Tuesday, May 19, 2009

Federal Trade Commission Warning on Creative Real Estate: Don't Buy These Worthless Overpriced Courses Because They Teach Fraud

Once again the Federal Trade Commission has issued yet another warning to the public about creative real estate foreclosure rescue scams.

I am asking EVERYONE who is thinking about purchasing ANY creative "get-rich-quick" real estate course to compare what the author is teaching against the warnings of the FTC and other law enforcement agencies.

Like this one from the Wisconsin Bureau of Consumer Protection.

Or even this one from an author who attended real estate get-rich-quick seminars and urges you to RUN AWAY.

Most creative real estate courses you see advertised are merely foreclosure rescue scams. The author isn't teaching you how to BUY real estate at discount prices. He or she is teaching you how to STEAL it from innocent and desperate people, often elderly, unemployed, or sick.

The FTC language could not be clearer.

How the Scams Work

Foreclosure rescue firms use a variety of tactics to find homeowners in distress: Some sift through public foreclosure notices in newspapers and on the Internet or through public files at local government offices, and then send personalized letters to homeowners. Others take a broader approach through ads on the Internet, on television, or in the newspaper, posters on telephone poles, median strips and at bus stops, or flyers or business cards at your front door. The scam artists use simple and straight-forward messages, like:

“Stop Foreclosure Now!”

“We guarantee to stop your foreclosure.”

“Keep Your Home. We know your home is scheduled to be sold. No Problem!”

“We have special relationships within many banks that can speed up case approvals.”

“We Can Save Your Home. Guaranteed. Free Consultation”

“We stop foreclosures everyday. Our team of professionals can stop yours this week!”

Once they have your attention, they use a variety of tactics to get your money:

Phony Counseling or Phantom Help

The scam artist tells you that he can negotiate a deal with your lender to save your house if you pay a fee first. You may be told not to contact your lender, lawyer, or credit counselor, and to let the scam artist handle all the details. Once you pay the fee, the scam artist takes off with your money.

Sometimes, the scam artist insists that you make all mortgage payments directly to him while he negotiates with the lender. In this instance, the scammer may collect a few months of payments before disappearing.

Bait-and-Switch

You think you’re signing documents for a new loan to make your existing mortgage current. This is a trick: you’ve signed documents that surrender the title of your house to the scam artist in exchange for a “rescue” loan.

Rent-to-Buy Scheme

You’re told to surrender the title as part of a deal that allows you to remain in your home as a renter, and to buy it back during the next few years. (Emphasis added by me.) You may be told that surrendering the title will permit a borrower with a better credit rating to secure new financing – and prevent the loss of the home. But the terms of these deals usually are so burdensome that buying back your home becomes impossible. You lose the home, and the scam artist walks off with all or most of your home’s equity. Worse yet, when the new borrower defaults on the loan, you’re evicted.

In a variation, the scam artist raises the rent over time to the point that the former homeowner can’t afford it. After missing several rent payments, the renter – the former homeowner – is evicted, leaving the “rescuer” free to sell the house.

In a similar equity-skimming situation, the scam artist offers to find a buyer for your home, but only if you sign over the deed and move out. The scam artist promises to pay you a portion of the profit when the home sells. Once you transfer the deed, the scam artist simply rents out the home and pockets the proceeds while your lender proceeds with the foreclosure. In the end, you lose your home – and you’re still responsible for the unpaid mortgage. That’s because transferring the deed does nothing to transfer your mortgage obligation.

Fraudulent foreclosure “rescue” professionals use half truths and outright lies to sell services that promise relief and then fail to deliver.

NEVER EVER sign away the deed to your home to ANYONE without them eliminating the existing mortgage on the property. This is a classic fraud technique at it is common in nearly all the creative real estate courses being sold today.

Creative real estate was born in the 1970s during a period of high interest rates and tight money. These techniques were taught to real estate brokers and sales agents to put together sales that otherwise would not happen. With the success of author Robert Allen's book NOTHING DOWN an army of creative real estate gurus entered the scene with each trying to outdo each other as to how easy and how fast a fortune can be made in real estate without cash or credit.

Creative real estate has degenerated these days into little more than a criminal enterprise where overpriced and mostly worthless courses are sold at hugely inflated prices. More real estate fraud is taught than legitimate real estate investing technique.

There are MANY honest and legitimate real estate authors out there. These authors make it clear that real estate investing is not a get-rich-quick endeavor but a hard business where 80% of investors lose money. These authors give ethical advice and don't talk about playing "games" like "hide and go seek" with lenders, insurance companies, and sellers.

I will have much more on creative real estate and the gurus who sell these products in the days ahead. They are frauds and, most importantly, they know I know they are.

Robert J. Abalos, Esq.