Trust games come and go. But some seem to last forever. The scammers are apparently still selling off-the-shelf Florida building lots that turn out to be underwater swamps.
But some disadvantages of real estate are worth remembering, if only because of their success.
For example, Darren Berg, a Seattle man nicknamed the “Mini Madoff” – named after Bernie Madoff, who ran the biggest Ponzi scheme in history – is still at large after escaping from prison in December 2017. Berg had been convicted of wire fraud and bankruptcy stemming from his own Ponzi scheme, which involved real estate contracts, mortgage-backed securities and other loans.
He defrauded more than 800 investors out of $120 million – small potatoes, compared to the $64.8 billion raked in by Madoff, who died in prison last year. Decades before these guys stole their herds, the man named after these tricks was indicted in Florida.
too common in history
In 1926, Charles Ponzi was convicted of fraudulent sale of swamps. He was sentenced to a year in prison, but appealed and was released on bail. He then tried to flee to Italy, but was captured and sent to Massachusetts – to serve his prison sentence for his other investment scam.
In this scheme, Ponzi banked about $20 million by convincing thousands of people to invest in international postage stamps. He used money from new customers to pay existing customers, while pocketing significant funds for himself. This is the basis of all Ponzi schemes: pay for the old with the money for the new.
But the downsides of real estate go back even further: Erik the Red, the murderous Viking explorer, succeeded one of the first, in the year 985, when he convinced several hundred of his fellow Icelanders to move with him in Greenland. He called the barely inhabitable island “Greenland” as a way to attract settlers.
Back in the present day, real estate scams are more prevalent than ever. According to Detroit law firm Maddin Hauser Roth & Heller, cybercriminals have “intensified their attacks on the mortgage and real estate industries, taking advantage of the multiple entry points available in each transaction, the lack of coordinated security efforts between parties, and the wealth of personal and financial information that awaits them after a successful breach.
The list is endless: mortgage fraud, title fraud, wire fraud, timeshare fraud, collection scams, foreclosure relief scams, credit fixing tricks and investment schemes. Earlier this year, Georgian real estate agent Eric Hill was sentenced to 30 months in prison for his part in a scheme that netted $21 million in bogus mortgages that ended in default.
How to dodge them
Here’s how to avoid scammers:
Rule #1 in any transaction is simple: if it sounds too good to be true, it most likely is. So be skeptical – very skeptical – when someone tries to part with your money.
Before putting your name on the dotted line, and certainly before handing over any money, carefully check the person or company you are dealing with.
If you’re pressured to take advantage of a deal immediately or it will evaporate, run, don’t walk, to the nearest exit. Being in a rush to act immediately is a sure sign that something is wrong in Denmark. If the deal is valid, it will still be there tomorrow.
“Stay away from high-pressure sales tactics that don’t give you time to read a contract or get legal advice before signing,” warns the Consumer Financial Protection Bureau. “Also, don’t fall into the sales trap that says you have to pay immediately – for example, by transferring the money or sending it by post.”
Don’t deal with someone who wants to be paid with gift cards. They are completely untraceable. Once you put them back on, they’re gone. And don’t deal with someone who asks for more than you owe with the promise that they’ll return the difference. Don’t take money from someone who asks you to return your money in exchange.
Do not transfer money without confirming the transaction with someone you trust. Better to use a credit card so you can reverse the transaction if you find out you’ve been cheated.
Once you’ve been presented with a “once in a lifetime” opportunity, ask for something in writing. Then read it carefully to make sure it says what you were promised. If not, keep your wallet closed. If you have any questions, talk to your lawyer first.
Write down the names and titles of everyone you speak with, as well as the time of conversation and what is said. Then check their credentials and make sure they are who they say they are.
If you’re chatting by email, never give anyone your bank account or credit card numbers. Ditto for your social security number.
Lew Sichelman has been covering real estate for over 50 years. He is a regular contributor to numerous shelter magazines and housing industry and housing finance publications. Readers can contact him at [email protected]