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Real Estate Fraud Is On the Rise: Protect Yourself

  • February 16, 2007
  • by PInow Staff

Real estate fraud is on the rise. Knowing the popular scams out there and knowing how to protect against this type of criminal activity is essential.

Real estate fraud is an umbrella term for criminal activity involving real estate criminal activity that usually amounts to little more than theft. According to new statistics, the problem seems to be getting worse. The FBI reported that in 2005 alone, real estate fraud cost the country at least $606 million. The Treasury Department is tracking 35% more suspicious through 2006. The IRS reports that cases of mortgage fraud that have been brought to their attention have been doubling every two years, starting with this decade. This worrisome trend means that all real estate investors and homeowners should be on the alert.

What is real estate fraud?

This type of fraud is usually a means of stealing money from homeowners or lenders. It can take many shapes:

  • Fraudulent real estate mortgage lenders and other professionals. Sometimes, criminals pose as real estate professionals in order to gather money from homeowners, lenders, mortgage holders, or others. Once they have money in hand, they may quickly disappear.

  • Scams involving investments. Some criminals target investors, especially new real estate investors. They may market information products that promise investors the secrets of investments or they may market actual investment offers. Once the investor pays up, they generally either find that they have paid for nothing or else for something worth far less than the asking price.

  • Identity theft resulting in theft of property title or equity. This is a very popular scam. A criminal will steal a person's identity and get a mortgage in their name. In another variation, the fraudster will target homeowners and will steal their identity in order to assume the title on the home in order to get an equity loan. Victims of identity fraud may not notice anything is wrong until they start getting angry calls from lenders. Even though lenders may not have checked the loan applicants identity carefully, lenders will often put pressure on the victim of fraud to pay up.

  • Stop foreclosure scams. There are many fraudsters who target homeowners who are about to lose their homes. They may offer these owners a fraction of the value of the home or equity in exchange for help. The victim may realize that foreclosure still takes place or that they have lost ownership or equity for far less than they were entitled to.

  • Illegal financing scams. Fraudulent lenders may offer homeowners mortgages at illegal rates or with highly suspect terms. Home equity loans scams fall into this same category homeowners may sign up for home equity loans only to find that the terms make their loan unaffordable and so lead to repossession of the home.

  • Scams involving falsified information. Some fraudsters over-appraise or falsify appraisal information in order to get a home loan. By the time lenders have realized their mistake, the criminal is long gone along with the money.

What can customers do to protect themselves?

There are many things that can be done to safeguard against scams:

  • Be careful with contracts. Always have written contracts for any major transaction and have those contracts looked over by a qualified attorney.

  • Keep tabs on credit reports. Checking a credit report is a good way to ensure that no new mortgages have been added. Credit reports are a good way to catch fraudsters fast possibly while they are still in the country and can be caught.

  • Always check out sellers of real estate products, lenders, borrowers, and others. If large amounts of money need to change hands, running a simple background check can uncover past criminal activity or other problems that can be a red flag.

What if it is too late?

Those who have already been victimized should seek legal help and the help of a professional investigator. Legal counsel can help a victim understand their rights and options. An investigator can find the criminal and any assets they have which can be used to repay the victim. Also, a qualified investigator can find other victims of the same fraudster, which can help mount a better court case against him or her. Finding a qualified, local investigator with the right experience is as simple as consulting the Worldwide Directory of Private Investigators. With resources and a free, easy-to-use database of resources, the Worldwide Directory of Private Investigators is an ideal place for answers.

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