Frauds and who they target

[Nicholas Varner]

Interesting article in the New York Times about "Real Estate Shell Companies Scheme to Defraud Owners Out of Their Homes". The story details Shell Companies that target desperate, poor sellers in neighborhoods in Brooklyn that are experiencing change through gentrification. The story argues "coming amid waves of gentrification, the reports of deed theft have helped feed the unease felt in neighborhoods where longtime residents — blacks and Hispanics, the poor and middle class — are increasingly being priced out." It states about the types of frauds, "Some schemes are particularly brazen, with thieves forging homeowners’ signatures and filing fraudulent deeds with the city to register transfers."

Two separate stories exist: first, the public must be wary of those groups that target the naive through a variety of false schemes. Second, the article makes an attempt at describing "who do frauds target"? 

Let's start with real estate con artists. If it sounds too good to be true, it is! Careful with those that are trying to "help you out of a jam". The fact is that if you have back taxes, are behind on your utility bills, or are elderly and are out of savings you are not in a great position to bargain. However, that's no excuse not to advocate for yourself. No one is going to fight for you as much as you are going to fight for yourself. Trusting other people to work on your behalf is dangerous, but at a certain point we need to lean on others do we not? We cannot be great at everything so we are forced to trust other individuals in our personal lives and professional lives. We must vet those that we trust and educate ourselves on the issues. One great website that is helping consumers to advocate for themselves as it pertains to contractors is www.pro.com. I have no affiliation or financial interest with pro.com, nor have I personally used their services. However, the idea of the website is to take the fragmented world of contracting services and aggregate data to put consumers in a more advantageous position to talk to contractors. This service helps provide quotes of what a bedroom that needs to be repainted should cost in Portland, Oregon or what a kitchen remodel would cost in Dallas, Texas. In this way, it helps frame conversations to understand if the contractor is in the ballpark with pricing and services or if they are way off. 

In terms of real estate scams like coercing homeowners into signing over the deeds to shell companies, you must read the contract. There is simply no substituting reading the contract and knowing what you are signing. If you do not understand it, have them explain point-by-point to you. If you ask questions and the responses do not make sense, the problem is not with you, it's with the "business owner" that cannot explain her services and products to you. One particular "product" that I dislike are reverse mortgages. These commercials come on during the "Rockford Files" or "Matlock" in the middle of the afternoon on a Wednesday and are targeting poor elderly individuals who have been in their homes for 25+ years and have free and clear homes. They are out of money or on fixed incomes that are not making ends meet. These predatory vendors come along and offer them "a way out of their troubles". If this isn't targeting a naive and vulnerable consumer, I do not know what is? These are loan sharks preying on the elderly. 

The one point I dispute in the New York Times article is the idea that frauds care about race. I do not think these groups care if they are getting deeds from blacks, hispanics, white, or asian. They just want the deed to the house and are looking for desperate sellers. There are plenty of desperate white sellers. Race does not factor into a fraud's psyche. 

I remember a time where a white realtor represented a black seller. They received an offer which the seller accepted. Inspections were passed and then the deal went to title. Title revealed a lien from a vendor on the house for 50% of the sales price. The seller assumed she was getting that money and made a variety of life decisions based on that assumption. When title gave the bad news to the seller, the seller blamed the realtor. "I never should have trusted you...........guys". Of course, the realtor was not at fault for an action the seller had taken years ago on her own house. The realtor had even asked if there were any outstanding mortgages or liens. "No," she replied. The realtor wanted to sell that house for her as much as she did, but there was still an education gap. 

As real estate professionals, it's easy to assume that the public and investors know a lot based on information being more public than ever before. However, really we still have to educate our clients on how everything comes together, understanding risks, frauds, finance, and so on.