Can you recognize the most common real estate scams?
It’s a fact of life that wherever you find people with money, you’ll also find crooks trying to separate them from it with real estate scams.
But you don’t have to fall victim to these thieves if you know can tell the scams from the real deals. These are some of the most common real estate scams you may encounter:
Home equity fraud – You’ve owned your home for a few years and have been making steady mortgage payments. The house is valued at $100,000 and you owe $90,000. That means you have $10,000 equity in your home.
A lender approaches you about a home equity loan. It sounds like a good deal – not like a real estate scam – so you take the loan. Only it comes with hidden fees and outrageous rates that get tacked onto your $10,000 loan. Say, $1,000, just as an example. You’re down to $9,000 equity.
Then the lender returns and offers an even lower interest rate. And another one after that, and another after that. The lender keeps convincing you to churn the second mortgage, slipping in those hidden fees each time. Pretty soon, your equity is gone, you owe more on the house than it’s worth, can’t keep up with the payments and lose the home to the lender.
Or, in another version, the lender offers to refinance your home at a low, low rate. You sign the loan paperwork, but don’t examine it closely. That lower rate actually turns out to be higher once all the extra fees and points are included. The mortgage payments are more than you can afford. The lender forecloses.
Stay out of trouble by not accepting loans you don’t need. If you do need the cash, try a regular lender, such as a bank. And if you still want to take the “low interest” loan, don’t sign anything until an attorney looks it over and tells you it isn’t a real estate scam.