Preventing Foreclosure Scams: How To Spot and Avoid Fraud

Unfortunately, foreclosure scams are real. In fact, agencies such as the Consumer Financial Protection Bureau (CFB) have gone after ringleaders of these scams across the country. But not all scams are brought to justice, and many families may still be at risk of falling for these fake foreclosures. Below, we’ll cover what foreclosure scams are and how you can avoid them.

What are Home Foreclosure Scams?

In all the foreclosure scams listed below, the common thread is deception and manipulation, where scammers exploit homeowners facing financial difficulties by making false promises.

Phantom Help

This is a type of home foreclosure scam in which the con artist promises to handle mortgage problems and offers refinancing or loan modification but never delivers these services. Instead, they collect payments from homeowners, claiming it will help them stay in their homes, but they pocket the money instead of contacting lenders or refinancing.

Additionally, they may offer to talk to your lender on your behalf to secure better financing for you (but they don’t talk to anyone). The Phantom Help sale leaseback with home buy back scam has many negative consequences, including the fact that the homeowner has lost valuable time and money that they could have used to avoid foreclosure.

Sale and Leaseback Scam

In this fraudulent activity, scammers offer to buy homes and lease them back to homeowners, taking monthly payments. Homeowners think they are signing documents for a leaseback, but in reality, they have transferred ownership to the scam artist. The scammer gains the title to the house and can do whatever they please because the terms of the leaseback were set up to make it extremely difficult — if not impossible — for the homeowner to ever buy back their home.

Bait and Switch

A “bait and switch” is when scammers offer to help the homeowner avoid foreclosure, but they end up tricking them out of their home. The homeowner signs documents, thinking they are for a loan or other help, but the documents transfer home ownership to the scammer. In some cases, this is a mortgage modification scam in which they promise to get your mortgage loan modified for a fee, but the paperwork you sign gives the scammer the title of your home without any form of assistance. 

How To Avoid Foreclosure Fraud

If you are looking for ways to avoid losing your home, keep these tips in mind to steer clear from foreclosure fraud:

1. Be cautious of individuals who contact you out of the blue, promising miraculous solutions to your foreclosure problems.
2. Conduct thorough online research on any company or individual offering foreclosure assistance to ensure they are legitimate and have a track record of helping homeowners.
3. Never provide personal or financial information to unsolicited callers or through online communications.
4. You should only sign papers you fully understand. Check with a lawyer or your mortgage company before entering into any deal involving your home.
5. Check to see if there are any complaints against the prospective buyer.
   
   

Know What a Real Foreclosure Alternative Looks Like

If you may be facing foreclosure, you have options. Some ways to avoid foreclosure include:

Loan modification: You negotiate with your lender to modify the terms of your mortgage.

Short sale: This is when your home is sold for less than what you owe on the mortgage with the lender's approval.

Traditional sale: If you owe less than what your home is worth and still own the title, you can sell your home.

Deed in lieu of foreclosure: You transfer the property's title to the lender to avoid foreclosure.

Bankruptcy: If you file for bankruptcy, the foreclosure process is halted as long as the sale of your home has not yet occurred.

Legitimate Home Sale-Leaseback Agreements

One of the most promising ways to avoid foreclosure is through a legitimate sale-leaseback agreement, where you sell your home to an investor who then leases it back to you. This can provide immediate relief from foreclosure while allowing you to stay in your home as a tenant.

After you sell your home to the investor company, you enter into a lease agreement with the investor. This agreement outlines the terms of your tenancy, including the monthly rent, duration of the lease, responsibilities of both parties, and any other relevant clauses. With a legitimate company, you’ll know what is in your agreement, and the company will likely suggest that you have a lawyer review the agreement because they have nothing to hide.

With a home sale-leaseback agreement, you can use the proceeds from the sale to address immediate financial concerns, such as debts, high mortgage payments, or foreclosure proceedings.

Avoid Foreclosure Scams and Find Legitimate Solutions

Being informed and vigilant is key to avoiding foreclosure scams. Always verify the legitimacy of any offers or assistance you receive, and explore genuine alternatives with trusted professionals. 

At District PHX, the residential sale-leaseback process is a smarter way to access the equity in your home without disrupting your life. If you need more information or guidance on navigating foreclosure issues, don't hesitate to contact us for assistance.