Top Real Estate Scams

Having worked in the Real Estate business for almost 10 years I’ve had a chance to hear some really wacky Real Estate claims. Some of these claims are made by unscrupulous individuals who are not licensed Realtors or lenders(for good reason). Most of the scams target unsuspecting individuals on late night infomercials promising fast cash and a track to riches for only 3 payments of $45! Over the last 5 years with the tanking of the Real Estate market various scams have exploded on to the Internet.  So, what are the biggest scams that I hear about now a days?

1. Get out of my mortgage:   This is the latest greatest scam. It centers around the lender not having all the paperwork needed to foreclose. I’ve heard of companies charging thousands of dollars in upfront fees to get you out of your mortgage.  As much as I hate some of the practices of lenders today I am here to tell you that the chances of you getting out of your mortgage are about the same as hitting the Powerball next week! I have not heard or read of any documented proof that anyone has gotten a pass on his or her mortgage. What does happen if you are lucky is that you might delay your foreclosure by a few months (if you are REALLY lucky). Otherwise, the bank will take your home at the end of the day.

2. The $500 house:   This is an oldie but goodie! About once a year I will get a call from someone asking me about a list of houses that sell for a couple hundred dollars. I had one client tell me that he was willing to go up to $3,000 for the right house in Fairfax. This scam centers on buying liens; mostly tax liens, mechanics liens, HOA liens etc. The idea is that if you buy one of these liens then the house will be yours for the amount of the lien. Although this could technical happen if there are no other liens on the house. What I’ve personally seen is that the homes in question are normally encumbered by other liens. Normally you will have a first trust, second trust, HOA liens etc. In most cases you have to clear up these other liens in order to get a free and clear title. Just because you buy the HOA lien does not mean that the first trust simply goes away.

3. The Flipper:           Many of my clients over the last few years have been investors. These investors are not what I’m taking about here. The flippers that I’m speaking about here are those buyers who somehow get in there head that buying an investment property is a fast way to easy money without fully understanding the risks involved in buying a Real Estate investment. If you are even remotely thinking of buying one of those really sweet foreclosures and you have not done it in the past I would highly recommend you befriend a savvy investor or a Realtor with a track record of working with investors. I’ve seen more good people lose their life’s savings flipping houses then I care to remember. The amount of legwork and real estate knowledge needed to pull off a successful investment transaction is mind blowing.

4. Bad Credit/No Credit/ No Down Payment/Rent to Buy:         I find that this scam seem to catch all the first time homebuyers who do not have a down payment or decent credit( or both). There might have been a time when some elements of this scam were true but I can assure you that the days of easy money are WAY gone. If you don’t have a credit score in the 640+ range with at least 5% of the sales price as a down payment ( read this blog) you are most likely not going to get a loan from a reputable (I use this word lightly) lender. This isn’t to say that an investor who owns a property (100% owner no liens) can’t loan you the full amount of the home you want to buy. However, expect a premium on the mortgage interest and for GODS sake have an attorney read the fine print on the mortgage note! With this scam, just know that very few deals are done with this type of owner financing. I’ve sold millions of dollars worth of Real Estate and I have never run into this type of transaction or know of another Realtor who has. So be careful!

5. The Foreclosure/Short Sale list (my favorite!):    No one has access to a special list when it comes to foreclosures or Short Sales. The truth of the matter is that when you fall behind on your mortagage your lender publicly release this information in your local paper. Also, any Realtor who has MLS access can run an auto program that spits out any possible foreclosures or short sales the minute the information becomes public. So, if you want to know when a foreclosure comes up in your neighborhood just ask me or your favorite Realtor( hopefully its the same person;0)). Its not exactly rocket science and only takes a minute to set up. MRIS just added some new software updates that will also send pre short sale info( very cool stuff!).

So what is your take away from all this? I have three saying for you to keep in mind when buying an investment property:

1.     If it’s too good to be true then it’s probably not true.

2.     There is no such thing as free money or fast money especially in Real Estate.

3.     If you walk into a room with a bunch of people and you can’t see the sucker in the room then most likely you’re the sucker in the room!

Play these little nuggets in your head anytime someone offers you a Real Estate deal you can’t refuse.

Take care and be safe!

Chuck

Serving all of your Ashburn, Chantilly,Fairfax,Herndon, Reston, Leesburg, Mclean and Loudoun County area Real Estate needs!

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