How to Steal a House: The Latest Scam On the Block

Here’s how it generally works:

The con artists start by picking out a house to steal—say, YOURS. 
Next, they assume your identity—getting a hold of your name and personal information (easy enough to do off the Internet) and using that to create fake IDs, social security cards, etc. 

Then, they go to an office supply store and purchase forms that transfer property. 
After forging your signature and using the fake IDs, they file these deeds with the proper authorities, and lo and behold, your house is now THEIRS.

There are some variations on this theme…
Con artists look for a vacant house—say, a vacation home or rental property—and do a little research to find out who owns it. Then, they steal the owner’s identity, go through the same process of transferring the deed, put the empty house on the market, and pocket the profits. 

Or, the fraudsters steal a house a family is still living in…find a buyer (someone, say, who is satisfied with a few online photos)…and sell the house without the family even knowing. In fact, the rightful owners continue right on paying the mortgage for a house they no longer own.

It can get even more complicated than this, as we learned in a recent case out of Los Angeles that we investigated with the IRS. Last year, a real estate business owner in southeast Los Angeles pled guilty to leading a scam that defrauded more than 100 homeowners and lenders out of some $12 million. She promised to help struggling homeowners pay their mortgages by refinancing their loans. Instead, she and her partners in crime used stolen identities or “straw buyers” (people who are paid for the illegal use of their personal information) to purchase these homes. They then pocketed the money they borrowed but never made any mortgage payments. In the process, the true owners lost the title to their homes and the banks were out the money they had loaned to fake buyers.

So how can prevent your house from getting stolen? Not easily, we’re sorry to say. The best you can do at this point is to stay vigilant. A few suggestions:

If you receive a payment book or information from a mortgage company that’s not yours, whether your name is on the envelope or not, don’t just throw it away. Open it, figure out what it says, and follow up with the company that sent it.

From time to time, it’s also a good idea to check all information pertaining to your house through your county’s deeds office. If you see any paperwork you don’t recognize or any signature that is not yours, look into it.

House-stealing is not too common at this point, but we’re keeping an eye out for any major cases or developing trends. Please contact us or your local police if you think you’ve been victimized.

Other Emerging Schemes
The Short-Sale Fraud  Short-sale fraud schemes are difficult to detect since the lender agrees to the transaction, and the incident is not reported to internal bank investigators or the authorities. As such, the extent of short sale fraud nationwide is unknown. A real estate short sale is a type of pre-foreclosure sale in which the lender agrees to sell a property for less than the mortgage owed. In a typical short sale scheme, the perpetrator uses a straw buyer to purchase a home for the purpose of defaulting on the mortgage. The mortgage is secured with fraudulent documentation and information regarding the straw buyer. Payments are not made on the property loan so that the mortgage defaults. Prior to the foreclosure sale, the perpetrator offers to purchase the property from the lender in a short-sale agreement. The lender agrees without knowing that the short sale was premeditated. The mortgage owed on the property often equals or exceeds 100 percent of the property’s equity.

The Property Flipping Scheme
The property flipping scheme involves the perpetrator (property flipper), an accomplice appraiser, and a straw buyer. The property flipper purchases a property for $20,000. He then has the property fraudulently appraised for $80,000. Next, the flipper sells the property for $80,000 to a straw buyer who obtained an 80% loan of $64,000, giving the flipper a $44,000 profit. The property usually results in foreclosure, leaving the bank with a $64,000 loan on a $20,000 property and a loss of $44,000. If the loan was FHA-insured, the government absorbs the loss.

The Builder-Bailout Scheme
Builders are employing builder-bailout schemes to offset losses and circumvent excessive debt and potential bankruptcy as home sales suffer from escalating foreclosures, rising inventory, and declining demand. Builder-bailout schemes are common in any distressed real estate market and typically consist of builders offering excessive incentives to buyers, which are not disclosed on the mortgage loan documents. Builder-bailout schemes often occur when a builder or developer experiences difficulty selling their inventory and uses fraudulent means to unload it. In a common scenario, the builder has difficulty selling property and offers an incentive of a mortgage with no down payment. For example, a builder wishes to sell a property for $200,000. He inflates the value of the property to $240,000 and finds a buyer. The lender funds a mortgage loan of $200,000 believing that $40,000 was paid to the builder, thus creating home equity. However, the lender is actually funding 100 percent of the home’s value. The builder acquires $200,000 from the sale of the home, pays off his building costs, forgives the buyer’s $40,000 down payment, and keeps any profits. If the home forecloses, the lender has no equity in the home and must pay foreclosure expenses.

Remember, in these troubling and uncertain times, investors must keep vigilant. Check and double-check all aspects of a transaction. Taking the extra time to verify information before the deal can help prevent big losses and heartache after.

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