What is affinity fraud? It’s a term in real estate where someone uses their position in a religious community to build faith with investors. This usually happens with devout members of an organized religion, that are active in their local community. Affinity fraud is especially devastating because of the level of trust and confidence the victims give to the scammers. Often times, people who are behind these scams are people who are looked up to or are viewed to have a high ethical and moral standing in the community. That’s why some victims, even after the scam has been revealed and their finances endangered, refuse to believe that they have been used. They may even refuse to prosecute the scammer, choosing to believe instead that the scammer will return their investments. Tragically, in most cases, the victims are regular wage-earners who have chosen to invest life-savings they can ill afford to lose.

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Nowadays, many people are fooled easily by the great promises that some real estates agents say. Here are some tips to avoid real estate fraud:

Always, always, always understand what you are signing and agreeing to, and, always seek assistance from a skilled real estate attorney. If you do not understand something you’re being asked to sign, ask for clarification and re- read the document again before signing.
Ask for and check referrals and references for real estate industry professionals. Check the licenses of the real estate professionals with state, county, or city regulatory agencies. Make sure that the people you’re dealing with are in good standing with the appropriate regulatory bodies.

Be suspicious of such low investment. If it sounds too good to be true, it probably is.
Be wary of strangers and unsolicited contracts, as well as high- pressure sales techniques and people who play to your emotions.

Extreme caution against this kind of people should be greatly measured.

Los Angeles FBI recently released a statement regarding the latest real estate fraud scheme. Lo and behold buyers, sellers and lenders… lend me your ears. This new scheme has indeed victimized a lot of people already. How do they do it?

1. Fraudsters tour villages. They pick a house they would like to steal. Yes, steal.
2. With a few searches on the internet (using your house address), they will get the name of the owner of the house and use that information to make fake documents (social security IDs, credit ratings etc.)
3. They then buy transfer papers from office supply stores (lots of these around the corner).
4. After doing everything, they will go to the authorities and transfer your house into their names. Ta-da! Your house is theirs now.

Photo taken from http://gjha.org

The FBI indeed has changed its focus. They have been working hard to pin down real estate fraudsters and scammers, making this white collar crime as one of their top priorities. In 2003, a total of 215 case initiations were filed but come 2007, the data indicated that there were at least 490 cases filed against the fraudsters. The FBI is still keen in chasing behind scammers since the real estate economy is not doing well (due to the sub-prime issue). They have released in their recent press release that they are investigating a total of 1,300 real estate fraud cases (more or less) to date.

Photo taken from http://www.ersnews.com

It is a shame for an Ex-Mayor’s to be tarnished with scandals—more so if the scandal is related to real estate fraud . New Jersey’s Ex-Mayor Sharpe James, together with his girlfriend Tamika Riley, were found guilty on all 5 counts: three counts of mail fraud (by selling low valued city lots to Riley), one count for obtaining funds from the state for the local government and one count of conspiracy in an effort to fool the public.

The flipping scheme allowed James to obtain low priced lands which he sold to his girlfriend for $46,000 (9 properties all in all). Riley then sold the properties for more than a total of $600,000.

Photo taken from http://blog.kir.com

As we all know, there are a lot of modus operandi (MO) surfacing in today’s real estate fraud. Most often than not, they adopt MOs that include faking documents to be submitted to lenders and buyers (both have different amounts indicated), identity theft, doctoring financial documents so that the buyer can get a loan from the lender and so on and so forth. But FinCEN, or the Financial Crimes Enforcement Network said that most of these scammers, an estimation of 75%, are not real estate agents/brokers by profession? Most of them are civilians just like you and me. Now, this trend actually should act as a wake up call to those lenders and buyers that they should be careful about their dealings.

Photo taken from http://www.fillthevoid.org

Guilty was what Anthony Fields, a mortgage scammer from Pennsylvania, pleaded before Judge Ambrose to one count of mortgage fraud conspiracy. He connived with his sister-in-law, Kelly Fields who was an unlicensed real estate broker. Their modus operandi involved recruiting buyers to buy properties with a much higher price compared to the true value of the property involved. The sister-in-law then gave lenders fake documents that have higher loan amounts in them and doctored documents for the buyers just to get the said loan. The law states a total of 20 years behind bars and/or a total of $250,000.00 fine.

Photo taken from http://www.516lawyer.com

The IRS has long been after the mortgage scammers. About $606 million was included in mortgage fraud and this has alerted the FBI too, since they included real estate fraud in their list of white collar crimes. Let us take a look at the available statistics of 2001 to 2003.

In 2001, a total of 107 cases were filed and 85 of those were convicted. In 2002, case initiations rose to 166 but only 57 were convicted. 2003 came and case initiations rose to 215. The convictions, however, was not far from the 2001 data as 81 fraudsters were put behind bars.

Photo taken from http://www.cobbsheriff.org

The human race has been ingenious in today’s era. It is in fact good, but if it is paired with a failing economy, chances are, that ingenuity will be used wrongly.

There are actually a lot of schemes that these real estate fraudsters are adopting. Every year, their methods change. There is this one common scamming style that most people are familiar with, yet, they still fall into the trap.

It’s called the “two sets of settlement statement”. The fraudster gives the seller a real copy of the settlement statement, indicating the real price of the property. He or she then produces a fake one and gives it to the lender. If the lender gives in, the excess will then be for the connivers to split.

Photo taken from http://firstrung.co.uk

Since real estate in the United States is not doing well (real estate market values are plummeting), lenders are more lenient in lending money to those who wish to have a new home. Also, since this is the case, a lot of scammers try to abuse the status quo.

A certain Mr. Cox was charged of real estate fraud in Atlanta, having scammed people from Florida to Nashville. He was able to accumulate $25 million for bank wire transfers, and he stole identities of the homeless just to get mortgages. The FBI classified real estate fraud as a white collar crime, describing it as robbing the people in a nice way.

Photo taken from http://latimesblogs.latimes.com