Real Estate Scams Aim to Hit You Where You Live

It’s prime location for scammers, scoundrels and bloodsuckers: real estate.

Think about it. Among the precious possessions we store in our homes is our self-worth, making it impossible for us to emotionally separate from our most precious possession.

Take Dale Haun and his wife, Clancy, who bought their dream home in Tucson, Arizona, in 2000. For the first six years, they were able to pay their mortgage and still put some money down. savings aside.

“Financially, we are in good shape,” Dale said.

It was a good situation, the dream house made them dream about the future.

“I thought, we’re going to buy this house and we’re going to pass it on for generations and it feels like a homestay here that’s been our home for seven generations, you know. Become a family. that family,” Clancy recalled.

So when a sales representative from a company calling itself Pacific Wealth Management presented Hauns with a plan that was supposed to allow them to refinance and pay down their mortgage years early, they jumped in.

“We thought, if we could pay off this house early, it would get paid and done, which was very unlikely,” Clancy said.

But it turned out to be a scam, running from a home in Orange County, California. Ringleader James Duncan, who calls himself the “Cash King,” simply co-opted his company name from a legitimate San Diego company called Pacific Wealth Management and raised millions of dollars from investors. investment without a doubt. He and an associate, Hendrix Montecastro, are both in prison.

Hauns’ monthly payments not only nearly doubled, but they also lost more than $70,000 in equity and $10,000 in savings. Now they owe more than the value of the house.

“I feel like a little girl who is always happy until something happens and then life becomes meaningful,” Clancy said.

Real estate scammers are certainly mean, and there are plenty of them out there. Paying attention to past scams can help you avoid being affected where you live. Here are some of the wildest real estate scams ever discovered and what you can learn from them.

What are the three rules of real estate? Location, location, location. One North Carolina company, Total Realty Management, hit that theme when it marketed undeveloped real estate to hundreds of Washington, DC area residents — including teachers and Pentagon staff — on early 2000s. With the housing boom wind at his back, owner Mark Dain sold undeveloped beachfront lots for $400,000 a lot.

But the boom went bust and the price dropped to just $10,000/lot. It turns out that TRM used fake appraisals and loan applications to allow people who could not afford to buy plots of land, while the big banks allegedly looked the other way. The company also lured investors by falsely claiming that North Carolina celebrities like Michael Jordan had trusted money with TRM.

Dain pleaded guilty to a single conspiracy count and served six months in prison. Three employees have also served time in prison, and civil lawsuits still abound over what authorities call the largest real estate scam in North Carolina history.

TRM is selling land to people who want to live there, but also as investment property that they can “turn around” as prices rise. And with home prices rising again, housing is back in vogue.

But investing directly in real estate can be extremely risky. Most of us don’t have the expertise to renovate a home profitably; Fewer still know how to navigate the real estate market and don’t get entangled in precarious assets.

If you still want to try to make money in real estate, consider Real Estate Investment Funds or REITs. As the name implies, it is a professionally managed organization that allows investors to pool their money to buy and sell assets. They tend to focus on a specific type of property – such as hotels, office buildings, apartment complexes.

And many exchanges are like stocks, which means the Securities and Exchange Commission oversees them. The SEC has a good chance of REITs on website. Some things to consider:

• Make sure you understand the tax implications of investing in a REIT. If not, talk to a tax advisor.
• If you are investing in an exchange-traded REIT, you can check it out just like any other company. If not, be sure to read the fine print. Some REITs that don’t trade on an exchange can be difficult to sell if you need to.

Television advertising couldn’t get away with the Midwest throughout the 1980s.

Actor George Hamilton, looking as fit and permanently tanned as he had been in any episode of the TV series “Dynasty” of the same period, sat in an appointed office and showed viewers know how they can earn extra money each month by refinancing their home through the Diamond Mortgage Company.

Flip to the next channel, and there’s actor Lloyd Bridges, looking as raw as he used to be when he played Captain Mike Nelson in “Sea Hunt,” but with a more engaging feel. In an ad clearly geared towards seniors, Bridges is strolling around her beach house with what appears to be her grandson on her shoulder.

“Plan for the future with an investment that grows over the years,” he said before turning to the sea.

He is promoting “safe” investments with a company called AJ Obie.

What the advertisement leaves out is the fact that AJ Obie and Diamond Mortgage are essentially two affiliates of the same company.

Diamond will be the source of mortgages, often for high-risk borrowers who cannot borrow elsewhere. Obie would sell those mortgages as safe-haven investments, often to seniors who are more inclined to believe in real estate than the rising stock market.

Soon, the plan began to show cracks. Individual Diamond mortgages have been assigned to more than one Obie investor. Some of Obie’s investments have no collateral backing them. And some Diamond borrowers never received their money, but still found their homes mortgaged and unsold. The scam netted thousands of investors in six states out of $75 million — worth $156 million today.

Owner Barton Greenberg, who ran the company with his late brother Sheldon, served six years in prison and actually got back into the mortgage business after being released from prison in 1994. Regulators reason soon put an end to that.

Hamilton and Bridges reached secret deals with investors who sued over glossy advertisements.

Most real estate scams involve mortgages – an ideal breeding ground for scams because they are so complex and because the sheer amount of money is at stake.

The Federal Trade Commission has an entire section on its website devoted to mortgage scams. Among the warning signs, the FTC said:

Beware of anyone who guarantees that they can lend you a loan or avoid foreclosure.

• Avoid anyone asking for an upfront fee.
• Don’t listen to offers to buy a home with cash for less than similar homes in your area.

The FTC site doesn’t say anything about celebrity endorsements, and since scandals and major settlements, celebrities have become more careful about the companies and products they want. However, don’t be swayed by the actors. They manipulate emotions for a living.

The biggest scandal that led to the 2008 financial crisis has a lot in common with the Obie/Diamond scam, and not just the fact that one of the central characters of this scam is also tanned. forever. This scam also involves lending to homeowners and selling mortgages to investors.

Countrywide Financial is based in California and founder Angelo Mozilo once pioneered what are known as primary subprime mortgages – home loans for low-income borrowers with poor credit. But rather than risk lending money to a homeowner that might not be repaid, Countrywide has packaged those loans into securities that are sold to large investors looking to bet on the housing market.

When housing collapsed under all the risky loans made by Countrywide and many other companies, it nearly brought the entire economy to a standstill. Mozilo was never charged, but settled with the SEC for $67.5 million. Bank of America, which took over Countrywide in 2008, agreed to pay nearly $17 billion in fines last year.

Less discussed, however, are the thousands of people who have been allowed to borrow from Countrywide even though they have no businesses that are so heavily indebted. At the heart of charges filed by the Justice Department and six states are claims Nationwide engages in predatory lending practices — tricking borrowers into taking out expensive loans they can’t repay.

The Mortgage Bankers Association has developed a Borrower’s Statement of Interest to help you ensure that you are not taken over by an unscrupulous lender.

Among the terms:

• You have the right to a clear explanation of the terms and conditions of the loan.
• You have the right to get credit advice before the loan ends.
• You have the right to a fair and reasonable resolution of any dispute.

The advice is equally important if you’re considering refinancing your mortgage, which more and more homeowners are doing as interest rates drop.

For Hauns of Arizona, an unscrupulous lender’s promise that they could achieve their dreams of financial independence by refinancing turned into a nightmare that could haunt them for the rest of their lives. .

It’s unfortunate that they’re among the hundreds of victims of a $125 million scam run by the self-proclaimed “Cash King,” or they’re among the countless real estate scams each year.