1. The Wholesale Scam.
Investors prey on newbies with so-called “wholesale” deals that aren’t wholesale at all. They give unreliable or inaccurate information to bolster their inaccurate values for the properties. Never rely on the seller for comparable sales information (“Comps”), Bronchick says, “Do your own instead using websites like Trulia.com, Redfin.com, and Zillow.com”.
2. Lying on Your Loan App.
Unethical mortgage brokers will tell you to lie and say you are living in the property when in fact you have no plans of doing so. You may get away with it once or twice, but is it worth going to federal prison if you get caught? Bronchick says, “NO!!”.
3. The Bogus Appraisal Scam.
Sometimes the seller and the appraiser are in cahoots on the appraisal. Don’t be fooled – Bronchick says, “Do your own research or your own appraisal”.
4. Shoddy Repairs.
Even though you are buying a fixed up property from a contractor or seller who just did a rehab, do an inspection! Just because it looks good doesn’t mean its really done right. Cosmetics can cover up a lot.
5. Short Sale Scams or Fraud.
I am not one of the people who think that reselling a short sale is fraud, but there are many other ways you can get into trouble. Giving the lender bogus comps, lying about the seller’s hardship or doing an inside deal where you sell back to the seller are all acts of fraud punishable by jail time. Bronchick says, “Don’t do it, it’s not worth it.”
There’s a lot of ways to get rich in America on real estate, but shortcuts may land you in hot water. Bronchick says, “Be honest, don’t break the law”.