How to Avoid Fraud When Facing Foreclosure

When a homeowner is facing foreclosure, options often seem limited. If working with your mortgage holder hasn't helped, and you haven't had any luck selling your home through FSBO or with a Realtor, a home buying company may be the way to go.

Home buying companies can and do help you avoid foreclosure and a ding to your personal credit, but as is often the case, there are companies out there that are only interested in making a fast buck. They often use barely legal tactics or fraud to get ahead. They are usually very, very clever, so you should know what to look for.

Avoid Less-Than-Trustworthy Companies

We ran across one fraud - "The "Helping Hand" Company - about two years ago - it came from the Better Business Bureau, and it's a doosie. These companies look like the "We Buy Wretched Houses" companies that pepper the landscape with flyers and get-out-of-your-mess-quick promises.

You sit down with a "Helping Hand" Company, and they tell you they will buy your house for a specified period of time. Not only that, they promise you can continue to live in the house while you pay them a much reduced rate with a promise that when you catch up on your finances, they will sell you the house for very reasonable terms. They pick up your late payments and penalties, and you get back to regular payments.

Sounds pretty good, right?

What you are probably not aware of is the papers you sign include some non-traditional mortgage terms. The favorite of these "Helping-Hand" Companies is a binding rider that notes "a deed will be executed if you are 10 or more days late on a payment."

That means the company will take immediate possession of your house and any and all equity if you are 10 days late on any payment during the contracted time period.

Use Your Head and Call In Professionals

If you need to sell your house fast, the best advice is pretty straightforward: avoid rushing into things because you are in a state of personal financial panic.

Here are sound suggestions:


• Work with Professionals - only deal with companies who have an established history of home buying.
• Do your research - if you have any concerns about your home buying company, don't hesitate to check them out. We always recommend sellers check the Better Business Bureau.
• Always Know What You're Signing - Don't be shy; ask for help! A lawyer or even your mortgage company can help you if you want professional advice from a third party. Never, ever sign a contract that you haven't read - "oh, that's just standard contract stuff" - or don't fully understand.
• Be Willing to Walk Away - if you have any doubts about the buyer or the contract - or if it just doesn't feel right - just walk.

When you feel your back is against the wall, don't risk your home, finances, and credit for a quick turnaround selling your home. Take some time to research your home buying company and ensure you are working with a trustworthy company. Make sure as you try to avoid foreclosure you take the necessary steps to avoid fraud.