How to Protect Yourself from Real Estate Fraud

[Bailey Harris]

If you've decided to try real estate investing you want to be sure you're doing everything the right way. That not only means obeying the rules, but you must also protect yourself from real estate fraud. It seems like some people never get tired of trying to take the easy way out--they never even seem to consider working for a living. That makes it hard for those who do. Investing in real estate can be lucrative, but you need to be prepared to work for it. Following are a few tips on protecting yourself from those who don't.

Not So Simple Anymore

Investing in real estate used to be pretty straightforward, but it's not so simple anymore. Navigating your way through a real estate transaction has become more difficult. Now you have to deal with a montage of people; real estate agents, real estate brokers, mortgage lenders, mortgage brokers, appraisers, escrow officers . . . there are a lot pieces to the real estate pie, and it seems like everyone wants a piece. Unfortunately for you, it's your money want to divvy up. Letting professionals handle the negotiations is certainly easier, and they usually do a good job, but not having a hand in it yourself can open you up to fraud. While most professionals try to do their job the right way, their bottom line is to make as much money as they can for themselves. They aren't necessarily concerned with protecting you from fraud in the process. So, you have to do that yourself.

Protect Your Own Self-Interest

Because you're the only who is 100% committed to your own self-interest you should take every step possible to protect yourself. One of the best ways to do that is to hire an attorney who specializes in real estate transactions. By signing a contract with them, and paying them money, their loyalty will be to you--your interests will be of primary concern. Although it will cost a bit extra, the money you spend will not only save you a lot of stress and hassle, an attorney knows how to negotiate, and they may be able to get you a better price than you expected to get. Having an attorney to protect your interests will ensure that all parties do things the right way, and no shortcuts are taken.

Be on the Lookout for Kickback Schemes

At times a participant in a real estate transaction will try and talk you into using 'their' people for appraisals or mortgage loans. Most of the time this is simply an innocent attempt to speed up the process by being able to work with people they're used to, and know will do the job in a timely manner. Unfortunately, the system can become corrupted by disreputable people. In some cases shady characters have banded together to take a bigger piece of the pie. This is done by bilking the unsuspecting and trusting buyer into paying more than they really need to. Having an attorney handle the transactions will not only provide you piece of mind, but will probably speed up the process.

Never Sign Papers Prematurely

Never sign anything without running it past your attorney first. People have unknowingly signed away a piece of property, or purchased a parcel of land, when they thought they were merely giving someone the right to negotiate for them. Instead the 'negotiator' was defrauding them. Anyone who wants you to sign something without the benefit of your lawyer's advice is suspect. You should refuse to go any further in negotiations until you've had the chance to let your attorney look over the papers.

Only You Can Prevent Fraud

To paraphrase Smokey the Bear, 'Only you can prevent fraud.' Because the system has become so complex you need the help of professionals to muddle your way through it. Unfortunately, as it grew the line between the needs of the buyer and the need for everyone involved to make money has become blurred. As a consequence some of the professionals that are part of the real estate industry don't see protecting your interests as their job. They're only in it for the money. Therefore it's up to you to protect yourself. If you keep that in mind and hire your own 'professional' you will stand a better chance of finding just the right property, at just the right price, to invest in. It is also a good idea to employ some type of identity theft prevention so that you can be sure your financial information is safe.