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      Real Estate Scams and How To Avoid Them

      We all know that the real estate market is red hot right now with investors, first-time homeowners, and property patrons flocking in to take hold of the opportunities being presented to them. Consumers are racing to outbid each other and close deals in a rate that hasn't been seen since the most 2007. But amidst the sunny outlook and the positive property movements, there are those who seek to scam it. And although consumers are now more aware of scams nowadays, it's also true that these scams have gotten more sophisticated, and there's a lot more information needed to get out there to let people know how to avoid being duped.

      During the housing bubble, scams commonly manifested among fraudulent brokers issuing predatory loans (extremely unfair loan terms) or, as home flipping reached a feverish pitch, some real estate gurus charged tens of thousands for get-rich-quick courses. When the bubble burst, many of those same swindlers set their sights on cash-strapped folks facing foreclosure.

      And even though the housing sector recovered and technology evolved, real estate scams have still not subsided. Rather, despite initiatives and measures on both the federal and state level, these scams have blossomed into more elaborate and sophisticated ploys. One of the most common ones takes the form of "loan modification" wherein clients suffer extremely higher interest rates, and to some instances even go well beyond what is legally acceptable.

      So, as scams become trickier to spot, the best way to respond is to educate the public. Though Boston isn't a hotspot for these scams, you can never be too careful, especially when you're entering a deal that's as huge as buying property, as it ties you down for life. Here's a rundown of some of the most suspicious scenarios plaguing real estate right now and some awesome tips on how to avoid them:

      RENTAL SCAMS

      Most people commence their house hunts online. The National Association of Realtors estimates that 90% of consumers turn to the internet first. Scammers take advantage of  listing data to target victims, illegally pulling online listings and re-posting them as their own, hoping to profit from the deal even without actually doing anything. This happens especially when a house hunter is willing to sign for a unit with the site unseen.

      So it's safe to say that as the rental market has boomed, so too have scams. The con person will scrape a listing, re-post on another site, and pose as the agent representing the listing. In the most obvious cases, they'll  ask for money upfront for the security deposit or their broker fee. In more covert scenarios, they may not directly ask for the cash, but request that you simply wire it to a friend to prove you have the funds. The scammer will then pose as that friend and collect the transfer.

      One of the most widespread and least detected ploys -- especially in high-density, renter-heavy cities like Boston, New York, and San Francisco -- revolves around phony application fees for credit checks. The fraudster, having actual access to a home, advertises the property with an alluringly low price tag, hosts an open house, and then collects application fees from the plethora of prospective tenants who pounce on the deal on the spot  and cough up the necessary downpayment to secure it. Those would-be renters never hear from the "agent" again or if they do, it's to be informed their "application" was denied.

      TIP: The Federal Trade Commission lists rental scam warning signs on its website. Be wary if you are told to wire money upfront, and if you are asked for fees before you've met or signed the contract; if they say they're out of the country and can't show you the place right now, or ask you to give money to a "lawyer" or "agent" on their behalf. The safest way really is to verify the brokerage the agent is working for. Make sure they are from a reputable firm, or at the least have a physical and verifiable address. Referral agents are also one's best bet against these scammers. Lastly, remember that agents and brokerage firms only get their commissions once you have actually signed the lease and have turned over checks to your future landlord or management company.

      LOAN MODIFICATION SCAMS

      With millions of Americans facing foreclosure over the past five years and another nearly 10 million still upside-down on their mortgages, scammers have preyed on the most vulnerable of these borrowers. Among the most common schemes: fake foreclosure counseling, phony loan auditing, nonexistent rejoinder agreements, bait-and-switch ploys, leaseback programs, and fraudulent "government" modification programs.

      These scams typically start with a cold call from a firm promising help in the form of a foreclosure-related service. In the case of a fake mass rejoinder lawsuit, the con man will offer the chance to join a group of distressed homeowners in a suit against a lender. He might promise the suit could result in lower mortgage payments or, better yet, freedom from foreclosure altogether, in return for upfront legal fees. Upfront fees are the red flag: while mass rejoinder suits do take place, lawyers do not typically take their cut until a legal decision has been reached by the court. It is also same to assume that fees are always incurred after service has been rendered.

      In the cases of foreclosure counseling and  loan auditing (in which documents are reviewed to make sure a lender is complying with state and local laws), the scammer promises to review your loan paperwork and offer advice in return for a fee. In the most extreme scenarios -- bait-and-switch ploys and fake leaseback deals -- you surrender the title or deed to your home, either unknowingly in the case of a bait-and-switch scheme or under the belief that you will have the opportunity to rent it out and buy it back in the future.

      Most commonly, though, scams revolve around fake ties to government housing programs like the Home Affordable Modification Program (HAMP) or the Home Affordable Refinance Program (HARP). In this scenario, the fraudster will claim government program partnership, collecting your information and charging fees to "modify" your loan. He may instruct you to stop making payments on your mortgage.

      And it might be easier to be taken than you think. These fake companies utilize website addresses that look somewhat official, incorporating elements of a government program name into the url or even the term"gov." According to recent complaints received by the National Housing Authority /HUD, the caller id on a phone call may even pop up with an official name like Making Home Affordable (a housing program instated by the Obama administration), with the scammer on the line pretending to work for the Treasury Department.

      The request for money may not come initially either, as owners have become increasingly aware of modification scams. It may be presented in the second, third, even fourth meeting, as a "processing fee" necessary to move forward with applications.

      The real key to circumventing this ploy: do not proceed if you are ever asked for money. Foreclosure counseling is free from agencies approved by Housing and Urban Development (HUD). It's also vital to contact your lender -- tedious and murky though that the process of modification may be -- to investigate your options. Check out the actual government sites and their approved links -- like the Loan Modification Scam Alert website -- for even more in-depth tips.

      WORKSHOP SCAMS

      Remember those seminars that promised so much return on your investment than what seemed real? Well, they're back. Get-rich-quick schemes were prevalent during the housing bubble and now that housing affordability remains near its record high, more people have renewed their interest in real estate investing. In this scenario, a self-proclaimed investment guru will host real estate educational seminars that they promote online or with infomercials or published books. You come across their pitch and sign up for an initial course that may cost little to no money. You arrive to the seminar, veiled in mystery and ambiguous tips, and the sales pitch continues. The guru promises to bestow upon you a torrent of information -- maybe even actual properties to invest in -- if you shell out tens of thousands of dollars for an advanced course that promises the opportunity to become a millionaire.

      You fork over your hard-earned cash for the advanced course and it turns out those dollar sign-inducing promises of double-digit returns and fast money are never realized. You feel taken advantage of, but here's the catch: when you enrolled in the courses you signed a release form that prevents or limits your ability to take legal action. And that's the reason many of these workshop gurus continue to operate -- despite complaints -- and make millions in the process themselves.

      This is not to say that every workshop educator is a con artist, quite the contrary. But to avoid being scammed,  do your homework and vet an investment advisor before you shell out money for a seminar. Check out the company's rating at the Better Business Bureau and see if it is affiliated with or members of credible industry associations. This will not only help identify scammers but likely yield the names of bonafide, vetted educators.

      THE FINAL WORD

      Do your homework. Take the extra steps to ensure a firm or a workshop's credibility or a property listing's authenticity, be it cross-checking different listing sites and verifying a broker or company's licenses. It's amazing what a simple Google search can yield. Review government websites for recommendations, tips or to search for complaints. And even though everything seems to be available online nowadays, it's still a good idea to ask your friends for referrals.

      If you are going to shell out money for a product or service or application fee, try not do it with cash.  A credit card allows you to track that money or put in a claim if, heaven forbid, you've been swindled. Be wary of cold calls and of course, any time upfront fees are charged, be very suspicious. As with any scam, if it seems to good to be true, it probably is. When it comes to real estate, don't let your emotions get the better of you. And remember: there's no getting rich rapidly in real estate -- even for the pros.

      Avoid getting scammed and swindled. Contact a bonafide broker. Call us at (617) 505-1781 now! Our agents are not only licensed, but are also capable, trustworthy, and knowledgable.