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CAUTION!!! FORECLOSURE SCHEME!!!

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Title Insurance

With the number of foreclosures going up and up, so does the number of people who want to prey on those in troubling times.  I actually saw this particular scheme several years ago up in New York.  Last week, I attended a continuing education seminar and they talked about it again, so I figured I would pass the knowledge along.

This scheme obviously takes advantage of people in foreclosure.  Here is the rundown.  Someone calls the homeowner, states that they can help them get out of foreclosure, repair their credit and keep their home.  They then have the homeowner execute a deed and a rental agreement.  This new buyer takes out a mortgage, and collects a rent payment from the homeowner.  This rent payment is usually significantly larger than that of the actual mortgage payment.  The new buyer will make the mortgage payment and pocket the difference.  From this point, I have seen several different scenarios;

1.  The new buyer takes out a 2nd mortgage, maxing out the equity and then disappears.

2.  The homeowner defaults on the "rent" payment and the new buyer moves to evict.

3.  The homeowner is given the opportunity to buy the property back however, the new buyer will not deed the property back without an outlandish consideration.  This renders the original homeowners ability to get financing impossible.  I have seen a deal where the new buyer wanted $100,000 on top of the existing mortgage balance.

The good thing is, this scheme should be pretty easy to identify.  Here are the red flags:

1. Purchase transaction where the current homeowner is in foreclosure.

2. The proposed buyer will be titled as an LLC, usually taking on the address of the property (i. e. 123 Main St., LLC)

3. The sales agreement is accompanied by a rental agreement.

Hopefully, you will never come across this situation.  If anyone else has seen this occur, please add your comments, the more information we can spread, the better!

 

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Daniel J. Brudnok, REALTOR
Berkshire Hathaway Home Services Fox & Roach, REALTORS - Exton - PA License #RS-225179-L / Delaware License #RS-0025038 - Downingtown, PA
SRES, e-PRO,ABR,GREEN,CSP

Michael,

Another way for those in trouble to be taken advantage of...how do these people sleep after doing this to others?

May 15, 2008 03:05 AM
John Doe
Pittsburgh, PA

Thanks for the comments Dan.  I'll tell you, as I mentioned, I saw this first hand when I was working for a prior employer.  The situation was where the woman already deeded her property and she was now trying to get it back.  This woman was in her sixties and she was scared because she didn't know what was going to happen.  My heart was absolutely breaking for her.  To answer your question, I have no idea how they would sleep at night.

May 15, 2008 03:11 AM