5 Types of Real Estate Fraud and How to Protect Yourself

Learn about common real estate fraud schemes and how to protect yourself from them in this post by Schutt Law in Fort Myers, FL.

Common Types of Real Estate Fraud

Real estate fraud is a growing problem in the United States, costing billions of dollars each year. It can take many forms, from simple scams to complex schemes involving multiple parties. Understanding the common types of real estate fraud can help you protect yourself from becoming a victim.

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1. Foreclosure Fraud

Foreclosure fraud occurs when someone tries to take advantage of a homeowner in distress. This can be done by:

• Falsely claiming to be able to help the homeowner avoid foreclosure. These scammers may charge upfront fees for services they never provide.
• Deeding the property to a straw buyer. This allows the scammer to take out a new mortgage on the property and then disappear with the money.
• Filing fraudulent documents to take ownership of the property. This is often done by forging the homeowner's signature on a deed or other legal document.

2. Loan Modification Scams

Loan modification scams are similar to foreclosure fraud, but they target homeowners who are struggling to make their mortgage payments. These scammers may:

• Charge upfront fees for loan modification services. They may promise to get the homeowner a lower interest rate or monthly payment, but they often do nothing to help.
• Convince the homeowner to sign over the deed to their property. This allows the scammer to take out a new mortgage on the property and then disappear with the money.
• Collect the homeowner's mortgage payments but not forward them to the lender. This can result in the homeowner falling further behind on their mortgage and eventually facing foreclosure.

3. Property Flipping Fraud

Property flipping is a legitimate investment strategy, but it can also be used to commit fraud. This is done by:

• Inflating the value of a property. This can be done by getting a false appraisal or by making cosmetic improvements that do not add real value to the property.
• Selling the property to an unsuspecting buyer. The buyer may end up paying far more than the property is worth.
• Using straw buyers to purchase and quickly resell properties. This can create the illusion of market demand and drive up prices.

4. Real Estate Investment Scams

Real estate investment scams often target people looking for a high return on their investment. These scams may:

• Promise guaranteed returns. No investment can guarantee a return, and any investment that promises high returns with little or no risk is likely a scam.
• Pressure investors to make a quick decision. Scammers often use high-pressure sales tactics to get people to invest before they have time to think about it.
• Use complex investment structures. This can make it difficult for investors to understand where their money is going and how it is being used.

5. Title Fraud

Title fraud occurs when someone forges or alters a property title to transfer ownership to themselves. This can be done by:

• Stealing the homeowner's identity. This allows the scammer to forge the homeowner's signature on a deed or other legal document.
• Filing fraudulent documents with the county recorder's office. This can be done by bribing or impersonating a government employee.
• Creating a fake title insurance policy. This can make it difficult for the rightful owner to recover their property.

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How to Protect Yourself from Real Estate Fraud

There are several things you can do to protect yourself from real estate fraud:

• Work with reputable professionals. Choose a real estate agent, lender, and title company that you trust.
• Do your research. Before you buy or sell a property, be sure to do your research and understand the process.
• Be wary of unsolicited offers. If you are contacted by someone offering to help you with your mortgage or foreclosure, be cautious.
• Never sign anything you don't understand. If you are unsure about something, ask a lawyer or other trusted professional to review it for you.
• Keep your personal information safe. Be careful about who you share your personal information with, especially online.

If you believe you have been a victim of real estate fraud, you should contact law enforcement and an attorney immediately.

Real estate transactions should be exciting, not stressful. Gain peace of mind with Schutt Law Firm, P.A. in Fort Myers, FL by your side. We provide comprehensive legal counsel to prevent real estate fraud and ensure a smooth closing process. Call (239) 540-7007 to discuss your needs.