I hate to keep beating a dead horse – but then, real estate fraud is far from a dead horse. In fact, people are being taken in by crooks more than ever.
Real estate is an especially fertile ground for criminals: Transactions are complex, lots of people are involved and much of the information needed to hoodwink someone is available online. And scammers exploit each of those facets.
West Virginia attorney Kim Gilbert-Toelle helped catch a scammer who forged a death certificate, then tried to use it to open probate on a legitimate homeowner and sell the property out from under him as the administrator of the estate. When Gilbert-Toelle realized the certificate was fake, she worked with the FBI to apprehend the bad guys.
Unfortunately, she said she was told the rotten apples had gotten away with it “a number of times before.”
Then there’s wire fraud, which takes many forms. In one well-known variant, shortly before homebuyers close on their new property, a miscreant sends them false instructions about where to send their down payment and closing costs. Once the funds are received, they are quickly transferred out of the country, rarely to be seen again.
“Every stage of the real estate transaction is vulnerable,” according to a report from CertifID, a wire fraud protection company. “The buyer’s cash to close, the seller’s net proceeds and mortgage payoffs are all at risk.”
Meanwhile, bogus letters are urging homeowners to “renew” a home warranty they never had. I received one labeled as a “FINAL NOTICE,” which warned that the (nonexistent) warranty was about to expire.
“Our records indicate that you have not contacted us yet to get your home warranty up to date,” the letter said. “Please call immediately, as this will be our final attempt to notify you.”
Yeah, right. And this was in addition to the hundreds of emails I receive every month from legitimate warranty outfits trying to sell me a contract.
Alleged Fraudster Firm Halted
Meanwhile, in the face of numerous legal challenges, MV Realty – the Florida firm that allegedly duped hundreds, if not thousands, of homeowners into giving away the right to list their properties with whomever they desire in exchange for cash payments of up to $5,000 – has shut down its so-called Homeowner Benefits Program and is redrafting its contract.
Under the program, owners can sell anytime they want, but if they do so within the next 40 years, they must list their places with MV Realty. If a seller uses any other broker, the company will still demand its share of the commission. The company also records the contract as a lien against the property.
In exchange, and upon signing a binding contract, owners are paid anywhere from $300 to $5,000, depending on the property’s location and other variables.
As of this writing, eight states outlaw these kinds of contracts, which are known legally as Non-Title Record Agreements for Personal Service (NTRAPS). Utah was the first to ban NTRAPS, followed by Colorado, Georgia, Tennessee, Idaho, North Dakota, North Carolina and Maryland.
In other legal action against MV Realty, Massachusetts has obtained a preliminary injunction blocking the outfit from presenting itself as a real estate company when it actually offers a loan product. The commonwealth maintains the Homeowner Benefit Program is, in effect, a loan and that the company used “unfair and deceptive marketing and sales tactics” to hide the true terms of the contract.
“MV Realty customers are unaware of the core terms of the transaction and are unwittingly saddled with a mortgage on their home, tying up what is most likely their most valuable asset, restricting their ability to refinance and preventing them from selling without paying a tenfold penalty to MV Realty,” Massachusetts Attorney General Andrea Campbell said in a statement.
For what it’s worth, the Massachusetts AG’s office also said cash payments under the program were usually less than $1,500.
Other States Join Push
Attorneys general in Florida, Pennsylvania and North Carolina also have sued the company, claiming its practices are unlawful. Pennsylvania is also going after MV’s founder, Amanda Zachman.
“MV Realty is a scam that exploits Pennsylvanians in vulnerable financial situations, and my office isn’t buying it,” said Pennsylvania Attorney General Josh Shapiro in a statement.
Added Attorney General Josh Stein of North Carolina: “My office is taking MV Realty to court to put them out of business because we allege they’re preying on vulnerable people to trick them into unfair, long-term agreements.”
At the federal level, senators Ron Wyden of Oregon, Tina Smith of Minnesota and Sherrod Brown of Ohio have called on the Federal Trade Commission and the Consumer Financial Protection Bureau to investigate the practice of exclusive real estate listing agreements such as those peddled by MV Realty.
Wyden, Smith and Brown urged the consumer watchdog agencies to work with state attorneys general to review whether long-term listing agreements violate federal consumer protection laws, including prohibitions against unfair, deceptive or abusive acts and practices, and to take appropriate action where violations are found.
For its part, MV Realty, which claims to have “helped” 35,000 clients obtain much-needed funds to pay their mortgages, utility bills and the like, say it believes its business practices comply with all laws. It also maintains the terms of the 40-year pacts are clear and legal, and are filed in the land records “only to note” its position as the owner’s future listing agent.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.