By Benny Kass
Saturday, June 14, 2008
Q: Do you recommend companies with pitches such as "we buy ugly houses" or "we pay immediate cash for your house"? What about people who knock on your door offering to assist you by paying off your mortgage, or by buying your home and allowing you to rent back until you get back on your feet?
Are they safe? Can this come back to haunt you?
A: Beware and be careful.
There are legitimate companies that buy houses through mass-mailing solicitations or media advertising. But there are also scam artists who will take advantage of you, especially if you are in desperate financial straits.
How do you determine if a company that contacts you is legitimate? You need to check out the company as thoroughly as possible.
First, call the company and find out where it is located. Under no circumstances should you provide any information other than your name. If you are asked for your banking information or Social Security number, just say thank you and hang up.
Ask whether they have a Web site, and if they do, go on the Internet to examine that site. Of course, having a mailing address and a Web site don't make a company legitimate -- anyone can fake them. But any legitimate company will have both.
Contact your local Better Business Bureau to determine whether there have been any complaints filed against that company. Keep in mind, however, that scam artists will often change the company name to keep ahead of those who want to investigate them.
Contact AARP, the advocacy group for senior citizens. Typically, predators will go after elderly persons, because they have found that, unfortunately, many older people are easier to defraud. This group often tracks known bad guys.
If you are in financial difficulty, discuss your situation with your lender. As a result of the subprime mortgage fiasco, many banks are willing to work with you so that you can keep your house. Additionally, many local and state governments have assistance programs, and your lender should be able to identify these for you.
If you have done your homework and have exhausted all other remedies, you may want to talk with one of the companies that have approached you. Ask them to put their purchase offer in writing. If they refuse, do not proceed further. Keep in mind that oral statements do not count in real estate transactions.
When you get the written proposal, I strongly suggest that you contact a local lawyer to assist you in understanding the transaction and reviewing the sales contract. If you cannot afford a lawyer, ask the company to give you a few hundred dollars in advance so that you can get a lawyer. Alternatively, there are a number of free legal services programs, and this information can be obtained from the local bar association. Under no circumstances should you use a lawyer selected by that company; that lawyer cannot properly represent your interests.
If you are satisfied that this company appears to be on the up and up and you are comfortable with the purchase price, then you can sign the contract. The contract should contain three important provisions:
· You have the right to select where settlement will take place. You can go to a title attorney or a title company; where is your choice.
· The buyer will immediately give an earnest money deposit of at least 10 percent of the purchase price to the settlement company or title attorney.
· A fixed settlement date will be spelled out in the contract. If you are living in the house, you want to know when you will have to move. You can also insist on getting a "post-settlement occupancy" agreement, whereby you will be able to stay in the house for a period after settlement. Such an agreement should spell out exactly when you have to vacate, and how much rent (if any) you will have to pay your buyer.
There are a number of approaches that scam artists use. A couple common ones:
· You are behind on your mortgage and are concerned that your house will be foreclosed upon. You meet a person in your neighborhood who tells you that he will lend you enough money so that you can become current and also have enough money to pay your mortgage for the next five or six months. That sounds attractive. A day later, the person comes back with a bunch of legal documents and says, "Just sign here and here, it's just a form."
But the "form" is actually a deed to your house. You sign it thinking that you are just getting a loan, when you have given your house to this stranger for considerably less than it is worth.
There have been a number of court cases against people who have done this, and the courts have often set aside the fraudulent deed and ordered that the house be deeded back to the true owner. Although a legal remedy is available, you don't want to spend months -- or years -- in court. If you are asked to sign any documents, read them carefully and consult a lawyer if you don't understand what you are being asked to sign.
· A variation on this theme is that you receive a mailing from a company that says it will buy your house, allow you to live there for a period of time and then permit you to buy it back when your financial situation improves. However, the buyback price is often very high -- beyond what most people could afford. Many states, including Maryland, have laws that impose many restrictions on this practice. If you get this kind of offer, before you even start to consider it, check it out with your local government consumer affairs or attorney general's office.
Your house is a valuable asset, even in today's depressed market. Because so many homeowners are in trouble and are facing foreclosure, the level of scam operations is rising.
Remember, if the offer sounds too good to be true, it probably is not right for you.
Benny L. Kass is a Washington lawyer. For a free copy of the booklet "A Guide to Settlement on Your New Home," send a self-addressed stamped envelope to Benny L. Kass, Suite 1100, 1050 17th St. NW, Washington, D.C. 20036. Readers may also send questions to him at that address or contact him through his Web site, http://www.kmklawyers.com.
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