

Thanks Steve!    Gene this market is here for a couple of years.  Wonder why you aren't doing short sales?

Aug 14, 2008 08:43 PM #5
Rainmaker
25,041
Joseph Alfe
Short Sale Processing Inc. - Chicago, IL

Vicki,

 

Great topic!  It makes the honest real estate professionals job more difficult.  I teach agents how to do short sales, and it always makes my head spin when I ask if they are IL HB 4611 compliant and they look at me like a deer in the headlights.  People have no clue!

 

I am in your area, we should talk!

http://short_sale_expert.activerain.com/

Aug 17, 2008 12:41 AM #6
Rainmaker
128,609
Vicki Watzlawick
Broker (The Watz Team) Exit Real Estate Partners - Algonquin, IL
Illinois Foreclosure Expert, The Watz Team

Joe,  maybe I'm behind in updates, but I didn't think 4611 was signed off yet.  I know it passed the house vote 115-0 but I didn't realize it was in effect yet.  I talked with a mortgage lender yesterday and he said the same thing.

Aug 17, 2008 06:40 AM #7
Rainmaker
25,041
Joseph Alfe
Short Sale Processing Inc. - Chicago, IL

Hi Vicki,

 

I have a copy of the full bill, and I'll double check and post any results.  It's good legislation.

Aug 17, 2008 09:03 AM #8
Rainer
32,233
Sidney Jimenez
Keller Williams - Miramar, FL
CDPE, Short Sale Expert, 954-665-9449,

VICKI--Here in Florida they passed legislation directly aiming at those folks that are doing the "equity purchases" or the "foreclosure rescue" outfits. It is really deplorable that there are people targeting the most vulnerable of homeowners. I started an 800 number in my area and plastered flyers all over. Hopefully, I can help a few people by having them call me instead of one of those scams. Giving people the information they need, whether you get the business or not, should be a top priority for all of us that have the proper information.

Thanks for the post!

Aug 17, 2008 05:59 PM #9
Rainmaker
128,609
Vicki Watzlawick
Broker (The Watz Team) Exit Real Estate Partners - Algonquin, IL
Illinois Foreclosure Expert, The Watz Team

Sidney,  Great idea about the 800 number.  I'm meeting with our congressman to see what they can do..maybe they can set up a local task force.

Aug 18, 2008 08:19 AM #10
Rainmaker
25,041
Joseph Alfe
Short Sale Processing Inc. - Chicago, IL

Great idea Vicki.  We need to be proactive with lawmakers, or before we know it, they will overreact and write legeslation that we don't like.

Aug 18, 2008 09:21 AM #11
Rainer
32,233
Sidney Jimenez
Keller Williams - Miramar, FL
CDPE, Short Sale Expert, 954-665-9449,

VICKI--I believe the way this will turn, if we don't get proactive, is that these jilted homeowners will start suing everybody they have dealt with. Once it is in the court systems everyone involved will let them set the standards of how to process a short sale. It seems few people want to come out and set the standard in order to avoid liabilities later. In the meantime, how many people are going to get hurt that could otherwise be helped.

The media, state and local authorities should be warning people of the "equity purchasers" and the "foreclosure rescue" companies. That is not getting attention and I think that is where the majority of the people are getting hurt.

Aug 18, 2008 10:03 AM #12
Rainer
32,233
Sidney Jimenez
Keller Williams - Miramar, FL
CDPE, Short Sale Expert, 954-665-9449,

VICKI--By the way, you might want to contact my fellow CDPE from Colorado. They met with the state officials and have started a similar program as to waht you are suggesting. Maybe he could help you with your endeavor.

http://activerain.com/rsanger

Aug 18, 2008 10:31 AM #13
Rainmaker
128,609
Vicki Watzlawick
Broker (The Watz Team) Exit Real Estate Partners - Algonquin, IL
Illinois Foreclosure Expert, The Watz Team

Great stuff Sidney!   I will call or email him!  Thank you so much for helping out. 

Aug 18, 2008 11:26 AM #14
Rainer
43,037
Thomas Hargreaves
TriStar Financial Services - Eugene, OR

Great Blog Vickie,   I keep telling everyone about the Loan Modification Scams going on.  I recently heard about an 82 year old lady who sent $ 3500.00 to a supposed Loan Mod company, and she has not heard from them in two months and will probably lose her house.  These people doing this crap need to be tared and feathered and then flogged, and then maybe tared again.

Aug 29, 2008 03:10 AM #15
Rainmaker
128,609
Vicki Watzlawick
Broker (The Watz Team) Exit Real Estate Partners - Algonquin, IL
Illinois Foreclosure Expert, The Watz Team

 TurkeyOK I got the feathers Thomas!  Phew I'm tired..took a while to catch this little sucker, Bring on the tar.   2 five gallon buckets ought to work nicely.





Aug 29, 2008 08:29 AM #16
Rainer
81,025
Mark & Lisa Ramsey
Keller Williams Realty - Charlotte, NC

Hi Vicki!

Thanks for posting this information.  You were ahead of the curve when you posted this last August.  I have really seen the scammers picking up on the desperation of so many worried homeowners.  I just posted a blog about some other places that people can go to find honest help to prevent foreclosure.  In fact, on my website www.YourCharlotteConnection.comI have a special section dedicated to showing people how many options they have available to keep from being foreclosed on.  Please feel free to go there and check it out.  If you want to use the information in your blogs that's fine with me.  I would love to put the scammers out of business!

Again, Great post!

Take Care, Mark

Apr 06, 2009 09:35 PM #17
Rainer
72,725
Karl Christen
Independent Leadership & Financial Fitness Consultant - Pleasant Grove, UT

Question,

 

Is this ethical if even legal... So the real estate agent goes to the seller, states he will rescue the house from foreclosure.  So his company then deals with the bank and negotiates for a short sale.  He then has an investor (his partner in another company) offer a short sale offer.  Then he lists the home on the MLS for full market price, but does not mention the house is in foreclosure.

 

#1  Is this legal, if he discloses this to the seller?  

 

#2  Isn't this unethical to the end buyer if they are not told that the "real estate" agent and his partner will close the same day as they will, but the Realtor will actually buy the home from the owner with the bank approved short sale, then immediately close with the new buyer at the market value.  

 

This does seem very dishonest to me, or at least unethical.  Why would any buyer's agent allow such a deal to take place?  They won't tell me right now, but I think this is happening to a friend of ours, he's' the renter so they won't talk to him, but the owner is his friend, and he doesn't even know whats going on.  All they know is the real estate agent is pushing the renters and owner to increase curb appeal, despite the fact that the listing price is high compared to similar homes.  I smell a rat!

Aug 10, 2010 03:48 PM #18
Rainmaker
128,609
Vicki Watzlawick
Broker (The Watz Team) Exit Real Estate Partners - Algonquin, IL
Illinois Foreclosure Expert, The Watz Team

There is a lot of flipping happening here also Karl.  The investors I see do fully disclose they are flipping the property.  The banks are getting wise to this and are putting in clauses that help. Example: the property can not be flipped or sold for 30 days by the purchaser.   But knowing that 54% of our area sales were investors, we need to appreciate that they are the ones with the money!  Not disclosing would be my biggest issue with that whole theory.  In my opinion the agent representing that seller is as much to balme as the investor.  If it's an arranged deal, most likely buying short, selling for more and spliting and giving back some cash to the buyer.  Hopefully not giving money to the seller because that is illegal.  I bet that's your rat!  :)

Aug 15, 2010 10:23 AM #19
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Vicki Watzlawick

Illinois Foreclosure Expert, The Watz Team
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