Christina and I have been doing a lot of work lately on Success Path Education, and scams are on our minds. Scammers not only take people’s money and leave them with nothing to show for it, but they can also do a lot of damage to good people in honest businesses, too. That’s why I feel like our clients should be aware of the different kinds of real estate scams out there, and not only the ones aimed at you and your business but also the ones aimed at your sellers and the other people you work with as you invest in real estate.
Foreclosure rescue scams are a huge problem for a lot of motivated sellers, and the fear of falling for one of these scams can make them think that their best bet is just to let their home go into foreclosure and avoid any more trouble. If you know about these scams and how they work, you’ll be able to show your sellers that you’re honest and that you’ll actually help them get out from under their house without foreclosure or bankruptcy.
According to Nolo.com, there are basically three kinds of foreclosure rescue scams. Unfortunately, like most scams, each of these can seem like a legitimate deal at the start, which is why you should be aware of them and learn how to differentiate yourself and your business.
The Lease or Buy-Back Scam
Basically, the scammer offers to buy the house and take care of the mortgage. In return, the seller gets to stay in the house and rent it from the buyer. Once the seller is back on their feet financially, they can then buy the house back. However, when you look closely at the details of the rental agreement and what it would take to buy the house back, the seller will often never be able to afford to get their house back.
It used to be pretty common for investors buying and holding a property to agree to a lease with their sellers. Unfortunately, this scam is really killing that option, and a lot of times it’s just better for the seller to get out and move on with their life in a new house that they can afford.
Charging for “Foreclosure Help”
This scam is really bad. Most of the time, the scammers actually claim to be protecting the seller against foreclosure scams. They’ll charge a pretty steep upfront fee for foreclosure protection services that the seller could have done themselves and/or that do nothing at all to actually protect against foreclosure. In the end, the seller still gets foreclosed on, and they lose a large chunk of cash, too.
Stealing the House
Finally, in this scam, the “foreclosure consultant” will talk a lot about getting the mortgage up to date for the homeowner. Before they know it, the homeowner will have signed a bunch of contracts that don’t make a lot of sense, and they’ll have just unknowingly signed over their house. The house gets sold at a really low price to the scammer, and the homeowner has to leave or agree to pay incredibly high rental rates to stay.
Get familiar with these real estate scams so that you can show your motivated sellers that you want to do fair, honest business. Scammers talk a lot about “helping” and “rescuing” the people that they’re stealing from, but if you know how their scams work, you can show your sellers that you’re the real deal. Want to learn more? Sign up for a workshop with Success Path Education. Scams like these are all too common, but you can learn how to help your motivated sellers avoid them by working with you instead.