Friday, November 17, 2006

Something's Fishy

What is the best way to protect yourself from fishy real estate deals.

How do you know that you're not being taken advantage of when you get involved with a real estate transaction? The best answer might be to maintain a "buyer beware" mentality. Ask all the questions you can think of, read all the small print, check references. Also you could call your state attorney general's office if something seems too good to be true, or doesn't feel right.

The good news is that the IRS is taking real estate fraud crimes seriously. The IRS started 309 fraud cases against individuals so far this year in 2006. Real estate fraud continues to grow and with the increase of home values the sleezbag scams will most likely not go away. There's an old saying that proclaims - "To find the problem find the money." Well it applies with real estate, especially when dealing with loans. In an attempt to vent some clean air into the rotten tank of real estate scams - I've listed a few below:

Equity Stripping: A lender convinces you to take out a home equity loan that you can't really afford by padding your income on the application to help get it approved.

Hidden Loan Terms/Balloon Payments: To avoid having your home foreclosed after falling behind on the payments, a new lender helps you refinance by offering lower monthly payments. But read carefully.

Loan Flipping
You feel you could use some extra money, so a lender convinces you to refinance. A few months later, he offers you more cash by repeating the procedure. But with each loan, you incur more charges in points and fees. You'll have a pile of cash, but the pile of debt is much larger and must be paid back with interest.

Home Improvement Loans
A contractor offers to arrange a loan through which you can pay for a remodeling or a major repair. After he begins the work, you're asked to sign a bunch of papers--he'll threaten to walk off the in the middle of the job if you don't.

Credit Insurance Packing
At a loan closing, the lender "packs on" credit insurance you didn't ask for at additional cost to you. Often, the lender casually tells you the insurance is a "standard" part of the loan.

Mortgage Servicing Abuses
You receive letters from a lender shortly after taking out a mortgage explaining that your monthly payments will be higher than previously discussed due to escrow payments for taxes and insurance.

Signing Over Your Deed
A distressed homeowner having trouble keeping up with the mortgage is pursued by another lender, who tells him it's necessary to deed the house over to him in exchange for new financing. Often, the money never comes.

Forged Deeds
Undeveloped land is prime fodder for a forged deed: A scammer takes over a piece of land illegitimately, then flips it before he has to repay the loan.

Straw Buyers
This scam involves a home owner who sells his property to an accomplice. The seller forges appraisal documents to help inflate the value of the house he is selling to the fake buyer. The bank lends money to the fake buyer, then he disappears--and gets a cut of the profits from the seller.

Lease Options
Landlords lure wannabe homeowners by signing them up to rent a home with an option to buy.

Also check out - they list some of the most common and destructive swindles to watch for when looking at home repair.

Sybil Pryor thought she was getting a deal. Early last year, a contractor showed up at the 77-year-old's Oakland, Calif. home and offered to install a new roof and new siding. The cost? Not to worry, he told her. All Pryor had to do was sign a few papers. Big mistake. The documents turned out to be for a home-equity loan, one that authorized a bank to pay out the proceeds of the loan -- more than $90,000 -- directly to the contractor... "It's awful, but I probably see 20 of these cases every year," says William Denny, the deputy district attorney on Pryor's case.

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