JUST A LITTLE OFF THE TOP: THE EQUITY SKIMMING SCAM
Florida homeowners have had much to feel good about due to the real estate recovery that has taken place since the housing market collapsed in 2007-08. But homeowners aren’t the only ones taking advantage of rising equity. Scam artists also have dollar signs in their eyes.
Although the economy has been improving and home values have been rising, it doesn’t mean every homeowner’s income and debt burden have improved. Equity-skimming scam artists concentrate on homeowners who are striving to pay their mortgage every month and who have impaired credit, making it tough, if not impossible to refinance their home loan. This is where the scam artists pounce, so people need to be cautious. In these situations, a scam artist approaches a struggling homeowner and offers to solve their problem with the perfect solution involving refinancing the home at a really good rate, and fixing the homeowner’s credit.
The scam artist uses an equity skimming technique such as a “straw man” scam where the scammer claims a third party (the “straw man”) with good credit will obtain a loan to “buy” the victim-homeowner’s house. The straw man will then rent the house back to the victim-homeowner for the price of the new lower mortgage payments. The scam artist also promises the victim-homeowner that they will use the victim’s “rent” money to pay the mortgage. At the same time, the scam artist will also propose to fix their credit so the homeowner can attain a very favorable loan to “buy” their house back. The distressed victim-homeowner agrees to this deal because it means they get to stay in their house. The scam artist tells the victim-homeowner that they will conduct the fake sale to the straw man buyer.
However, what really ends up happening is the scam artist organizes the sham sale but keeps the proceeds from the sale for themselves. They then take the rent money but do not pay the mortgage, and do nothing to fix the victim-homeowner’s credit. Since the mortgage is never paid, the house goes into foreclosure. The victim-homeowner is left with no money and is confronted with being evicted from their home. The key to the scam is the homeowner’s desperation to “save” their house rather than sell it themselves to pay off the mortgage.
Recently clever attorneys, real estate agents, and property managers have been found guilty of these types of schemes. For them it has led to disbarment or revocation of their professional licenses as well as punitive and criminal penalties. At that point though it is usually too late to complete redeem the damage that was done to the victim homeowners.
Homeowners need to be careful not to fall for this scam. First, only deal with licensed, reputable real estate professionals. If you can’t manage to pay your monthly mortgage payments and your house is worth more than you owe and you have been turned down by the banks for a refinance, then you may need to sell your house. For many this can be a very emotional decision but there may be no other legitimate choice. Second, be very wary dealing with anyone in a financial transaction that does not have a physical office unless you have thoroughly researched the company and are confident, they are licensed and legitimate. Third, talk to friends and family before entering into an agreement. Fourth, read everything you sign carefully and ask questions if you don’t understand what you are signing. Finally, if you or someone you know has been a victim of equity skimming scams or you think may be in the midst of one contact a reputable and experienced attorney to protect your rights.
Sweeney Law, P.A. Has Vast Experience in Litigation Involving Equity Skimming
Brendan A. Sweeney, Esq., LL.M., of Sweeney Law, P.A., a boutique firm in Fort Lauderdale, Florida, regularly handles complex litigation matters throughout Florida. Brendan A. Sweeney, Esq., LL.M. is an AV Preeminent Martindale Rated Attorney, that has been recognized as a Florida Super Lawyer in 2019, Florida Legal Elite in 2019, and as a Florida Super Lawyer Rising Star in 2018, 2017, 2016, 2015, and 2014. If you have any questions and/or issues regarding equity skimming contact Sweeney Law, P.A. at (954) 440-3993 immediately to protect your rights.