Beware! Scammers Pretending to be Homeowners and Getting Away With It--A New Scam

November 4, 2011

Thumbnail image for Thumbnail image for iStock_000016119220XSmall.jpg In my Solano County, California-based, online Consumer, Bankruptcy and Family-Law Practice, I receive countless calls on a weekly basis regarding anything and everything related to what I call the "mortgage meltdown." Inquiries include asking me questions about loan modifications, short-sales, California anti-deficiency statutes, foreclosures, and so on. These types of calls I expected to receive when I expanded my legal practice to include bankruptcy and mortgage-related issues back in 2006. I did not, expect, however, to receive calls inquiring about illegal behavior . . . from banks, from lawyers, from . . . scammers.

This blog entry deal with a scam that I fondly like to refer to as "Little Red Riding Hood and the Greedy Big Bad Wolf." This new scam is very similar to this beloved child's tale. Everyone knows the story of Little Red Riding Hood--how she innocently goes to Grandma's house, innocently skipping alone down the road, carrying a bag of goodies for Grandma, and only later, to her surprise, discovers the Big Bad Wolf at Grandma's house--pretending to be Grandma! Remember what happens to little Red Riding hood at the end of the story? She gets eaten up by the Big Bad Wolf!

Most people know about the scam artist that guarantees to fix your problem regarding your distressed property and then quickly, after paying a hefty fee disappears, never to be seen or heard from again. As an attorney, I find it surprising that I need to not only keep current on the law related to the "mortgage meltdown," but also, keep current on new scams that are popping up every few weeks. At this point, I find it both my legal and ethical duty to warn my readers of these various scams.

Let's Introduce Our Players

The basic nuts-and-bolts of the scam encompass the following players--Grandma, played by the distressed home-buyer ("Grandma"), Big Bad Wolf ("Bad Wolf") played by the scammer, and Little Red Riding Hood ("Little Red"), played by prospective tenant: Their roles in the tale: : Grandma, who can no longer afford to keep making payments on her cottage in the woods, usually one does of two things: proceeds with foreclosure after a failed attempt at requesting a loan modification from her lender; or, decides to work with her lender and real-estate agent to do a short-sale on her home. In either scenario, Grandma vacates the home. In comes, Big Bad Wolf. In preparation for his scam, he starts off by searching public records or real-estate adds to learn about homes in foreclosure and/or on the market as a short-sale in his area. Once he identifies a home as a possible target, he then drives by the home. If he discovers that the home is vacant or abandoned--he proceeds with the next step. Bad Wolf puts an advertisement in a local newspaper or online (such as Craigslist.com) stating that he is a homeowner putting HIS home on the rental market. The problem is that the advertisement looks very legitimate. One caller indicated to me that a scammer stole the identity of a local realtor and erased her phone number and put his instead--so as to give the impression that he was the agent acting on behalf of the homeowner. (Thanks, Karri.) Continuing on . . . . With the advertisement in place, he then contacts a local locksmith, paying him to change the locks on the home. For reasons which I can understand, the locksmith does not ask for identification or proof that the scammer is entitled to change the locks. Finally, Bad Wolf then goes to a local post office and sets up a post-office box account so that all future rental payments will go to the post office box.

The Scam At Work--Once Players in Place

With all systems in place, Bad Wolf is now ready to go in "for the kill"--to take money from innocent prospective callers who are calling to inquire into the rental property. Having Bad Wolf's advertisement in front of her, Little Red calls Bad Wolf and informs him that she is interested in renting the subject property--for herself and family. After talking on the phone about the amount due Bad Wolf (first and last month's rent, security deposit, paying by Cashier's Check or cash, etc.) Little Red agrees to meet Wolf at the abandoned home to finalize the contract. Bad Wolf is usually in the drive-way waiting for Little Red. Everything looks legitimate to Little Red because Bad Wolf has entered the property with his keys. So, from Little Red's perspective, everything seems legitimate.

With the transaction completed, Little Red and her family begin to move into their rental home, Bad Wolf with lots of money in pocket drives off into the sunset. So long as no-one knows what has happened, Bad Wolf will continue to receive rent payments from Little Red at the post-office box. At some point, the scam is exposed; however it's too late for Little Red and Grandma because Bad Wolf has disappeared--never to be seen or heard from again.

In Bad Wolf's wake, he has caused extensive harm and damage to so many innocent people. For Grandma, she is exposed to liability for any damage done to the property by the "renters"--because the deed is still in her name. Grandma also has the nasty task of having to evict Little Red and her family from her home. If the home was sold in a short-sale--everyone, but Bad Wolf, will be blamed--the real-estate agents (if their advertisement was stolen by Bad Wolf), Grandma (for not realizing what has happened) and the new buyer--who is now forced to deal with having to find other housing for himself and family, such as a local motel--until things can be straightened out. . Since Little Red is also an innocent victim, she has a legal argument that the cottage is her "legal residence" which would result in Grandma or the new home-owner having to file an unlawful detainer action to evict Little Red and her family--which could take several weeks to months.

Moral of story: don't be a victim, don't trust anyone, and be proactive!

To learn more about local scams in your area, go to PreventLoanScams.org

I wonder if the author of Little Red Riding Hood wrote the book as a metaphor for real life . . . that he knew, even back then, that there were many real-life stories of Little Red Riding Hood. In all seriousness, please spread the word to all friends, neighbors, relatives, co-workers. I recommend that anytime you decide to do business with any third party (even an attorney) that you do your due diligence and find out as much as you can about the person or company that you can. An excellent way to do this is by Googling the person's name, person's phone number and/or their company name. Also, run a search with the Better Business Bureau.

So to end our tale, what could Grandma or Little Red done to prevent being scammed? In Grandma's case, she should have not moved out of the cottage until it was foreclosed or sold in short-sale; or, if she left, she could have regularly checked the cottage on a daily (or regular) basis to determine if anyone was trying to move in or, or "sniffing" around. For Little Red, she should have done a Google search for the name "Bad Wolf" or his company name. She should have also asked him to show his Driver's License and any other proof that he was the owner or third party representing Grandma. For instance, showing Little Red copies of utility bills, mortgage statement, etc.--anything that verified that Big Wolf owned the home. Also, Little Red could have talked to neighbors and asked if they personally knew Bad Wolf.

Should you have any questions or concerns about your legal rights and options in connection with your distressed property, please feel free to contact Linda Garrett at the Law Office of Linda C. Garrett. Ms. Garrett specializes in consumer law, bankruptcy and family law.

Copyright © 2011 by Law Office of Linda C. Garrett. All rights reserved.