Foreclosure scams you must avoid

What are some foreclosure scams I should be aware of?

When the notice that you are in default has been recorded (made public record at the courthouse or county recorder's office), you will most likely receive a host of contacts from people wanting to solve your problems by refinancing, helping you sell, or offering to buy your home. There are two particular scams that are common.

1. First is called equity skimming, or in less polite circles, milking. Someone offers to buy your home right now by giving you enough money to move and maybe a little more. You are not going to get anything otherwise, so it sounds like a good deal. You give a deed and move out. The milker then rents the property until the foreclosure sale and eviction of the tenants. The problem is that you are now stuck with a deficiency judgment. The amount of the deficiency judgment is also usually greater because of a lower auction sale price due to any damage done to the property by the tenants. Milkers are usually not very particular about screening tenants.

2. The second scam is the phony counselor scam. People will contact you offering services to help you out of your predicament. If they are not really counselors, you will end up selling your home to a milker or will be taken advantage of in some other way. Do not sign anything until you have talked to a knowledgeable person you can trust.

Is it worth talking to a financial counselor if I am facing foreclosure?

Yes. Talk to your lawyer or accountant. Talk to the real estate officer at your bank. Call the approved counselors from the FHA website, the Fannie Mae website, the Freddie Mac website, or even the MGIC website. You do not have to talk to all of these people. One or two phone calls should get you to a qualified person.

Once you have found a good counselor, make an appointment.

Then make a list of questions to ask about the possibilities of avoiding foreclosure based on the alternatives previously mentioned. When you get the advice, follow up on it immediately. This is not a time for procrastination.

One of the most important things you can do is stay in the house until the foreclosure sale. You become ineligible for many of the programs designed to save you from foreclosure if you are not occupying the property.

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