The real estate industry, and the consumers within, are often vulnerable to scams due to the nature of the complicated and costly transaction. Over a decade ago, it was predatory mortgage terms that swindled home buyers. More recently, it’s been hacked wiring instructions that led to home buyers sending hundreds of thousands of dollars to a scammer’s bank account. And now, it’s a handful of predatory real estate brokerages that are taking advantage of desperate or needy homeowners.
THE CRAFT BROKER
NORTHERN COLORADO HOMES
Be Aware: A New Real Estate Scam
The Craft Broker
HOW THE SCAM BEGINS
Homeowners will receive communication from a real estate brokerage offering anywhere between $800 – $1200 for the right to list their home at some point in the future. For some of the most cash-strapped homeowners, that amount of money can help them make ends meet. They contact the brokerage, an agent or associate comes to visit with the homeowner to sign the paperwork, and a check is provided within 24-48 hours. Sounds too good to be true, right?
THE TERMS OF THE AGREEMENT
This is where it gets really, really hairy. The terms of the agreement allow the listing brokerage the right to list from the date of signing, for the next 40 years. So, if the seller wants to list immediately, they can, or they can wait up to 40 years, but they must give that listing brokerage the first shot at listing. The listing broker also gets to dictate the price and they get up to 6 months to list the property at that price. Then it starts to get worse.
WHAT HAPPENS NEXT
The listing brokerage then takes the agreement and records a memorandum of the agreement with the county that effectively clouds the chain of title. If there is any transfer of the property, without including the listing brokerage, there is a hefty fee associated with it. If the homeowners refinance, get divorced/change name on title, die and transfer to heirs or any number of administrative title changes, the listing brokerage is owed a hefty fee. If the sellers decide they want to sell but forget about this agreement, the new buyer might be stuck having to pay this penalty. Once the initial agreement is signed, the only way for the homeowner to get out of it would be to wait the 40 years, without selling or modifying title in anyway. Or they could allow the listing brokerage to list the home at some point and wait through the 6 months listing period. Beyond that, you’re either at the mercy of the listing brokerage, the market, or your memory to make sure you don’t break the rules and face the penalties outlined in the agreement. The brokerage is not interested in ever listing your home, they are waiting for you to break the rules of your agreement and collect.
HOW TO STAY SAFE
If anything seems too good to be true, it probably is. Many of these companies will target owners who might have missed a payment or two, are on some kind of financial assistance or other financially vulnerable people, but that doesn’t mean they won’t go after people with deeper pockets. If you own a home and $800-$1200 will completely change your life, contact your favorite agent (me!) to help you determine how much equity you might have if you sell, do not sign any agreements that bind you to a 40 year commitment. If you’ve got good equity, there are options for you that we can talk through. If you’re ever struggling or need some good advice and assistance, I’m just a click away.
About the Author: Jared Reimer is a native Coloradoan and an Associate Broker at Elevations Real Estate in Old Town Fort Collins. He’s a community advocate, business champion, blogger, leader, tireless volunteer, innovator, thinker and expert on all things real estate in Fort Collins and surrounding Northern Colorado. You’re likely to find Jared spending quality time outside with his wife, Kacie, and young son, Hudson, or sharing a beer or two with a friend throughout Fort Collins. Call or text Jared at 970.222.1049 or email him at Jared@TheCraftBroker.com