How to Avoid Real Estate Cyber-Scams
by Jeanne Roberts
According to Forbes magazine, scammers are making an end run around the real estate business lately, and the cons are so sophisticated that only the truly savvy will be able to spot them.
Several years ago, in the wake of the housing bubble meltdown and subsequent recession – when many new homeowners found themselves the owners of “underwater” mortgages – these real estate cyber-fraudsters misrepresented themselves to one consumer – call him Mr. Jones, from Colorado – as a federal housing agency offering a loan modification program that bilked Jones out of $10,000.
Mr. Jones, you see, was another victim of the “housing bubble” and the subsequent recession. In Jones case, it was an “underwater” mortgage. That is, he owed more on his house than it was worth – as did almost 10 million other Americans – and Jones’s mortgage interest rate was just this side of usurious – as was the case for many homeowners during the housing bubble run up (2006-2007).
By the end of 2008, however, the Case-Shiller home price index saw its biggest fall in history. Many suffered under the economic burden (coupled, as it was, with the subsequent recession). Others simply walked away from their homes. The government did, in fact, offer some help, both rescuing underwater mortgages and helping consumers spot real estate scams, and it was this latter opportunity that real estate cyber-scammers targeted, pretending to offer relief.
Many discovered the deception before it was too late. Others were incrementally drawn into such scams; a few hundred dollars here for a credit report or to prevent foreclosure. A few more dollars for processing fees for a nonexistent loan, and eventually the victims were trapped.
More recently, the National Association of Realtors issued an alert warning of the persistence (and increasing sophistication) of real estate cyber-scammers using brokers’ hacked e-mail accounts to redirect wire transfers or bank routing directions.
The FBI has also alerted real estate professionals, real estate buyers, and those holding underwater mortgages to some intricate real estate cyber-scams. They include:
Loan modification scams, in which a scammer will offer to provide foreclosure counseling, loan auditing, leaseback programs, lawsuits suing lenders for recovery, and even government loan modification programs which reduce mortgage interest rates and offer longer terms like the Home Affordable Modification Program (HAMP) and the Home Affordable Refinance Program (HARP).
Workshop scams, in which the scammer will offer real estate seminars on real estate investing, including house “flipping”, fixer-uppers, rent-to-own, no money down, or no-condition (“as is”) house sales. Costs for attendance, access to Internet sites, and printed materials can be exorbitant.
Ponzi schemes, as when a phony real estate investment company asks for money to invest in purchasing, improving, and selling properties in order to make you a fortune, but it turns out to be some guy in his spare bedroom who absconds with your life savings.
Bid rigging, as when the scammer offers a piece of property exclusively to one party, via mail or e-mail (i.e., “mail fraud”), though for appearances sake it appears that several other parties are also bidding. These other parties then “run up” the bid to extort more money from the initial party, who is not aware of the actual value of said property.
Whether you live in Missouri, Texas or North Carolina, there are two rules to follow to prevent real estate cyber-scammers from taking your money. First, never give your personal information (birth date, annual income, and especially social security number or bank account number) to anyone you don’t know. Second, never give anyone a significant amount of money – that is, more than you can afford to lose – without doing your due diligence.
Finally, if you aren’t familiar with the ins and outs of real estate but still want to invest, consider crowdfunding and let the platform itself perform the due diligence for you. And don’t worry about those rumors that Dodd-Frank legislation slowed lending from 2010 forward. It didn’t, and Trump’s proposed repeal may not make it any easier for you to borrow the money for your new home or a few acres of land.