In his article "Miami condo at ground zero in mortgage fraud," Tom Brown highlights the fact that foreclosures follow fast on the heals of mortgage and real estate fraud. As he points out, "fraud accounts for a sizable share of the bad bets on mortgages," which often result in foreclosures. Lenders get stuck holding the bag, but as we have seen recently, problems in the mortgage industry affect the entire national economy and can even destabilize the global economy.

Brown focuses his article on a 643-unit condo known as the Club at Brickell in Miami's international banking district. Con artists and other opportunists used this building as a vehicle to commit rampant fraud in what are commonly known as cash back at closing deals.

With cash back at closing, buyers, sellers, appraisers, real estate agents, and other real estate professionals often conspire to inflate the value of a property to fool a lender into approving a loan that grossly exceeds the true market value of the property. The buyer receives the excess proceeds, the sellers are able to sell their property for close to their asking price, the real estate agent receives a higher commission based on the inflated price tag, and the appraiser is rewarded with another satisfied customer.

These cash back at closing schemes have become very popular during the latest housing boom, because they seem like "everybody wins" deals. On the surface, even the lender seems to win -- loaning more money and earning more interest over the life of the loan. Unfortunately, however, when the housing bubble bursts, someone gets stuck holding the bag -- the lender. And when enough lenders get stuck holding the bag, they simply pass the costs on to investors, homeowners, and taxpayers. The only winners are the con artists who rake in the cash at the closing table.

Real estate professionals and homeowners need to keep in mind that cash back at closing is wrong, however right it may seem when someone pitches the idea. They also need to keep in mind that cash back at closing is just one of the many schemes that con artists use to rip off the system.

In our book, Protect Yourself from Real Estate and Mortgage Fraud: Preserving the American Dream of Homeownership, Rachel Dollar and I point out a host of other types of real estate and mortgage fraud, including illegal flipping, double-sales scams, builder bailouts, contractor cons, chunking, Ponzi schemes, and foreclosure rescue scams. Remember that the best defense against scams and the scumbags who perpetrate it is education. Learn how to spot, stop, and post (report) real estate and mortgage fraud. It just may save your home, your neighborhood, and your nation.

Published: January 10, 2008

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Ralph R. Roberts, CRS, GRI is an award-winning and internationally recognized real estate agent, author, coach, and speaker. Throughout his career, Ralph has proven his commitment to helping other real estate and sales professionals build upon their past and present success, grow and expand their businesses, and provide a rich and rewarding future for themselves, their customers, their employees, and their families. As president and CEO of Ralph Roberts Realty, Ralph has personally helped thousands of consumers realize their dream of homeownership. While selling over 10,000 homes (and buying and selling over 3,000 investment properties) throughout his 30-year career, Ralph has made the time to mentor and coach hundreds of professionals in real estate, sales, and a host of other fields. Ralph is a recognized authority on Real Estate and Mortgage Fraud; Residential Real Estate; Personal Salesmanship; Sales Force and Office Management, Motivation, Design, and Team Building; and Foreclosure Self-Defense and Loan Modification, fields in which he has demonstrated his commitment to preserving the American Dream of Homeownership. Ralph's numerous websites, blogs, seminars, and speaking engagements engage, entertain, and educate both consumers and professionals. Ralph is also an accomplished author with several successful titles to his credit, including: Power Teams: The Complete Guide to Building and Managing a Winning Real Estate Agent Team Financing Real Estate Investments For Dummies (John Wiley & Sons) Mortgage Myths: 77 Secrets That Will Save You Thousands on Home Financing (John Wiley & Sons) Foreclosure Self-Defense For Dummies (John Wiley & Sons) Protect Yourself from Real Estate and Mortgage Fraud: Preserving the American Dream of Homeownership (Kaplan) Foreclosure Investing For Dummies (John Wiley & Sons) Foreclosure Myths: 77 Secrets to Saving Thousands on Distressed Properties (John Wiley & Sons) Advanced Selling For Dummies (John Wiley & Sons) Flipping Houses For Dummies 52 Weeks of Sales Success (John Wiley & Sons) Walk Like a Giant, Sell Like a Madman (John Wiley & Sons) Cross-Cultural Selling For Dummies (John Wiley & Sons) To learn more about Ralph, visit AboutRalph.com, check out his daily insights on real estate and mortgage fraud prevention at FlippingFrenzy.com, or visit his latest blog dedicated to helping distressed homeowners fight foreclosure, KeepMyHouse.com. You can reach Ralph at or by calling (586) 751-0000.