5 Real Estate Scams You Need to Know About

By Melissa Dittmann Tracey | August 2010

Mortgage fraud is pervasive: An estimated $4 billion to $6 billion in annual losses result from mortgage fraud, according to FBI reports. “An entire community can be damaged by mortgage fraud,” says Rachel Dollar, a lawyer from Santa Rosa, Calif., and editor of the Mortgage Fraud Blog. Mortgage fraud can lead to a spike in foreclosures, home values plummeting, and lenders raising their rates and fees to recover losses.

The crimes are often complex, involving several parties and occurring over multiple transactions. To protect you and your clients, educate yourself about mortgage fraud and be on guard for any warning signs in a transaction. You can start by reviewing these five scams, and then test your knowledge by taking our Mortgage Fraud Quiz.


1. The Foreclosure Rescue Scheme

The Scam: “Rescuers” promise cash-strapped home owners that they can save their home from foreclosure. The rescue, which involves paying upfront fees, can take multiple forms, such as the perpetrator obtaining a new loan on behalf of the owner or by having the owner sign over the home’s deed and then rent the home until they can repurchase it. Eventually, the home owner loses the home, either to foreclosure or the fictitious rescue company.

Red Flags: With foreclosure rescue programs, borrowers are often advised to sign over the title of their house to a third party, become renters of their home, not contact their lender, or send mortgage payments to a third party, according to Fannie Mae, which provides fact sheets on mortgage fraud.


2. Loan Documentation Fraud

The Scam: This fraud involves numerous schemes in which a borrower provides inaccurate financial information — such as about their income, assets, and liabilities — or employment status in order to qualify for a loan with lower rates and more favorable terms. Occupancy fraud is one growing area: Borrowers say they plan to live in the property when they actually intend to rent it.

Red Flags: Documentation may raise suspicion if the employer’s address is shown as a post office box, accumulation of assets compared to the person’s income appears too high or low, the new house is too small to accommodate occupants, the person has no credit history, or the application is unsigned or undated, according to Fannie Mae.


3. Appraisal Fraud

The Scam: A faulty appraisal — saying a property is worth more than what it really is — is connected to many types of mortgage fraud. It entails manipulating or overstating comparables, market values, or property characteristics in order to obtain a higher appraisal. The higher property appraisal, which generates false equity, is done by falsifying an appraisal document or using an appraiser accomplice to obtain the higher value.

Red Flags: Be skeptical of appraisals that are dated prior to the sales contract, list comparable sales that do not contain similarities to the property or are outside the neighborhood, the owner is not the seller listed on the contract or the title, or a third party participating in the transaction orders the appraisal, Freddie Mac warns.


4. Illegal Property Flipping

The Scam: This entails purchasing properties and reselling them at inflated prices. These scams usually involve faulty appraisals and inaccurate loan documents. The property is then refinanced or resold immediately after purchase for an inflated value. The home is purchased at a higher price, often by straw buyers working with the “flipper,” and eventually falls into foreclosure.

Red Flags: Some key things to look for are rapid refinancing of a property; the seller recently having acquired the title or acquiring the title concurrent with the transaction; an appraisal that comes in too high; a property that was recently in foreclosure being purchased at a much lower price than its sales price; or the owner listed on the appraisal and title not matching the seller on the sales contract, according to Fannie Mae.


5. Short Sales Schemes

The Scam: Borrowers owe more than the current value of their home so they fake financial hardship and no longer make their mortgage payments. An accomplice of the borrower then submits a low offer to purchase the property in a short sale agreement. The lender agrees to the short sale, unaware that it was premeditated. The property, after being purchased at the reduced price, is then often resold at the home’s actual value for profit.

Red Flags: The borrower suddenly defaults on the mortgage with no workout discussions with the lender, an immediate offer is made to a lender at a short sale price, the short sale offer is less than current market value, or a cash back is offered at closing to the delinquent borrower (disguised as “repairs” or other payouts, for example) and is not disclosed to the lender, according to Fannie Mae.



You can report instances of suspected mortgage fraud to Stopfraud.gov.

No Shortage of Construction in DFW!

(Dallas Business Journal) – According to New York-based McGraw-Hill Construction, there is an increase in the number of future construction projects in the Dallas-Fort Worth area.

Filings for new nonresidential construction projects totaled $421 million in April, up 6 percent from the previous year, when filings were $396.3 million. The total contract value on new residential filings in April reached $383 million compared with $307.6 million from a year earlier, a 25 percent increase.

This bodes well for our area. Moving to Murphy should continue to be a great idea!

I Am a REALTOR®

The I Am a REALTOR® Pledge

I Pledge Myself

To protect the individual rights of real estate ownership and to widen the opportunity to enjoy it;

To be honorable and honest in all my dealings;

To seek better to represent my clients by building my knowledge and competence;

To act fairly towards all in the spirit of the Golden Rule;

To serve well my community, and through it my country;

To observe the REALTOR’S® Code of Ethics and conform my conduct to its lofty ideals.

Be Prepared for Inspection Day

Adapted from an article by the Collin County Association of REALTORS(R) Affiliate Committee.

A quick guide for listing agents and sellers:

• Make sure all utilities are ON inside the home.
• Clear the areas around the electric panel, water heater, furnace and air conditioner to give Inspector full access.
• Unlock gates.
• Clear attic access and landing areas.
• Clear out closets to access crawlspace (under floor area).
• Leave the fireplace gas key on the mantle.
• Empty the dishwasher and oven.
• Make arrangements to secure or remove pets.
• Remove pet waste from the yard.
• Clean the swimming pool.
• Be prepared to leave the house for about 3–4 hours (varies).

Reducing Items on an Inspection Report – 12 easy fixes for homeowners:
• Replace batteries in smoke detectors and/or install smoke detectors in each bedroom, hall and on each floor level.
• Replace missing or broken switch and outlet cover plates.
• Repair leaky faucets.
• Tighten loose doorknobs.
• Repair or replace exterior door weather stripping.
• Caulk doors and windows at the exterior brick/siding.
• Replace damaged or missing screens.
• Replace broken panes of glass in doors and windows.
• Replace burned-out light bulbs.
• Secure loose hand and stair railings.
• Patch holes and cracks in walls and ceilings, then repaint.
• Replace heating and air conditioning filters.

These are the most common gigs on inspection reports. Keep in mind that buyers often use 10 items to leverage for the 2-3 they really want done. So, if you can reduce the list, you the seller reduce the leverage being applied against you.

Your Broker Matters (TM)

Do I Need a Home Inspection?

Yup. Home inspections are good, good, good!

I think most Murphy, Plano, Rowlett, Richardson, etc., home buyers naturally gravitate toward having a home inspected by a licensed inspector when they buy. The federal Housing and Urban Development folks even have a handy flyer about buyers home inspections you can read here. http://www.hud.gov/offices/adm/hudclips/forms/files/92564-cn.pdf

But what about the value of home inspections to sellers? Well, did you know that the Texas Real Estate Commission's mandatory contract for resale says that if your buyer finds a needed repair, you have to pay big bucks to a licensed person for that repair?

COMPLETION OF REPAIRS AND TREATMENTS: Unless otherwise agreed in writing, Seller shall complete all agreed repairs and treatments prior to the Closing Date. All required permits must be obtained, and repairs and treatments must be performed by persons who are licensed or otherwise authorized by law to provide such repairs or treatments. At Buyer's election, any transferable warranties received by Seller with respect to the repairs and treatments will be transferred to Buyer at Buyer's expense. If Seller fails to complete any agreed repairs and treatments prior to the Closing Date, Buyer may do so and receive reimbursement from Seller at closing. The Closing Date will be extended up to 15 days, if necessary, to complete repairs and treatments.

So, let's say you have a GFCI plug that's bad (those outlets with the little test button) and you need to replace it to sell your house. Those sell at Lowes for $14.99. To have a licensed electrician come out per the contract you will spend $85 to $125!

So, if your pre-listing home inspection had revealed that issue, a simple and cheap DIY project would have saved $$$!

For more information on home inspections for buyers and getting your home ready for sale, contact us at JTOden Realty.

Mortgage Industry Update

Buying a home in Murphy, Plano Richardson, etc? You'll likely need a Mortgage.

So what's up with mortgages today? Keith Bazzell at Integrity Mortgage in Dallas tells me that rates are holding strong and should be promoting some good growth in the economy. Bazzell says that 30 year fixed rates on FHA and Conventional loans are right at 5% with a couple of recent days actually dipping into the high 4’s and the 15 year rates are in the 4.25% range. Now more than ever, these rates are subjective based upon credit scores, down payment and loan amount due to investors changing their risk assessments. Overall these should be good incentive for you.

Also, Bazzell reminds us that the First Time Homebuyer and Move-Up Buyer loans are drawing closer and closer to an end. Contracts on homes in Murphy, Richardson, Dallas, Plano, etc. must be in place by April 30^th in order to take advantage of these programs! So far there hasn’t been a push to extend this any further.

For folks interested in more info, Mr.Bazzell is available by phone and email and also points us toward a long but good read about the housing market (Review Housing Market Indicators.).

Your Broker Matters!

February is Black History Month

Matthew "Bones" Hooks was born to former slaves, best remembered as a cowboy & Amarillo, Texas civic leader.

Hooks was also a religious leader, businessman, cowboy and horse breaker and became one of the first black cowboys to work alongside whites as a ranch hand, and the first black person to serve on a Potter County grand jury.

Morris Overstreet

is the first African-American

elected to the Texas Court of Criminal Appeals in 1990 and served 8 years. He grew up in Amarillo graduating high school from Amarillo High School (GO SANDIES), earned a BA from Angelo State University, earned his Juris Doctor Degree from Texas Southern University School of Law in Houston.

February is Black History Month

The United States has many historical figures that have achieved notably and well represent the African American community. From current figures like Bill Cosby, Michael Steele and President Obama to historical figures like George Washington Carver, MLK, and Harold Washington the country is ripe with black achievement. This February, I'd like to blog about noteworthy black TEXANS.

Barbra Jordan. Ms. Jordan served as a congresswoman in the United States House of Representatives from 1973 to 1979. She was the first black woman elected to that post from Texas.

Daniel Webster (80 John) Wallace.

Mr. Wallace was a cowboy, born into slavery, worked

until his freedom was secured and died Texas'

first Black Millionaire.

How About a Ranch in the City?????

Click HERE to see the REALTOR.com listing for this property

Click HERE to see the REALTOR.com listing for this property

225 Mortgage Companies failed in 2009

225 Mortgage Companies failed in 2009.

Here's one that didn't:

Intergrity Mortgage Corp.

& Keith Bazzell -- 214-342-0044

http://imcoftx.com/

Record Year for Mortgage Company Failures

More than 225 mortgage-related companies ended their operations or failed in 2009, more than any year since MortgageDaily.com began tracking data in 1998.

Bank failures lead the decline with 140 suspended and forced into bankruptcy. There were 66 non-bank closures and 19 credit union failures.

The most notable 2009 failures included Ocala, Fla.-based Taylor Bean Whitaker Mortgage Corp., Melville, N.Y.-based Lend America, and Montgomery, Ala.-based Colonial Bank.

Source: MortgageDaily.com (01/04/2010)

REALTOR® Magazine-Daily News-Record Year for Mortgage Company Failures

Home Buyer Tax Credits

So what? So, who can qualify for this and what does it look like when you get your check?

Well, the law qualifies a first time home buyer as a buyer who hasn't owned a principal residence in in the last three years. Those folk can buy a new or resale home and get up to $8,000 in a tax credit. Here's the part no one knows about: home owners who make a "move-up" may be eligble for a a $6,500 tax credit! That means that if you move from your existing property to a new one, Uncle Sam may pay over six thousand dollars to you via a tax credit. HUD may even allow you to use that money as closing costs. That's a lot of closing cost assistance! But the jig is up in April, so it's time to start moving TODAY.

For more information, call JTOden Realty, or read more at www.irs.gov

Some details were lifted from http://www.federalhousingtaxcredit.com/ by the NAHB.

Toys, Toys, and More Toys!!!!

Go Murphy!

CITIZENS OF MURPHY, TEXAS GO ABOVE AND BEYOND AT HOLIDAY CELEBRATION TOY DRIVE

Murphy, Texas (Dec 10, 2009) -

The City of Murphy would like to extend a big thank you to our community. With over 1000 friends and families in attendance at the December 3 Annual Christmas Tree Lighting and Holiday Event, the outpouring of kindness shone through.

Attendees were asked to bring and donate a new unwrapped toy benefiting the Collin County Children's Advocacy Center. The amount of toys donated that night exceeded all expectations and once again proved the strong sense of community in Murphy and coming together when neighbors are in need.

On Friday, December 4, staff delivered a truck load overflowing with generous toy donations from the citizens of Murphy. With excitement, hundreds of toys were unloaded at CCCAC and are on their way to children in need this holiday season.

"The children served by Collin County Children's Advocacy Center (CCCAC) need our help year round, but when it comes to the holidays, we work hard to do what we can to make it special for the kids," says Vanessa Gill, Holiday Project Coordinator of CCCAC. "We have many children who would otherwise have no gifts at the holidays and communities such as Murphy are a tremendous blessing." The mission of Collin County Children's Advocacy Center is to identify, protect and improve the lives of abused and neglected children in Collin County.

For more information contact Kristen Roberts, Assistant to the City Manager at (972) 468-4006 or kroberts@murphytx.org. For additional information on Collin County Children's Advocacy Center, please call Betsey DeVenny at (972) 633-6608 or visit www.cacplano.org.

Real Estate Sales Soar in Collin County

October sales of homes in Collin County and surrounding areas are projected to be 23 percent higher than in October 2008, reports the Collin County Association of Realtors (CCAR). In addition, "under contract" listings also increased by 27 percent from a year ago. "This is a tremendous rebound for real estate sales in this area, especially for this time of year," says Steve Haid, CCAR member services director. The CCAR Pulse, which delves into the real estate markets of 36 local communities, also reports that the time it took to sell a home in October decreased 8.2 percent from 100 days a year ago to 92 days. Year-to-date, median sales price is approximately 1 percent less than the same time last year, which is mostly due to the large number of sales of foreclosure listings. "As we continue to absorb the large number of lower-priced foreclosure properties that were listed earlier in the year, we can expect those sales to continue to impact the overall median sales price," notes Haid. "However, sales prices have held pretty steady because the prices of non-foreclosure listings has increased and offset the impact of the foreclosure sales." In addition, buyers continue to enjoy record low mortgage interest rates and very affordable homes. In fact, the Housing Affordability Index is up 18.4 percent over the same time a year ago. This means that most people in this area could afford to purchase the median priced home -which is not the case in many other parts of the country. Collin County and surrounding areas remain in an overall balanced market, as has been the case all year. However, there is a shortage of homes priced below $200,000 and an oversupply of houses priced above $500,000. "Overall, we are enjoying a strong rebound in our local market," says Haid. "Closed sales and homes going under contract are very brisk for this time of year. And, homes in the area are very affordable with low mortgage interest rates. These are the right ingredients for a strong local real estate market."