Beware: Scams and Fraud in the Real Estate World

It’s a sad fact of human nature that when people are facing tough times, there are those out there that will try to take advantage of them.

Given the general sordid state of the real estate market in Phoenix, combined with a less-than-stellar economy, the pickings are ripe for the scammers and others who attempt to take advantage of people.

Late last week, two separate stories were reported in the Phoenix mainstream media that highlight what can go wrong in a couple of real estate hot beds – renting a home, and seeking a mortgage loan modification.

In the March 11, 2011 edition of the Arizona Republic, J. Craig Anderson reports, Scottsdale-based mortgage assistance firm closed by Attorney General’s Office:

A Scottsdale-based mortgage-modification assistance firm with a bold promise in its name has been shut down by the Arizona Attorney General’s Office as part of a settlement agreement announced Friday.

Principal Reduction Group LLC owner Brian Cutright also must refund a $5,500 charge to each client, which, according to (former) Attorney General Tom Horne, did not result in a single principal reduction.

Cutright also is required to pay a $25,000 penalty and $5,000 for attorney fees.

Here is the original complaint filed by former Arizona Attorney General Terry Goddard. It’s interesting reading. According to the complaint, Principle Reduction Group falsely represented a 92% success rate in getting principle reductions for clients – while the actual success rate was 0%, and represented clients would get a full refund of their fees if a reduction was not worked out – but actually kept $1,950 of the fees as a non-refundable “processing fee”. Several other misrepresentations are defined in the AG’s complaint.

On March 10, 2011, Natalie Rivers with AZFamily.com reported, Father, son arrested for home rental scam:

A father and son allegedly have been renting out homes that did not belong to them and now they face felony charges for the fraud.

According to police, Earl Koskella, 75, and Keith Koskella, 38, rented out five separate homes for well below market value. Each of the homes were in some stage of foreclosure.

Property records show Earl as the owner of the homes as an apparent result of quit claim deeds that he forged.

Earl claims to have a background in the mortgage industry and no criminal record.

Keith has been in and out of prison since 1996 for drug-related charges, aggravated assault and forgery.

This is a particularly frightening scam as thanks to the elder Koskella allegedly forging documents, he appears in county records to be the legitimate owner of the homes he and his son allegedly leased to unsuspecting victims.  In the video below, alleged victim Tim Housel explains how he found the rental home listed on Craig’s List and was subsequently served an eviction notice by Earl Koskella.

At the end of the video, Peoria, AZ police spokesman Jay Davies mentions that prospective renters can check public records to see if a home they are considering renting has been properly registered as a rental unit in Maricopa County. Of course if someone like an Earl Koskella is willing to forge and record ownership documents, they may just be willing to wrongfully register a home as a rental too – so this isn’t foolproof.

Here is the site to search the Maricopa Country Assessors office for registered rentals.

The reporter suggests not using Craig’s List as your principal source when looking for a rental. There are a plethora of sites out there that list rental properties, and I suspect the vast majority of those listings are from legitimate property owners. But the scammers are definitely out there. Also be *very* wary of rental properties that require you to mail in a payment or deposit, and properties priced well below market value.  A fairly prevalent scam run on rental sites uses both of these tactics to take peoples hard-earned money.

And keep in mind the age-old saying, “if it sounds to good to be true, it probably is…”

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