Every single day I speak with people who are in foreclosure. These conversations always have several things in common: A stressed, and frustrated homeowner, a bank that has been utterly useless in terms of making the situation any better, and the one that burns me up more than anything else – someone who has attempted, or worse, succeeded at taking advantage of the homeowner in distress, by attempting to perpetrate any number of scams.
I want to cover three of the most common scenarios I come across so that if you run into any of them, you’ll know to run away from them just as fast as you can.
- Upfront Fees I can’t tell you the amount of money that people I speak with have spent on bogus, illegal, upfront fees. It is illegal for anyone – and I mean ANYONE – to ask you for an upfront fees in connection with helping you with a home in foreclosure – particularly for a modification. This includes attorneys. A lot of attorneys will say they are charging you a legal retainer fee for “other services.” If those services really amount to modification services, however, no fees can be charged legally.
- Bankruptcy Since I’m on the topic of attorneys … Remember that they are not exempt from dirty, unethical practice. A dozen times a month I talk to people who have read advertising by attorney’s offices that states that they can “get you out of foreclosure,” the implication being that they can truly solve your problem. Clients file bankruptcy thinking that they are safe, not realizing that bankruptcy is only a temporary solution, that buys you some time to figure things out. It is not permanent. If you come across an attorney who leads you to believe that it is the answer to all your questions, try reporting him to the State Bar. And don’t pay him anything.
- Short Sale Scams It is illegal for you to receive any benefit from the sale of your home if it is done through a short sale, unless the bank approves it. And unless you are receiving $3500 from the HAFA Program, or the bank has agreed to a nominal amount of “cash for keys” the bank won’t approve it, trust me. A good friend of mine who was substantially upside down on her property had someone approach her and promise to give her $30,000 if she would allow him to “help her” with her short sale. Not only is this unlikely, but if you accept money from an agent or investor who agrees to “share” in the monies earned by them through commissions, you could be breaking the law, and are subject to penalty, fine and imprisonment.
I’ll cover more pitfalls to watch out for in a future post, but if you or someone you know is in foreclosure, these three seem to be some of the most popular. If you should see any shenanigans coming your way, now you will know what to do.