How Mortgage Fraud Works

Perhaps one of the most important decisions we make throughout our lifetime is investing on properties, such as homes.  While we want to make our home buying transactions to be trouble-free, convenient and cheap, we constantly look for the best deals and look for people who have comprehensive real estate knowledge than us.  Little do we know, these people are up to some surprises at our disadvantage.

In real estate transactions, there may be little imperfections once in a while.  Unnoticed leaks in oil tanks, unsatisfactory roofing, or the home siding materials maybe are failing; these are excusable.  The bigger risk lies in the process before actually acquiring the property, such as in obtaining a loan.  Believe me, scammers are the most sophisticated people out there.  In order to keep you on your toes of how to determine suspicious deals and other forms of scams, here are some tips on how they work.

• Foreclosure Schemes. This is the most inhumane of all types of mortgage fraud because they prey on those people who have financial problems and are at stake of losing their homes.  When they know that a certain individual is in an early stage of home foreclosure, someone would call and give them help to save their debts and their house for a sum of money.  Scammers usually disappear and after getting those fees.  Another tactic would be inducing the homeowner to sign documents to refinance the about-to-be-foreclosed house, and the homeowner would later find out that they actually sold the house to those scammers.

• Appraisals. Appraisal fraud happens when a fraudulent appraiser increase the property’s value without the knowledge of the seller.  When the seller of the property gets the check after a sale, he then pays off the appraiser and those he had conspiracy with, with a bogus amount.  With this type of fraud, the borrower usually doesn’t make any payment until the house is foreclosed.

• Straw Buyers. A straw buyer is an individual who allows his money to be used to purchase a property he never intend to purchase or to use.  Take for example those ads in real estate listings looking for a credit partner.  These people have plans investing on properties but their income won’t qualify them.  Instead, they look for someone who has bigger income and purchase the property in their behalf in exchange for a percentage they will later pay.  Even though their credits are used to purchase numerous properties, they get a big fat sum back.

• Flipping. Also known as quick turns, there isn’t really illegal with flipping per se.  This type of deal includes buying a house and improving it so it could quickly be sold.   However, what becomes fraudulent is when those homeowners lie about the value of improvements they made in a particular house which usually concerns inflated prices.

If you suspect a spam, don’t give out any information like bank account numbers or anything else they can use to their advantage.  Avoid sending funds until your bank confirms that accounts are legitimate and cleared.  Lastly, observe scam cautions by alerting your broker whenever some suspicious individuals send funds.

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Robert Smyth is a professional writer from Fort Collins, Colorado specializing in foreclosures and real estate sales.  If you want to know more about Fort Collins real estate and Fort Collins homes for sale, visit his website at www.clicktopfortcollinshomes.com.