06/09/08: Dealing With Cold Calls
By Benny L. Kass
Q: Do you recommend companies such as “we buy ugly houses” or “we pay immediate cash for your house”? What about people who knock on your door offering to assist you by paying off your mortgage, or by buying your home and allowing you to rent back until you get back on your financial feet?
Are they safe and secure? Can it come back to haunt you?
A: My answer is only three words: beware and be careful.
There are a number of legitimate companies that buy houses through mass mailing or media advertising. But there are also scam artists that will take advantage of you, especially if you are in desperate financial straits.
How do you determine if the company that contacts you is legitimate?
Ask if they have a website, and if they do, go on the internet to examine that site. Of course, having a mailing address and a web site does not make a company legitimate – anyone can fake them. But any legitimate company should have both.
Second, contact your local Better Business Bureau to determine if there have been any complaints filed against that company. Keep in mind, however, that a good scam artist will periodically change their company name so as to keep ahead of those who want to investigate them.
Third, contact the AARP, the advocacy group for senior citizens. Typically, predators will go after elderly persons, since unfortunately, many older people are more gullible and easier to defraud.
Fourth, if you are currently in financial difficulty, you should discuss your situation with your mortgage lender. As a result of the sub-prime mortgage fiasco that has impacted the housing industry, many banks are willing to work with you so that you can keep your house. Additionally, many local and State governments have assistance programs that are available, and your lender should be able to identify these for you.
If you have done your homework, and have exhausted all other remedies, then you may want to talk with one of the companies that have approached you. Ask them to put their purchase offer in writing. If they refuse, do not proceed further with this company. Keep in mind that verbal statements are not admissible in real estate transactions.
When you get the written proposal, I strongly suggest that you contact a local attorney to assist you in understanding the transaction and reviewing the sales contract. If you cannot afford an attorney, ask the company to give you a few hundred dollars so that you can get a lawyer. Alternatively, there are a number of free legal services programs available, and this information can be obtained from the local bar association in your area. Under no circumstances should you use an attorney selected by that company; that lawyer cannot properly represent your interests.
If you are satisfied that this company appears to be on the “up and up”, and you are comfortable with the purchase price, then you can sign the contract. However, the contract should contain three important provisions:
– you have the right to select where settlement will take place. You can go to a title attorney or a title company; its your choice and you have the absolute right to make this selection.
– the buyer will immediately give an earnest money deposit of at least 10 percent of the purchase price to the settlement company (or title attorney).
– a fixed settlement date will be spelled out in the contract. If you are living in the house, you want to know when you will have to move out. You can also insist on getting a “post-settlement occupancy” agreement, whereby you will be able to stay in the house for a period of time after settlement. If you get this agreement, it has to spell out exactly when you have to vacate, and how much rent (if any) you will have to pay your buyer.
There are a number of different approaches that scam artists use, and here are a few that you should avoid:
– you are behind in your mortgage and are concerned that your house will be foreclosed upon. You meet a person in your neighborhood who tells you that he will lend you enough money so that you can become current and also have enough money to pay your mortgage for the next five-six months. That sounds attractive to you. A day later, the person comes back with a bunch of legal documents and says “just sign here and here, its just a form”.
But the “form” is actually a deed to your house. You sign it thinking that you are just getting a loan, when in reality you have given your house to this stranger for considerably less than it is worth.
There have been a number of court cases against people like this, and the Courts have often set aside this fraudulent deed and ordered that the house be deeded back to the true owner. The legal remedy is available, but you don’t want to spend months – or even years – in court. If you are asked to sign any documents, read them carefully and consult an attorney if you don’t understand what you are being asked to sign.
– a variation on this theme is where you receive a mailing that a company will buy your house, allow you to live there for a period of time, and then buy it back when your financial situation improves. However, the “buy-back” price is often very expensive -meaning that most consumers will not be able to afford the new purchase price. Many States, including Maryland, have enacted legislation imposing many restrictions on this practice. If you get this kind of offer, before you even start to consider it, check it out with your local government consumer affairs or attorney general’s office.
Your house is a valuable asset, even in today’s depressed market. Because so many homeowners are in trouble and are facing foreclosure, the level of scam operations is rising.
There is no such thing as a “free lunch”. If the offer sounds too good to be true, it probably is not for you.