"We Buy Houses" Scams. How to Spot Scams and How to Avoid Them.

There are many reasons why a home owner would want to sell a house fast. Job change, relocation, debt problems, divorce and inheritance are just a few. Unfortunately, people in need also tend to attract predators who have no problem profiting from someone else's misfortune.

If you're looking to sell a house fast, here are a few scams to be on the lookout for and how to avoid becoming a victim yourself.

Equity Scam
One of the most common types of "we buy houses" scams allows the "buyer" of the home to make off with most or all of your equity. It begins with you transferring your home's deed to the "buyer." The buyer may then have you make payments to him instead of the mortgage company, or he may have you move out so he can begin renting out the house.

There are several ways the buyer can then profit from this transaction. First, he receives some sort of payment every month — whether from you or from the renter. Second, he can use the equity in your home to secure home equity loans or other lines of financing. Third, he can simply resell the house without satisfying the outstanding mortgage.

Ultimately, once most of his profit is exhausted, he simply stops making payments on the mortgage and allows the home to go into foreclosure, because while he holds the deed to the home, he never assumed liability for the mortgage. As a result, you are left with a foreclosed home, no remaining equity and a significant black spot on your credit history.

Contract Bait and Switch
The contract "bait and switch" is a clever scheme that takes advantage of the trust between buyer and seller.

In one version of this scam, the home buyer inspects your house and makes a verbal offer that you accept. A few days later, he presents you with a written contract that he presents as "just a formal, legal version" of your verbal agreement. Because you believe it to be the same offer you had already agreed to, you simply skim it and sign on the dotted line.

In the time between signing and closing, he may also deliver one or more "minor changes" to the contract. He presents these as simply "a few tweaks" and nothing that really affects the original agreement.

At some point, though, possibly at the closing or even later, you discover that the last contract you signed actually bears little resemblance to the initial offer, and you are either stuck with a losing home sale or tangled in legal battles for months or even years to get out of the contract.

Liberian FSBO
This scam is an interesting twist on the Nigerian Scam or 419 Scam. In it, a person outside the U.S. contacts you after seeing your house on a For Sale By Owner site, telling you that he is looking to move to the U.S. soon and can pay cash for your home. His story is compelling to the point that you actually feel good about helping him out — not to mention being able to sell your home.

Ultimately, though, his only goal is to get you to transfer him money and/or to get access to your bank account so that he can transfer the funds himself before you realize what has happened. And because he is outside the U.S., recovering your money can be next to impossible.

How to Protect Yourself from Scams
If you need to sell a house fast, here are a few rules for protecting yourself from falling prey to a scam like these.

Only Work with Professionals
The best way to protect yourself from scams is to work only with real estate professionals. Never sign documents you don't understand. It is always recommended that you consult an attorney before you sign documents you do not understand. Make sure that closing takes place at the title company, and/or real estate attorney is involved (depending of the rules in the state where you live).

Check Out the Buyer
If you have any concerns about the buyer, don't hesitate to check them out. Contact your state Attorney General's office, your state's Real Estate Commission, or your District Attorney's Consumer Fraud Unit. If they are an established business, also check out the Better Business Bureau.

Always Understand What You're Signing
Not asking questions because you are afraid of looking stupid could end up costing you tens of thousands of dollars or more if you end up in a deal that wasn't what you thought it was. A lawyer or even your mortgage company can help you if you want professional advice from a third party. Never, ever sign a contract that you don't understand. It is always recommended that you consult an attorney before you sign documents you do not understand.

Get All Agreements in Writing
If a disagreement arises about a verbal agreement, the issue becomes your word against theirs and often must go to a court of law to be settled. Don't risk that. Insist that all terms be in writing, and don't agree to anything that isn't.

If something sounds too good to be true, it usually is. So don't get so emotionally tied up in the sale of your home that you abandon caution and logic.

On July 30, 2009, New Government Regulations May Impact Closing Dates

On July 30, 2009, new amendments to the Truth In Lending Act (TILA)will go into effect. They require all mortgage lenders and mortgage brokers to help prevent deceptive lending practices and protect customers by helping them become more informed.

Most of the changes will be very important to the Homebuyers, Real Estate Agents, Builders, and Settlement Agents. It means that we all need to prepare for this impact, the process and time lines for mortgage financing, because it could impact closing dates.

Right now Homebuyers and sellers can still agree on a closing date, and then service providers – including lenders – will work as best they can toward meeting that date.

Mandatory 7 days waiting period is required.
With the new regulations, purchase contracts can still be written with a specific closing date in mind, but all parties need to take into account that the earliest time any home purchase transaction can close is 7 business days after the homebuyer is issued his or her initial mortgage disclosures from the lender.

What is considered a business day
A Business Day is defined as a calendar day except Sunday and legal public holidays (New Year's Day, MLK Day, Washington's Birthday, Memorial Day, Independence Day, Labor Day, Columbus Day, and Christmas Day)

Fee restrictions.
With new regulations upfront fees cannot be collected by the lender (except for a credit report fee) until the initial disclosures are received. If the disclosure is mailed, fees can not be collected 3 days after mailing. If the disclosures are overnighted, they are considered “received” the next business day—(excluding Sundays and Federal Holidays) allowing the fees to be collected on the following business day after shipping. If the disclosure is issued in person, fees can be collected immediately.

The homebuyer must receive a copy of his or her appraisal a minimum of 3 business days prior to closing.

Revised disclosure and waiting period
An increase of more than .125% in the Annual Percentage Rate (APR) from the initial APR, the Truth in Lending Disclosure (TIL) requires the TIL disclosure to be revised and reissued to the homebuyer. The homebuyer must receive a revised TIL disclosure at least 3 business days before closing, providing the homebuyer with the time required to determine if the homebuyer is comfortable with his or her loan choice. If mailed, the TIL disclosure is considered “received” 3 business days after mailing. It means that this will add an additional 7 business days to the timing.
If the change is less than .125%, then no re-disclosure is required.
It is wise though, to plan on a minimum of 30 days to close, as well as to lock in the rate and fees as soon as possible.