Real Estate Fraud!
Buyer Beware today‘s real estate challenges!
Buyer Beware real estate buyer and renters are being taken advantage of by con artist posing as for sale by owners or real estate agents. They take rent and or deposit money then disappear. Properties include abandoned properties, vacation rentals homes, annual rentals, condos and vacant lots.
Buyer Beware sometimes dishonest real estate agents are also involved in bait and switch schemes. Buyer beware this really happens! At least one home in my neighborhood was being used by scammers to divert first month rent and security deposit to someone on the internet. The listing broker had an unsecured combination lock box with a code that is given to cleaning people, handyman, and anyone in the consumer public who the broker wants to give the code to enable them to access the property alone. The combination lock box makes it easy for the broker or their agents NOT to have to accompany a prospective renter, buyer or scammer to a property.
Seller and buyer beware a scammer can call to get access into any vacant property with a combination lock box, copy the listing information from the internet and re-post it with their contact information. Usually, re-posting is done at a very low price to attract unsuspecting buyers or renter victims. The scammer gets them in and out of the property quickly and collects first month rents, security deposit or purchase deposits from as many victims as possible before disappearing. When someone shows up to move in and find out they got scammed, they are totally out of luck because there is no way to recover their lost money. The location sheriff departments say they do not have jurisdiction over the internet.
All REALTORS® take a pledge to protect property rights and the consumer public. The use of a secure REALTOR® lock box not only protects the public, it also protects other real estate agents from walking into a potentially dangerous situation with a client or if they are previewing a property alone.
HOW DOES A SCAMMER GET A REAL ESTATE LICENSE?
Southwest Florida Real Estate Boards are flooded with new licensees. The Florida Real Estate Commission is hearing hundreds of cases each month concerning real estate licenses issued to convicted felons. This happens because background checks are not completed prior to issuing a real estate license.
Buyers come to the area thinking resale properties they find on the internet sometimes offering many photos and are in good condition. Buyers don’t realize a “little fix up” can really mean a property is a total disaster. The photos on the internet do not always paint a true picture of a property. Buyers can’t smell what a property is like from the internet photos. Buyers can’t tell if a property has mold or Chinese drywall when looking at a home on line.
Buyer Beware when a listing says “cash only” the property is likely to have a big issue. It may be in very bad condition or have some adverse problem. Banks will not finance properties with termites, mold, non-permitted additions, leaky roofs or overpriced properties. (See the section on toxic Chinese drywall.)
Many buyers are not aware that it is fraud for a buyer not to disclose to their potential lender there is an adverse condition affecting the property they are buying, like mold, termites or toxic Chinese drywall. These problems often show up in the home inspection but are not found by the banks appraiser.
If the property is a condominium the homeowners may be behind in their condominium fees. The condominium community may have too many investors in the development. Banks will not finance in condo communities with too many investors.
Fannie Mae and Freddie Mac are doing spot approvals on properties they own in condominium communities which have too many investors or owners delinquent on their condominium fees, so they can get them off their books. Sometimes the buyer is required to finance with the foreclosure entity or pay cash for a foreclosed property. The property condition maybe is so bad or the financial situation is so bad a lender will not loan money to buy the property. Sometimes, listing agents won’t do their homework. They will let the buyer be the Ginny pig. Leaving it to the buyer to find out whether the property will qualify for financing or has an material defect like toxic Chinese drywall or an unacceptable financial situation with the condominium association.
Auction buyers may not know the auction property has multiple unpaid liens against it. Along with additional fees above and beyond the auction price which must be paid and sometimes no due diligence. All inspections including checking the title for liens must be done prior to the auction.
Florida Law requires the seller to disclose if they know there is anything which can adversely affect the value of the property. However, many foreclosure banks don’t abide by Florida real estate laws. Some of them will not allow the listing agent to disclose known defects to buyers.
Buyer beware any property which has been under contract and comes back on the market. There are any number of reasons why this can happen. It is not always because the buyer did not qualify for a mortgage. It could be any kind of adverse property condition, like toxic Chinese drywall or a short sale heading toward foreclosure.
Buyer beware builders advertise their lowest priced product, which typically is not available when the buyer arrives at the development to purchase a home.
Buyer beware all agents won’t disclose to the public when a property is a short sale. (See Short Sale and Short Sale Fraud on my homepage.)
Some agents are taking short sale listings and using fictitious buyers or investors to flip the property. Then they sell the property to another buyer at a higher price as soon as they close the short sale. This is type of fraud is cheating the seller and the bank out of the additional money made by the agent and or investor.
Buyer beware many builders started new developments then filed bankruptcy. They left the developments with partially build homes. Sometimes no clubhouses were built for the existing homeowners. Investors have been buying the left over inventory in some bankrupt communities and offering it for sale to buyers. These investors may not be building the rest of the community. Sometimes they hold the vacant land until the prices come back or until they can resell their interest to another developer. That developer may or may not build the club house promised to those owners already living in the development.
Buyer beware investors offer warranties or certificates saying properties don’t have toxic Chinese drywall. They limit their liability to a small sums like $500. Chinese drywall inspectors do not guarantee their inspections. They document their findings.
Some home inspectors do not take the cover off of the electrical box. They just send a photo of the closed box. A good inspector knows to remove the cover of the electrical box to look for evidence of toxic Chinese drywall damage.
Some investors are offering to sell their properties to a buyer and asking for an advance fee from the buyers. The buyer thinks they are getting a deal. Often, these investor fees are higher proportionally than many real estate commissions might be on the same property type of property listed in the REALTOR® MLS data base.
Investors are competing with banks buying their properties when auctioned at the courthouse. These investors do not pay off the mortgages or obtain title insurance. They then flip the property to an unsuspecting buyer who pays cash and who does not realize the property still has outstanding debts.
Foreclosure banks require the buyer to use their title companies. Some homeowners who feel their foreclosure was handled improperly are filing law suits. And some have gotten their homes back even after foreclosures seem to be finalized! Much caution is recommended in reviewing any exceptions to title insurance policies provided by foreclosure banks who insist the buyer choose their title companies.
There have been occasions of fraudulent dealing with attorneys who underwrite title insurance policies for builders when there are still liens on the property. Once an attorney got at 90 suspension for this behavior. I am not sure what the buyer every really got, if they did not get a clear title?
A good number people including international people are working as real estate agents without a license. When a buyer may enters into a transaction with an unlicensed person the buyer has no recourse if there are problems with the property or transaction.
Buyers tell say this to me all the time, “if you find a good deal I’ll get on a plane and fly down.” It is the listing agents job to talk you into coming down to buy their listing. Whether it is really what you want or not. Once you are here they will show you anything else they think they can sell you. Whether it is something you really want or not! Another buyer might make an offer while you are on the plane coming to see the property! The seller does not have to wait to see if you will make an offer when you get here.
Buyer beware any broker or agent can say they are a buyer broker or buyers agent. Just because an agent has an ABR Accredited Buyers’ Representative designation does not mean they do not take listings. Should a buyer become interested in a property listed by the agent or by another agent in the same real estate office; the law says there is a conflict of interest between the buyer and the seller. These brokers or agents will ask the real estate buyer to let them change their status from buyer broker to transaction broker who can no longer give the buyer full representation.
When you are considering making one of the largest investments of your life…ask Beverly Howe first!
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