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10 Real Estate Housing Scams You Need to Avoid at All Costs

Real estate housing scams have spiked in the last year due to the COVID-19 pandemic. Unfortunately, criminals are getting more creative on how to scam renters and homeowners. In 2020 alone more than 13,600 victims reported some sort of rental fraud and housing fraud, according to data from the Federal Bureau of Investigation’s Internet Crime Complaint Center. Once the scammers get your attention, they use a variety of tactics to get your money. The FTC says, once you know how their scams work, you will be more prepared to defend yourself from fraud.

Here are ten common real estate housing scams to keep on your radar, and tips to avoid becoming a scammer’s next victim.

1. Fake Housing Help

The scammers tell you to pay an upfront fee, and they will work out a deal with the lender to either reduce your mortgage payments or help save your home. They may even at times claim to be attorneys or represent a law firm. By squeezing you in their palm of their hands, by telling you not to contact another lender, lawyer, or credit counselor, then with a promise of handling all the details once they receive the payment. Soon after, they do not return phone calls and take off with your money.

2. Auditors Scam

In exchange for an upfront fee, the so-called loan “auditors,” mortgage loan “auditors” or foreclosure prevention “auditors” offer an attorney or expert to review your mortgage documents to determine whether your lender has complied with the law. The “auditors” then use their report to avoid foreclosures, speed up the loan modification process, reduce what you owe, or cancel your loan.

3. Rent-to-buy Scam

As the con artists tell you to surrender the title as part of a deal, where you stay there as a renter and buy it back later. They pull you in by talking you into surrendering the title and up to talk how the title will let a borrower with a better credit rating get new financing and prevent the loss of the home. The terms are usually so expensive and end up being impossible to buy back your home. You end up losing the house and the scammer walks away with all the money you have invested in it.

4. New Borrower Defaults on the Loan Scam

The worst-case scenario is when the new borrower defaults on the loan, and you are the one who becomes evicted. Scam artists are also known to raise the rent over time so that eventually the several missing payments to get you evicted, leaving the “rescuer” able to sell.

5. Deed Scam

In a similar scam, the fraudsters offer to find a buyer, but only when you sign over the deed and move out, and they promise to pay you a portion of the profit when the home sells. Once you transfer the deed, they end up renting out your home and pocketing the proceeds while your lender continues with a foreclosure process. You end up losing your home and you are held responsible for the unpaid mortgage because transferring the deed did not transfer the amount you owe on the mortgage.

6. Bait-and-Switch Scam

Real estate housing scams come in all shapes and forms, scams artists are getting more and more creative. Con artists give you papers that they claim you must sign to get another loan in order to make your mortgage current. Buried in the stack, is a document that surrenders the title to your house that the scammers get in exchange for a “rescue” loan.

7. Changing Loan Scam

You do not have to pay a single penny until the company delivers you the results. The company needs you to give you a written offer for a loan modification or other relief for your lender; you accept the offer. The company must give you a document from your lender to show changes to your loan if you accept your lender’s offer. And the company must clearly tell you the total fee for their services.

  • Companies must disclose any important information, the requirements of companies to release important information includes:
  • They are not associated with the government, and services have not been approved by the government or by your lender;
  • Your lender may not agree in changing your loan;
  • When a company tells you to stop paying your mortgage; they also must disclose that doing so could result in losing your home and damaging your credit.
  • Companies cannot tell you to stop talking to your lender. You should always feel free to contact your lender directly and see whether they can offer other options. Companies who tell you otherwise are breaking the law.

8. Phony Housing Company Rules Scam

  • When a company does not follow these rules, they could potentially be a scammer, steps towards getting the right help. Make sure to shop around to compare mortgage rates. Get help from a lawyer that may offer help for you to get a loan modification or other mortgage relief. Under the MARS Rule, lawyers may require an upfront fee, but only when:
  • They are licensed to practice law in the state or where your home is located;
  • Providing real legal services;
  • They are complying with state ethics requirements for attorneys; and
  • They place money in a client trust account, withdraw fees only once they complete the actual legal services, and notify you each time there is a withdrawal.

9. Fake Real Estate Attorneys

Get the name of each attorney who is helping you, the state or states they are licensed, and the attorney’s license number in each state. Call your state bar or check the website to make sure the attorney has a good record. You can get the links to your bar here at the National Organization of Bar Counsel.

10. Fake Housing Help

When you are having trouble paying your mortgage or have received a foreclosure notice, be sure to contact your lender immediately. You may also consider other foreclosure prevention options, such as reinstatement or forbearance.

You may also want to consider contacting a credit counselor through the Homeownership Preservation Foundation (HPF), a nonprofit organization that operates 24/7 on a toll-free hotline 1-888-995-HOPE with free, bilingual, personalized assistance that will help at-risk homeowners avoid foreclosure.