If you can afford it, buying foreclosures or the rights to properties on the verge of foreclosure can be a big business.
It can also be a big opportunity for criminals.
One person's tragedy is often another person’s profit when it comes to foreclosures.
But if you're not careful, foreclosure scammers can put you in the poor house, too.
In this tough economy, many Americans struggle to buy food and keep up with paying property taxes and a mortgage. And in a cunning scheme, crooks are taking full advantage.
“This scam involved properties that were delinquent on their taxes, and what happens is, after a certain period of time, when your property is delinquent, the county seizes your property and sells it for back taxes,” says an expert.
If someone buys that lien on the property they then get the first option to also buy that property if it is heading toward foreclosure. In this case, scammers bought the liens and then turned around and sold bogus or duplicate first options to others - at inflated rates - to unsuspecting buyers. Victims were easily duped into making what seemed like good deal, sometimes shelling out six figures only never to see a return.
“It was people who wanted to invest and buy property, used as rental property, and there were people who just wanted to buy a home, for cheaper than the market value,” says an expert.
Investigators were tipped off to the scam after reviewing fraud complaints filed against the individual or company.
“We also had an undercover operation, where we sent someone in to pose as a customer to purchase a tax certificate,” an expert says.
When done legally and properly, buying a tax lien certificate can be profitable. But it requires homework.
Call the courthouse and learn how your county handles foreclosures and tax defaults.
Know what you are bidding on. Check out the property and the records. And be aware that just because you buy the tax lien, it doesn`t mean you will automatically get the house. Many times the house will never go into foreclosure.
Consumer advocates suggest speaking to your county`s tax assessor to get educated on purchasing tax certificates. Also consider hiring a lawyer to walk you through what can be a confusing process.