“We Buy Houses – A scam?”
Video Series – Part 4

The second one involves your mortgage. As I mentioned earlier, most investors don’t have cash on hand to pay for your home, but they lie and tell you they do. They give you a price over the phone and say they’ll pay cash – that’s the bait. Then they make an appointment to come see your home. Once they get to your house, they convince you to keep your mortgage in place and simply deed the house over to them – that’s the switch. They don’t have the cash and instead persuade you to finance the purchase of your home.

This scheme is known as buying a house “subject-to,” which means they are buying it subject to the existing mortgage in place. That means your name remains on the mortgage and you remain financially responsible for making the payments but they own your home and can profit from it.

In theory, there is nothing wrong with selling a property “subject to” as long as you are dealing with a reputable company that guarantees to make your mortgage payments on time. The problem is when someone isn’t reputable and doesn’t make your mortgage payments. Then you are left to suffer the consequences. Making matters worse, these scam artists will often stick a renter in your home and collect rent, but still won’t pay your mortgage.

The “subject to” ploy is very similar to another often-used dirty technique of tricking a homeowner into signing over their home. Let’s say you’re in foreclosure and have a pending foreclosure auction date 30 days out. This means if nothing happens in 30 days, your home will be auctioned off to the highest bidder and the sheriff will force you out of your home after the sale. Not a good scenario by any stretch of the imagination. To avoid this happening, you call a property investor. Let’s say you owe $100,000 on your mortgage and your house is worth $200,000. The crooked investor meets with you and says you have nothing to worry about. He will stop the foreclosure and allow you to stay in your home until you can get another loan and buy it back from him. All you have to do is pay him some rent – which is usually more than the mortgage payments were. If you couldn’t make the mortgage payments, you likely can’t pay a higher amount in rent! Oh, and additionally during this process, the investor tricks you into signing over your deed. That means he now has full control over your home. You miss a rent payment or two and a short time later you get an eviction notice on your door. You are forced out of your home and lose all of your hard earned equity. If something sounds too good to be true it usually is.

You’re probably thinking you’re smart enough to avoid getting caught in these so-called traps. Unfortunately, smart people get played all the time by these scam artists.