Common Real Estate Fraud Schemes to Look Out For
Avoid Real Estate Fraud Scams
Anyone in the real estate industry can tell you that real estate transactions are complex. Because most people don’t understand the intricacies of the business, fraudulent activities do occur. From corrupt mortgage brokers to fraudulent appraisals, the landscape is riddled with potential scams. It’s best to have a real estate lawyer on your side, watching out for you at all times. As you investigate real estate opportunities, here are some common scams to avoid.
To qualify for a loan, someone might forge key documents to make their situation look better financially than it actually is. That could mean altering earnings documents, bank statements, and other such key items. That person could also misrepresent their employment status or history to get the loan they want, or they might fail to disclose liabilities and assets that work against them.
This occurs when investors buy a home using a loan to cover most of the purchase, pay the down payment and then rent out the property, but don’t make the mortgage payments. They get their deposit money back through the rental payments and they get tax benefits from having real estate. If the bank eventually forecloses on the investor, it can be hard for them to track that person down.
3-Inflated Or Fake Appraisals
Making assets look larger than they are can increase loan application chances. Investors might seek out appraisers who are willing to give them higher numbers than they deserve. They could offer the appraiser a kickback for giving them the value they want. Instead of a bribe, the investor could give the appraiser rental rates and expenses.
You’ve probably heard of investors ‘flipping’ homes and other pieces of real estate, but the fraud occurs when the investor buys property and then sells it again right away at an inflated price that has been artificially raised in some way. They might say they’ve completed work on the property, but that work never took place. They could have another person buy the home and take out another loan. When the first loan is due, it gets paid off but the second one goes into default.
5-The Short Sale Scheme
This occurs when Investors use someone else to buy a property. That person defaults on the loan and just before the bank forecloses, the investor gets the property on a short sale. Because of this scheme, they receive a good deal on a property, well below the market value.
Watching For Real Estate Frauds
When you work in real estate, there are a lot of different scams and acts of fraud you’ll want to be aware of. The best thing you can do is work with a real estate lawyer to check over any business deal you might be involved in to ensure your safety and legalities. Contact the professionals at Stokes O’Brien to get the best in real estate law on your side for any of your business or real estate-related needs.