Foreclosure Scammers Target Short Sales

Hey D.C. Here,

This article was written on 6/15/09.

Read the article, then read my commentary

Foreclosure Scammers Target Short Sales

Scottsdale, Arizona-based National Short Sale Center says more than 50 percent of the homeowners it is working with to secure short sales have been approached by “circumspect individuals or companies” proffering fraudulent foreclosure rescue services.

With 20 percent of the nation’s homeowners underwater, the Obama administration recently introduced a new component of its Making Home Affordable program, aimed at steering struggling homeowners who do not qualify for a federal loan modification toward short sales. The government’s new plan will pay a servicer $1,000 for completing a successful short sale and will pay the borrower $1,500 to assist with relocation expenses.

While a short sale can prove to be a practicable alternative to foreclosure, National Short Sale Center says many struggling homeowners are confused about short sales and fall for deceptive offers, including phone calls, letters, advertisements, and e-mails (also known as phishing).

Travis Hamel Olsen, president of National Short Sale Center, stressed, “Under no circumstances should anybody be paying an upfront fee to complete a short sale. Unscrupulous companies use myriad ways to take advantage of unsuspecting homeowners. Usually if the deal seems too good to be true, then it probably is.”

Foreclosure and loan modifications scams are a growing area of concern for lawmakers, investigators, and the industry. The Federal Bureau of Investigation (FBI) is currently looking into more than 2,100 mortgage fraud cases—a 400 percent increase from five years ago. The recently enacted Fraud Enforcement and Recovery Act of 2009 allocates $500 million to the FBI, Justice Department, Secret Service, and Postal Service to combat mortgage fraud.

The types of fraud circulating include sale-leasebacks, quitclaims, stripping homeowner equity, and misleading homeowners into signing over deeds. And with the administration’s mortgage relief initiatives and its recent push for modifications, dozens of bogus companies with official-sounding names and fake Web sites mimicking the fonts and layouts of government sites claim to help struggling homeowners modify their mortgages. Some unsuspecting borrowers have fallen prey to unscrupulous con artists that take them for up to $7,000 before disappearing.

Olsen said, “The fraud usually comes through in the fine print, but foreclosure rescue teams and highly suspect scammers are basically taking homes through a variety of means, resulting in foreclosure and eviction.”

My Commentary:

This article is a very clear example of why you should always operate with integrity and disclose everything in writing to your sellers. You should not take any up front money from distressed homeowners or take a deed from any distressed homeowners. Stay far far away from lease-backs.

This is why we use the State Approved Real Estate Purchase Agreement that is appropriate to the seller’s foreclosure situation when working with properties through an Agent.

In California, the California Association of Realtors (CAR) contract is referred to as the Notice of Default Purchase Agreement (NODPA). It has the California Required Notice to Cancel built into it.
In Florida, Use the FAR/BAR as-is contract and add the Florida Notice to Cancel addendum to it. You can find the Florida Notice to Cancel on the Bonus page of your VSSI members site.

It’s unfortunate that the unscrupulous investors make a bad name for the industry. The best thing you can do is operate with integrity, comply with your state laws and treat people the way you would want to be treated if you were in their situation.

Committed to Your Extreme Success,

D.C. Fawcett

Legal Disclaimer: D.C. Fawcett is not an attorney and this should not be considered legal advice.