Real estate fraud and schemes for financial gain are found everywhere in Maryland and the rest of the country for that matter.Understanding and educating ourselves is one of the best ways to avoid fraud or identify it before falling victim to a scheme that could cost you everything. There are many moving parts in our real estate transactions and a large group of people and entities involved. The fact we have so many moving parts and so many people involved create opportunities for deception and fraudulent schemers. Appraisers, Banks, Lenders, Loan Officers, Underwriters, Processors, Abstractors, Surveyors, Inspectors, Auctioneers, Attorneys, Title Agents, Insurance Agents, Buyers, Sellers, Builders, Developers, Contractors, Brokers, Real Estate Agents, Investors and Court Recorders represent many of the individuals who can play a role in real estate transactions and processes. It is easy imagine with this many moving parts and hands in the cookie jar, the opportunities for fraud exist and occur. Let's all take some responsibility for education and awareness as one of the best methods to avoiding fraud or damaging schemes. Recognizing the danger signals and common ways these fraudulent methods are played out will help you avoid and detect fraud before it happens. There is no guarantee we can avoid every possible situation but if we can learn together protect ourselves from the common schemes we will all be better off.
Here are some more common methods of real estate fraud in Maryland:
Property Flipping:From a fraud perspective “flipping” occurs when several people work together to form a team of deception. Most commonly this involves a buyer, closer, appraiser and possibly a potential secondary buyer. At the heart of the scam is the inflation of property value to obtain financing monies from a lender. The first stage is the buyer takes out mortgage for the homes actual value or cost to acquire. Then some fake or falsified improvements are supposedly done creating the opportunity to demonstrate a new higher value on an appraisal. The increase is justified by the improvements or additions to the initial property. The problem is the improvements are not real and the value is falsely represented on the appraisal. The bank gets an application for a second mortgage or home equity loan for the increase and with the false appraisal lends the money largely unsecured. Subsequently the property is then sold quickly “hence the word flipping” to a new buyer who may or may not be in on on the scam. Then the fraudsters abscond with the money and the new buyer often defaults on the loan. Lenders and Banks are the ones bearing the majority of the losses in this situation.
False Foreclosure Rescue:
What to do about it?
We can all be on the lookout for the warning signs and be aware of the common sense rule of “if it sounds to good to be true – it probably is!”