As with any sizeable financial transaction, real estate dealings can involve fraud. Those who engage in these schemes can be very skilled, which means it’s difficult to identify the signs of fraud. If you’re thinking about buying or selling your home, or being otherwise involved with investments in real estate, there are a few common real estate fraud schemes you should watch out for or contact an accounting fraud investigation firm about.
Mortgage Elimination
These programs offer mortgage borrowers an expedited plan for getting out of their loan by proposing so-called “loopholes” to the arrangement. The company charges a hefty price for assisting a borrower in doing so, but the loophole closes up quickly after payment is submitted.
Foreclosure Rescues
Those who are behind on mortgage payments or are being threatened with foreclosure can be victims of these scams. The fraudster will promise to save the home if the borrower temporarily transfers over title to the property; then, the owner can stay in the house, but must pay rent. Many times, these “rescuers” simply sell the home once they obtain the title, leaving the victim still on the hook for the mortgage amount.
Equity Skimming
When a buyer wants to take out a large mortgage, he or she might be able to convince the seller to list the property for an inflated price – far beyond what it’s actually worth. Often, the fraudster will take the larger amount, pay the seller and then disappear with the remainder of the funds. The home is no longer “owned” by anyone, and will usually be foreclosed upon at a huge expense to the lender.
Home Improvement Fraud
This is one of many real estate fraud scams that involves identity theft or inventing a completely fictitious person. The bogus identity is used to obtain a home improvement loan to do renovations on an existing property; once the funds are paid out, the scammers use the money for their own purposes.
Land Fraud
Here, a company engages in fraud by obtaining sales lists of people who have expressed interest in investing in real estate and then selling them property that’s much lower in value. Typically, an agent will contact a prospect, promising gifts, bonuses and other advantages if the person will buy land from the company. The victim may advance up to $50,000, only to discover that the real estate is unimproved and only worth $1,000 – $2,000.
Straw Man Transactions
Similar to identity theft, straw man transactions usually involve taking a person’s credit history in order to obtain a mortgage on real estate. The scammer convinces the borrower to sign over the deed in exchange for a percentage of the turnaround sale. Unfortunately, the straw man is usually the one who’s held accountable for the funds.
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