Bird Dogs must Avoid Real Estate Scams – Training Lesson 15

Within days of showing up on notice of default or foreclosure auction lists, desperate homeowners are beset by hordes of supposed white knights.   During the three months it typically takes a lender to foreclose, some distressed homeowners will receive as many as 20 calls or letters daily from firms promising to help them keep their houses.

The outfits are sophisticated, carefully targeting owners whom the tax records show have been in their homes for years, a sign they may be sitting on a nice chunk of equity.  These “foreclosure rescuers” know better than to go after homes refinanced or purchased last year [with subprime loans], because chances are it was a 100% loan and there’s no equity to strip out,”.  However, honest foreclosure rescuers may try to assist the homeowner with a short sale.

Most commonly, the rescuers then coordinate what they say is a refinancing through a designated investor (bird dog), or they arrange a deed transfer with a rent-to-own plan that will supposedly allow the owners to buy back their homes down the road. But usually buried within the stack of closing documents is a so-called quit claim, or deed of gift, in which the homeowners effectively sign their houses over to the investor. At that point, the rescuers charge the former owners rent high enough to ensure they can evict them and pocket the equity built up in the property.

Some of these operations are quite complex. A number of firms recruit staff through real estate seminars or late-night TV infomercials to work either as “door knockers,” who pay visits to distressed homeowners, or as “bird dogs,” who serve as fake buyers.  Take Real Estate Investor’s Advantage (REIA), a Fort Washington (Md.) outfit run by Nathaniel X. Arnold that filed for bankruptcy and shut its doors last year. The firm’s Web site advertised seminars in which attendees paid $1,995 to become a “credit partner” in its “Real Estate Exchange & Profit System.” In the pitch, REIA sought out individuals with good credit to be both door knockers and bird dogs in these transactions. In return, they would be paid a flat fee or a cut of the profits.

As a Real Estate Bird Dog, be careful not to get involved with lease-buyback scams, which are now illegal in many states.   Also, never agree to be a credit partner in which you get a mortgage for someone else as you may end up with a lot of debt when they skip the country.

While the schemes vary in their mechanics, all follow a similar pattern. An individual or group, in the guise of helping a homeowner avoid losing his or her house, persuades the owner to transfer the title to the rescuer or another designated buyer.

The practice has become easier with the rise of Web sites like PreForeclosure.com and All-foreclosure.com, which give subscribers listings as soon as mortgage lenders file a “notice of trustee sale” with the courts, the first step in the foreclosure process. Such sites, which compile public records to provide legitimate leads for investors in distressed properties, as well as services for homeowners, also give unscrupulous individuals direct access to potential targets.

Filed under: Real Estate Bird Dog Training

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