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'Get-Rich-Quick' Reaches Dizzying Heights in Real Estate

Fast-buck artists make $97,000 in 3 days flipping someone else's home

By D.O. Volente
ConsumerAffairs.com

March 27, 2008

It almost feels like the get-rich-quick scammers work like trapeze artists and try to con just about anyone who is vulnerable.

And who could feel more down these days than the overstretched American homeowner?

If you've driven through any major intersection in any major city in the U.S., chances are you've passed a yard or road sign promising to buy foreclosure properties or calling your attention to a toll-free number if you want someone to assist you with your mortgage payments.

Well, if it's too good to be true ...

On Monday, prosecutors in California unsealed twin cases against 19 people who, according to agents from the Federal Bureau of Investigation and the Internal Revenue Service, skimmed nearly $13 million in equity from 115 homeowners coast to coast under the guise of a mortgage rescue scam very similar to the one described above.

Real-estate scammers "took advantage of the elevated market that peaked in 2005, and here now the vultures are waiting as the market goes down," said U.S. Attorney McGregor Scott of Sacramento.

Here is a detailed modus operandi of the scammers, as reported by leading dailies:

• Sales agents for the ring contact homeowners through mailings, offering rescue plans to those who appeared on lists used by banks and credit agencies to show owners near foreclosure.

• When the homeowners sought help, sales agents would steer them into a plan that called for owners to put an "investor" on the home's title.

• In exchange, the homeowner would pay rent to the investor, typically a sum smaller than the original mortgage payment. In reality, the investor was usually an associate or family member of the ringleaders or someone recruited via the Internet.

• The convoluted paperwork often gave the investor the right to replace he homeowner on the title.

• Within months, prosecutors say, the ring would take out a new mortgage on the property, to take out the equity.

• Homeowners either were evicted or ended up in foreclosure when the investor stopped making payments on the new loan.

In one instance described in indictments unsealed Monday, prosecutors said members of the ring transferred the title of a home in Sacramento to an "investor," who is among those indicted. The transfer occurred Oct. 4, 2004. One month later, the alleged fraudsters filed a new mortgage-loan application. By Nov. 11, 2004, they had netted $89,142 in proceeds from the equity of the home, which they wired to accounts they owned, prosecutors said.

Why now?

So why are foreclosure scams suddenly so hot.

Experts say the cooling of the housing market led to the eradication of the so-called straw buyers (using someone else's name to buy a property). So swindlers moved to the next easy target within the same industry they know so intimately: pushing the edgy homeowner over the edge into foreclosure.

Except instead of sharing the spoils (ostensibly with a straw buyer) this time around the con artists have gotten greedier.

This time around, they want your money - and your house.

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