Education and news for smart DIY landlords!
Whether you’re buying or selling a home, people with nefarious intentions will always set their crosshairs on you. Sometimes, they’re out to take all of your money. Other times, they’ll just make you pay an unreasonable extra. There are also others who’ll waste your time.
Whatever the intentions of these frauds are, they all lead to one thing - financial loss. As I promised last week, we’ll talk about deceptive real estate practices so you can safeguard your property and money. Here they are.
Home sellers may not lose money here but they will lose a lot of opportunities when selling their home. This is because some buyers will intentionally misrepresent their financial capabilities just to get into a purchase contract. The buyer will then back out of the deal due to a lack of funds. However, the home seller has the right to file a fraud case against the buyer.
Real estate fraud may not necessarily involve scamming one person on one property deal at a time. There are times where criminals entice different buyers into pooling all their money into one property with the promise of profit at resale.
In the end, the investors get duped into earning profits from a property sale that doesn’t exist or will never happen.
History is critical for the future and the present value of a property. A fraud seller may lie about structural damages, the presence of molds, history of crime, wear, and tears. But this common real estate fraud can easily be detected by a good real estate agent. You can also learn how to properly inspect a home here.
This fraud practice is common among commercial, rental property sellers, and landlords. They’ll provide false information such as falsified leases of the tenants in their building or restrictions on the property. Their goal is to increase the selling value of the property or rent to gain an absurd amount of profit.
Land fraud is a practice where companies obtain information from potential homebuyers and sellers. The companies will then contact the buyers and sellers in a direct mail or telemarketing campaign with promises of huge profits and gifts.
Usually, the companies will offer unimproved lands that they have recently purchased for a higher price than they’ve bought to buyers and sellers. For example, if they bought the offered land for a grand or two, they’ll resell the land to the victim buyers for 50 grand.
Also called “air loan”. This is where scammers and other sophisticated criminals forge property, land titles, deeds, and their identities. They’ll show a buyer a home but the property is owned by somebody else. When the buyer has paid for the home, the frauds will then disappear and the buyer has no legitimate claim of the property they have “bought”.
The house seller partner’s up with a corrupt appraiser by offering a kickback and lists the house with an amount higher than other appraisers’ prices. Sometimes the seller provides unrealistic information such as false rental, vacancy rates, and expenses to the unsuspecting appraiser. This will make the buyer pay more for a home than what it’s actually worth.
A buyer convinces the seller to list the house for twice its price so that the buyer can get a higher mortgage from their bank. The buyer will then pay the seller for the house’s original price and disappear with the rest of the mortgage money. Usually, the seller’s house ends up in foreclosure.
The best way for you to avoid being scammed by these fraudulent real estate practices is to always study the local housing market before buying or selling a property. If you’re a buyer, set realistic expectations for your homeownership experience. If you’re an investor, set realistic goals for profit.
Learn more on what it takes to be an efficient real estate investor here: