Two men from right here in Sanpete County, Utah have recently been brought up on charges related to a real estate investment scam.
According to a local paper, the scam may have involved 400 investors and over $200 million dollars. That’s a lot of cash.
Unfortunately, these types of scams are not entirely uncommon. So what can you do, as a homeowner or real estate investor, to protect yourself? Let’s take a look at some common scams and how you can spot and avoid them.
Common Real Estate Investment Scams
It may be super tempting to try to make some quick cash on a real estate transaction or to leverage your home for few extra bucks, but not all offers are legit. Here are a few of the ways scammers try to separate you from your hard-earned cash.
Fake and/or Overvalued Appraisals
Some real estate investment scams involve offering overvalued properties, some that are supposedly in-demand, and promising big returns on the investment.
I probably don’t need to tell you that if something sounds too good to be true, it probably is, but I’ll do it anyway. And, frankly, even if it doesn’t, you should always get your own appraisal done before agreeing to buy any property.
Have you ever signed a stack of legal documents without reading them? Leases and real estate transactions typically involve mountains of paperwork that must be signed, making these types of documents more tempting to skim over. Unsuspecting homeowners have managed to sign away the rights to their property when failing to carefully read the documentation.
Times of financial distress are the worst times to be forced to make big decisions. Scammers sometimes take advantage of hard times by promising to fix your problems. They may claim to be in close contact with your mortgage servicer. They may promise they can save your home or lower your payments.
Remember to always contact your mortgage servicer before making any arrangements involving your home.
Sold Mortgage Scams
It is quite common for mortgages to be sold between banks, so many homeowners wouldn’t look twice if they received a notice in the mail informing them of the new mortgage owner. If you receive a document like this in the mail, don’t just automatically send payments to the new company. Contact the old company first to verify this sale has occurred.
The contact information in the letter should not be trusted until you have verified with the previous mortgage servicer.
Okay, this type of arrangement isn’t always a scam in the strict sense, but it is usually a huge waste of money. Some companies will charge you thousands of dollars to fill out applications or paperwork that you could very easily complete on your own. In most cases there is no added benefit to paying for these services, and some of them are actually outright scams.
How To Spot a Real Estate Investment Scam
I have to admit, some of these scams are pretty sneaky. But that doesn’t mean you are doomed to fall victim. The following are some tell-tale signs that something isn’t right:
- Real estate systems. The real estate market is relatively simple. Anyone promising to have the latest and greatest “system” for investing in real estate is really just trying to get you to invest in their personal savings account.
- Must act now! A sense of urgency is a common marketing tactic used to keep people from thinking too much before they make a decision. In the context of real estate, it is a huge red flag.
- No money down! If you’re looking to invest in something, does it really make sense that you don’t actually have to invest? This promise is incredibly rare and suspicious.
- Details withheld. If someone is heavy on the sale and light on the info, you might want to hold your money close, like a football, and high-tail it out of there.
Now that you have a good idea of what “too good to be true” looks like in the real estate world, you are well-equipped to protect your cash and your home from scammers. Remember, even small communities like Sanpete County are not immune to real estate investment scams.
Do you know anyone who has been face-to-face with a real estate scam? Tell me about it in the comments.