Avoiding the imposing threat of real estate or mortgage fraud can be just as important as making any income or wealth gains. So how can real estate investors prevent this, and protect themselves?
Sadly, mortgage and real estate fraud haven’t been eradicated. We were recently reminded of its presence when Southern California ‘real estate mogul’ Eric Elegado and his wife were sentenced to several years in prison. Many may have been harmed by recent schemes, but in some wa,y many individuals like this and their families have also become victims. This is just one story of many. Mortgage brokers, title company reps, real estate agents and investors continue to get sentenced to lengthy terms on an almost daily basis. In many cases, this is not new fraud, but past deeds catching up with them.
The U.S. housing market is in great shape, and the outlook for the next decade is bright. There is really no shortage of deals. In fact, there are more real estate deals out there available than any investor or hedge fund can handle. There is no need to get caught up in committing fraud or real estate scams in attempt to find a short cut to riches. It doesn’t matter how much you make the wrong way if it is all lost overnight.
Popular online real estate forums are filling up with new real estate investors looking for ways to scam the system and get around bank rules, while others offer fraudulent advice and openly brag about getting away with fraud (at least until now). Don’t be a victim. Ignorance of the law is not an excuse. Invest in quality and reputable real estate education. The proper education includes up-to-date courses and books that account for new laws and regulations. If it doesn’t smell right, or the paper work isn’t 100% accurate, ask questions, and get a second opinion. “Everyone else was doing it,” or “this Realtor said it would be okay” are not excuses that will fly in court.
Have a good real estate attorney that can back you up, and have a real estate investing coach on tap to run ideas, strategies and tactics by. Build smart business structures and have insurance. Be alert to what could be ruled bad in the future. Who expected stated income loans, or cash back at closing or other practices which were legal to come back to land so many in prison for decades afterwards. Have your business model and plan B ready.
There is plenty of money to make the right way, and too much to lose the wrong way. Articles like this don’t mean that the industry is absolutely full of these characters, but watch it. Preserve your ability to continue to invest, receive passive income, and generate and enjoy passive wealth.