FRAUD PREVENTION
Can appraisals be used to deceive and influence people adversely?
What
are the dangers of a vendor / seller take back mortgage (
VTB mortgage )?
What are the dangers of
a vendor / seller take back mortgage ( VTB mortgage )?
Real Estate Fraud is the newest crime and
is dramatically increasing with identity theift. There
are many variations and factors that go into perpertating
a fraud. One of the big target areas are the Private for Sales
or the For Sale by Owner, the "FSBO". These fraudsters
may try using the "VTB Mortgage" or Vendor (seller)
Take Back Mortgage in an old fraud schema somtimes referred
to the "Oklahoma Offer" that goes something like
this:
Buyer "A" offers to buy a house
from Seller "B" for say $400,000.00. Buyer "A"
informs the Seller "B" that he will put down $50,000.00
on closing and needs the balance in mortgages.
Buyer" A" wants the Seller "B"
to take back a second mortgage for $150,000.00 and to postpone
this mortgage to a first mortgage of Not Less Than $200,000.00.
Let's recap:
$400,000.00 Sale Price
50,000.00 Down Payment
150,000.00 Second Vendor Take Back Mortgage Postponing
to First Mortgage not less than $200,000.00
200,000.00 First Mortgage
$400,000.00 Total
Fraudsters are professional cons! The Private For Sale Owner
may not be savy to the tecnicalitials and it's wise that owners
should hire professionals to help them with the process. Let's
go on....
Postponing to a first mortgage means that the second mortgage
will remain in second place even after the first mortgage
is paid out so it could be replaced with another mortgage.
Remenber the key words in the postponment clause was "not
less than $200,000.00". Well this could happen on closing
or a month or two after closing. The Buyer "A" now
the Owner gets a First mortgage of $300,000.00 or 75% of the
purchase price. Remember, it said "not less than".
Let's recap:
$400,000.00 Sale Price
150,000.00 Second Vendor Take Back Mortgage Postponing
to First Mortgage not less than $200,000.00
300,000.00 First Mortgage
$450,000.00 Total Mortgages on a property worth $400,000.00
50,000.00 CASH IN HAND
TO THE BUYER or NEW Property OWNER
So the property is financed with a 112% mortgage
and the buyer /new owner has his $50,000.00 cash downpayment
back in his hands. This is a very simple example but could
be made much more complex. The second mortgage could have
been a not so savey private investor and/or the first mortgage
could have obtained an 85% new first mortgage. Fraudster could
overstate values by Property Flipping, include Tenants with
over stated rents, there are Rent to Own Schems, Straw Buyers,
Identity Theft, Forged Documents and many more twists.
As a Seller, the Buyer may offer you more
to intice you into this schem. Keep professionals in your
service team, Appraiser,
Mortgage Broker, Real Estate Agent, and Lawyer. An Appraisal
is the cornerstone of your independent review of the property's
market value to ensure your investment in the market.
First you should ensure that you have hired a professional
to complete the appraisal assignment. Appraisers are
not not licensed in Ontario, anyone can hang out a shingle
and call themselves an appraiser. Investigate the background
and expertise of the appraiser you hire. Appraisers
from INHOUSE Appraisal are members of the Appraisal Institute
of Canada.
Visit our Electronic
Reports web page for other information.
< MORE TO COME >
Appraisals
Sale prices
Rent to Own
Proprty Fliping
Sale of Mortgage to Investers
Fraud with Mortgages
Document fraud
Identity Theft
Grow houses
Environmental contamination |