Real Estate Scams – Most Common
April 9, 2020
By Jeff Prang
Los Angeles County Assessor
The dream of home ownership remains one of the most important goals for many residents of Culver City as well as the rest of Los Angeles County.
Unfortunately, real estate scams can steal these dreams with a single forged signature or get-rich-quick scheme. This type of crime can have serious, long-lasting impacts on its victims.
Unscrupulous individuals can do inconceivable things with personal – and public – information ranging from the relatively minor infractions to the abhorrently mind-boggling scam.
While anyone may fall prey to one of these scams, the groups most targeted by real estate scammers are usually the elderly, homeowners already in foreclosure, and individuals with low incomes.
The following is a set of examples (by no means all-inclusive) of the types of real estate scams that are pervasive across the country. Of course there may be completely legitimate real estate transactions that have similar circumstances as the scams outlined below.
Remember that knowledge is the best prevention.
Foreclosure Rescue: These companies prey on people who are behind on mortgage payments and whose mortgage company has commenced foreclosure proceedings. The companies tell desperate mortgage holders that they can save their home if the borrowers enact a "temporary" title transfer to the rescue company. The companies promise that the borrower can stay in the home and pay rent during the temporary title transfer time – what they claim is a "leaseback." Often these "rescue companies" sell the homes once they obtain the title from the real owner. Because the rescue companies claim it is a leaseback, they often only pay the owner a minimum amount that rarely reflects what the owner would have made if they had sold the property on the market. In the meantime, the owners remain on the hook for the original mortgage payments on their home.
Mortgage Elimination: These programs offer borrowers a way out of their mortgages in a relatively brief period of time (for example, eradication of a full mortgage in less than a year). They convince borrowers that there are loopholes that will allow the borrowers to escape the mortgage, and these companies charge a premium for this so-called "service."
Equity Skimming: Equity skimming happens when a buyer who wants to take out a large mortgage convinces the seller to re-list the house for an extraordinarily high amount (for instance, twice the original amount) so that the buyer can obtain a larger mortgage from his/her bank. Often times in these situations, the buyer will take out the larger mortgage, pay the seller the original asking price for the house, and disappear with the rest of the loaned funds. The house usually ends up in foreclosure as a result.
Equity Fraud: This is old-fashioned theft. The criminal in this situation actually obtains the personal information of the victim and uses this information on mortgage or loan origination documents. In addition, the criminal forges the victim's name on the deed and steals the equity from the property involved.
Fraudulent Loan Origination: This happens when real estate professionals help unqualified buyers get the money necessary to purchase a home with an FHA-insured mortgage. Real estate professionals in this situation promise potential homebuyers that they will qualify for mortgages that are much larger than the buyers' ability to repay, and often then falsify official documents to assist homebuyers in obtaining these properties.
Land Fraud: This happens when companies obtain information about potential homebuyers and sellers from mailing and call lists. The companies then engage in a direct mail and telemarketing campaign, promising huge profits and gifts if the sellers agree to buy land from the company. These companies sometimes sell unimproved, recently purchased lots that they purchased for $1000 or $2000 to unsuspecting buyers for up to $50,000.
Rental Scams: Scammers post property rental ads on Craigslist or social media pages to lure in unsuspecting renters, sometimes using photos from other listings. The scammers, who have no connection to the property or its owner, will ask for an upfront payment to let you see the property or hold it as a deposit. In reality, they're just looking to get quick cash through nefarious means.
Rental scams are alarmingly common. An estimated 5.2 million U.S. renters say they have lost money from rental fraud, according to a 2018 survey from ApartmentList. Younger renters are the likeliest victims, with 9.1 percent of 18- to 29-year-old renters having lost money on such a scam, compared with 6.4 percent of all renters, the survey revealed. And of those who did lose money to scammers, one in three lost more than $1,000, likely after paying a security deposit or rent on a fake rental property, ApartmentList found.
For more information about real estate fraud, including information about reverse mortgages, please visit the Los Angeles County Department of Consumer and Business Affairs website.
As always, for additional information visit assessor.lacounty.gov or telephone at (213) 974-3211.
Los Angeles County Assessor Jeff Prang has been in office since 2014. Upon taking office, Prang implemented sweeping reforms to ensure that the strictest ethical guidelines rooted in fairness, accuracy and integrity would be adhered to in his office, which is the largest office of its kind in the nation with 1,400 employees and provides the foundation for a property tax system that generates $17 billion annually.