With a record number of foreclosures happening across the United States, many distressed homeowners don’t know where to turn. In Nevada, where foreclosure rates are among the highest in the nation in cities like Las Vegas, the state government tired of waiting for Washington, stepped in and set up a toll free hot line to help homeowners get answers to their questions. Unfortunately, that hasn’t stopped less ethical business people and scam artists from preying on these individuals. These individuals will often target distressed properties and their owners and offer to "help" them get out of foreclosure….which always ends up costing the homeowner.

Be a Smart Homeowner

Of course homeowners should be a little leery of offers that sound to good to be true. A little due diligence on a homeowner’s part can save them a lot of grief later on. If a business approaches you, check them out thoroughly before giving them any money! Nevada homeowners should contact the state foreclosure hot-line first and avail themselves of the free, up to date information provided there. There are step by step instructions on who they should call first, how to negotiate with their lender and other helpful, free advice. Foreclosure happens because of a variety of reasons to most homeowners, but the most common reason today is the type of loan (adjustable rate) those individuals took out on their homes. The interest rate adjusts and goes up and up and if the homeowner is unable to refinance to a fixed rate loan with affordable payments, the home goes into foreclosure.

Foreclosure Scams

There are several different foreclosure scams used by criminals. Let’s look at one of the more common scams out there.

Straw Buyers

A straw buyer is defined as an individual used to buy property in order to conceal the actual owner. The straw buyer does not intend to occupy the property or make payments & often deeds the property to the other individual immediately after closing. A straw buyer may or may not know that their name will be on the loan application. The straw buyer is usually compensated for use of his identity. Normally the straw buyer gives control of the property over to the originator of the scheme, who then proceeds to not make any payments on the property until it is foreclosed on by the bank. However, there have been cases where the straw buyer has been scammed as well. The buyer will give the agent money up front in order to purchase the property (at an over inflated value). These buyers often move into the property with the intent on living there. It’s only after several months do they realize they’ve been part of a scam. The duped buyer may still be responsible for the property or worse. For example, if the buyer knowingly made false statements to obtain the loan, even at the urging of the scam artist, they may face criminal charges as well. The scammers usually make their money on the purchase of the property through a commission or by obtaining funds from a ‘buyer’ (or both). Generally for this scam to work, there has to be a few people involved, especially if the home is being purchased for an over inflated value.

Typically these scams are run on several properties until either the perpetrators are caught or they have moved on. The properties are eventually foreclosed on and the bank takes possession of the property, putting them back on the market (this time at their true market value or less). In areas with a high amount of fraud, you may even see several properties owned by the same bank in the same neighborhood.