Seen on the Fox 9 News last night was yet another mortgage scam to watch out for and you can see the investigation here. Mortgage fraud and scams aren’t new to Minnesota and definitely sheds a black eye on the industry.
The scam dubbed “builder bailout” operated when an appraiser knowingly inflated the price of the house. The house was then listed at the inflated appraisal price. A straw buyer came by and purchased the home at the listed price, then the title company would close the deal. All knowing that the deal was fraudulent.
Here is a different “builder bailout” that use to go around (not to sure if it still is). Not quite sure what happened to it or if the someone threw the hammer down on this but it went down like this:
- Investor Buyer would start a LLC or some sort of company
- Home Builder would offer discounts on properties (usually in 9%-13% range)
- Investor Buyer would buy the home for a set price (could also be zero down)
- Money in the amount of the discount would be given back to the buyer at closing because it was a business to business transaction (back to 1 because buyer started a biz in the LLC), but the mortgage would be on the purchase price.
I had a chance to see some of these properties that were new construction, the price seemed to be inflated a little bit but not a lot. They were not good buys and the properties did not comp out withe relevant properties in the area. Investor buyers would buy these homes on the basis of “rent to own” or a “buy and hold”.
It’s almost like they would always go after the first time home investor because of them being unsuspecting and the rebate was pretty good. These mortgage fraud schemes go along the lines of “To Good To Be True”. If you come across something like this make sure and report it to the Minneapolis FBI Field Office for Mortgage Fraud or the Minnesota Attorney General Office to file a complaint.
