BEWARE OF SCAM ARTIST

What is a foreclosure-related scam?

A foreclosure-related scam is a loose term for fraud, deceit, or trickery perpetrated against homeowners facing foreclosure or others involved in the foreclosure process. With the rise in foreclosures in the mid-2000s, foreclosure-related scams have exploded onto the real estate scene. Some con artists offer to help homeowners in foreclosure, but in truth, merely intend to dupe the distressed homeowners out of their money or property. Other scams target real estate agents, investors, buyers, lenders, tenants, or other people involved in the foreclosure process.

How could someone fall victim
to a foreclosure-related scam?

A scam artist generally knows which victims to target and which buttons to push. Homeowners facing foreclosure are highly vulnerable to scams. They are often unable to comprehend or get help for the complicated legal, financial, and tax issues surrounding foreclosures, short sales, loan modifications, and bankruptcies. Moreover, they often experience difficulty handling the stress and stigma of possibly losing their homes through foreclosure. Because homeowners are likely to consider purchasing a home as one of the most important things that they have ever done, the anxiety from possibly losing that home may cause them to make bad decisions. Some homeowners are specifically targeted by scam artists because they are perceived as easy prey, such as people who are elderly, have language barriers, have limited resources, or lack knowledge.

Aside from homeowners, real estate agents and others involved in the foreclosure process are also vulnerable to scams, especially given the financial strain brought about by a down real estate market. Some agents merely get caught in the crossfire between the scam artist and homeowner in foreclosure. Others are reeled in by design because their participation may facilitate or lend legitimacy to the fraudulent schemes. Agents are also targeted for their leads as they are often the first point of contact for a homeowner in distress, such as outfits that claim they will do short sale consulting. Agents may also get tricked into paying for bogus foreclosure related marketing tools, farming lists, training seminars, coaching services, and other products or services.

Is there a simple way to detect
if someone is a scam artist?

No. Outwardly, scam artists do not act or appear dastardly. On the contrary, the typical scam artists look nice and clean-cut, and they seem kind, helpful, patient, and trustworthy. Their purported companies or organizations often have names that sound altruistic, such as Community Home Savers or Housing Assistance Services.

Scam artists commonly engage in "affinity marketing" tactics which means they attempt to lure people by being, or pretending to be, members of the same racial, religious, social, or other group as their victims. For example, a scam artist may claim to be in the military and use military terms and mannerisms in an attempt to befriend someone in the military. Or another scammer may join a church to gain the trust of other members of that church before attempting to defraud them. Scam artists may also use many other tactics, such as claiming to be conducting official business for a government entity, claiming to be a non-profit organization, or offering a money-back guarantee, just to name a few.

What are the red flags of a
foreclosure-related scam to watch out for?

Homeowners in foreclosure and their real estate agents should be wary when dealing with someone who does any of the following:

• Asks for money upfront before providing any service;

• Asks for payment only in the form of cash, cashier’s check, or wire transfer;

• Asks for a transfer of title or an interest in the property;

• Gives an unqualified promise to stop foreclosure or other assurances;

• Offers to buy a home for a price above its market value;

• Asks for something to be done immediately without delay;

• Asks for the homeowner to give a power of attorney;

• Asks for signatures on a grant deed or deed of trust;

• Asks for signatures without giving homeowner 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 an oral promise in writing;

• Instructs a homeowner to make mortgage payments to someone other than the lender; or

• Instructs a homeowner not to discuss the situation with the lender, housing counselor, accountant, attorney, family, friends, or others.

Additionally, for acts prohibited under the foreclosure consultant law, see Question 40. For things a person can do to take a proactive stance against scams, see Question 9.