Foreclosures are on the rise making an excellent breeding ground for scams. Rescue scams are ploys that tout they can “save your home” or “pay your mortgage.”
1. The Scheme: Homeowners are told by a “professional” entity or “foreclosure consultant” to sign over or deed the property to them. They claim that you are no longer responsible for the remaining balance on the mortgage to avoid foreclosure. They also promise to pay off the debt or to sell the house on your behalf. They proceed to rent the house back to either you or someone else. They will then dispose of your home at fair market value and you won't owe them a dime.
The Scam: Deeding over a property does not avoid a foreclosure on your record if the payments are not made or the loan not paid in full. When these clever scammers rent out your property, they collect and pocket the rent until the home goes into foreclosure. You will still be liable for the loan because you are still on the loan, not them!
2. The Scheme: If you agree to a “short sale”, (when the outstanding obligations (loans) against a property are greater than what the property can be sold for. Short sales are a way for homeowners to avoid foreclosure on their homes and still be able to pay off their loan by settling with lender.) beware of an agent that says "List your home with me and I'll pay you $XXXX."
The Scam: This is illegal. One of the forms you and your real estate agent will is sign states that there is no money, you are not expecting any money and you are not receive any proceeds from the sale of your home. If you don't get it in writing, you will never collect after the sale closes. 3.
3.The Scheme: An agent says they are an expert in "Short Sales" or "Short Pays." They may claim to be an expert in this difficult field, and state that this will get you off the hook and protect your credit. Beware!
The Scam: Just because an agent has completed hundreds of short sales does not mean they will protect you! There are things that many agents will not do to protect you. Always be sure the contract is worded correctly to protect you when a buyer makes the offer to purchase your home. If not, the transaction could be reflected on your credit as your credit as "Sold Short", just as bad as a foreclosure. Your lender could issue you a "1099" for tax reporting if your agent does not prepare the contract appropriately. Once the IRS receives your 1099 with a dollar amount, it may reflect income. Guess who pays taxes on that...Not your agent! Again, your agent needs to know the right working to negotiate with your lender. Unless your loan is the original loan you purchased the home with (not a refinance), your lender, at their discretion, could seek a deficiency judgment against you for the balance owing. This judgment could follow you to the end of your days and beyond!
So, beware of those who claim to help you. Ask who are they and what will they actually do?
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