Confidence games come and go. But some seem to go on forever. Con artists are apparently still selling building lots in Florida, sight unseen, that turn out to be underwater swampland.
But some real estate cons are worth remembering, if only because how successful they were.
For example, Darren Berg, a Seattle man dubbed the “Mini Madoff” – after Bernie Madoff, who ran the largest Ponzi scheme in history – is still at large after escaping prison in December 2017. Berg had been convicted of wire and bankruptcy fraud stemming from his own Ponzi scheme, which involved real estate contracts, mortgage-backed securities and other loans.
He bilked more than 800 investors out of $120 million – small potatoes, compared to the $64.8 billion raked in by Madoff, who died in prison last year. Decades before these guys fleeced their flocks, though, the man for whom these ruses are named was indicted in Florida.
All too Common in History
In 1926, Charles Ponzi was found guilty of fraudulently selling swampland. He was sentenced to a year in prison, but appealed and was freed on bond. He then tried to flee to Italy, but was captured and sent to Massachusetts – to serve out his prison sentence for his other investment scam.
In that scheme, Ponzi took in an estimated $20 million by convincing thousands of people to invest in international postage stamps. He used the money from new clients to pay the existing ones, all while pocketing significant funds for himself. That’s the basis for all Ponzi schemes: Pay the old guy with money from the new one.
But real estate cons go back even farther: Erik the Red, the murderous Viking explorer, pulled off one of the first, in the year 985, when he convinced several hundred of his fellow Icelanders to move with him to Greenland. He called the barely habitable island “Greenland” as a way of enticing settlers.
Back to the present day, real estate rip-offs are more prevalent than ever. According to the Detroit law firm of Maddin Hauser Roth & Heller, cybercriminals have “ramped up their attacks on the mortgage and real estate industries, taking advantage of the multiple entry points available in every transaction, the lack of coordinated security efforts among the parties, and the abundance of personal and financial information that awaits them after a successful breach.”
The list is unending: mortgage fraud, title fraud, wire fraud, timeshare fraud, collection scams, foreclosure relief scams, credit fixing ruses and investment schemes. Earlier this year, Georgia realty agent Eric Hill was sentenced to 30 months in prison for his part in a scheme that netted $21 million in fake mortgages that ended up in default.
How to Dodge Them
Here’s how to avoid scammers:
The No. 1 rule in any transaction is simple: If it sounds too good to be true, it most likely is. So be skeptical – very skeptical – when someone is trying to separate you from your money.
Before you put your name on the dotted line, and definitely before handing over cash, thoroughly check out the person or company you are dealing with.
If you are being pressured to take advantage of a deal right away or it will evaporate, run, don’t walk, to the nearest exit. Being pressed into acting immediately is a sure sign something’s rotten in Denmark. If the deal is valid, it’ll still be there tomorrow.
“Walk away from high-pressure sales tactics that don’t allow you time to read a contract or get legal advice before signing,” warns the Consumer Financial Protection Bureau. “Also, don’t fall for the sales pitch that said you need to pay immediately – for example, by wiring the money or sending it by courier.”
Don’t deal with anyone who wants to be paid with gift cards. They’re totally untraceable. Once you hand them over, they’re gone. And don’t deal with anyone who asks for more than what you will owe with the promise that they will send you back the difference. Don’t take any money from someone who asks you to send your money back in exchange.
Don’t wire any money without confirming the transaction with someone you trust. Better to use a credit card so you can cancel the transaction if you find out you’ve been had.
Once you’ve been presented with a “once-in-a-lifetime” opportunity, ask for something in writing. Then read it carefully to make sure it said what you’ve been promised. If it doesn’t, keep your wallet closed. If you have any questions, run it by your lawyer first.
Write down the names and titles of everyone with whom you speak, as well as the time of the conversation and what is said. Next, verify their credentials and make sure they are who they say they are.
If you are conversing by email, never give anyone your bank account or credit card numbers. Ditto for your Social Security number.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at email@example.com.