What is Equity Theft?
Equity theft is a deceptive and fraudulent scheme employed by unscrupulous corporate home buyers who use a web of lies and manipulative tactics to persuade homeowners into accepting offers significantly below the actual market value of their properties.
The result is a substantial loss of equity for homeowners who, often unknowingly, fall victim to these schemes. It's a practice that not only has severe financial consequences but also preys upon the trust and vulnerability of homeowners.
How does Equity Theft work?
These dishonest buyers often resort to a range of underhanded tactics, including falsifying property appraisals, applying high-pressure sales tactics, and providing misleading information about the real estate market. The ultimate goal is to siphon away a substantial portion of the homeowner's equity, leaving them with a considerably lower return on their most significant investment, their home.
They capitalize on equity theft by engaging in a practice known as wholesaling. After acquiring the right to buy properties from distressed homeowners at significantly reduced prices, wholesalers scramble to find an end buyer who will actually purchase the property (at a much higher price). They then assign the right to purchase the property to the end buyer, collecting considerable assignment fees in exchange for doing so - all without making any improvements or investments in the properties themselves. If they are unable to find an end buyer, they will extend the contract indefinitely, request price reductions, and trap innocent homeowners.
Wholesalers pocket the difference between the low purchase price and higher resale value, effectively profiting from the equity they've stripped away from the original homeowners. Learn more about wholesaling in this video.
Is wholesaling a scam?
One alarming aspect of the wholesale real estate practice is that these wholesalers typically don't put down any earnest money when they make offers to homeowners. Instead, they structure contracts that allow them to walk away from the deal without any financial commitment if things don't go as planned.
On the contrary, it's the homeowners who bear all the risk in these transactions. They may invest their time, purchase another house, and pay movers, based on the promises made by the wholesaler, only to find themselves left in a vulnerable position when the wholesaler decides to back out. This one-sided arrangement further underscores the predatory nature of wholesaling, where homeowners are left with potential financial losses and emotional distress while wholesalers can easily abandon the deal with no consequences.
Who’s actually doing this?
The companies involved in equity theft equity typically fall into the category of corporate home buyers or real estate investors. These companies vary in size and scope, ranging from small, local investors to larger corporate entities with nationwide operations. They often target vulnerable homeowners who are facing financial difficulties, job loss, family deaths, foreclosure, or other difficult situations, making them more susceptible to manipulation.
But it seems like they’re offering a fair price?
The thieves use a variety of tactics to convince homeowners that they are getting a fair deal. Their strategy is to present a polished and professional image, with well-dressed representatives who claim to have the homeowner's best interests at heart. They use deceptive market data and/or false appraisals to make their lowball offers seem fair.
They prey on homeowners in distress, emphasizing quick, hassle-free transactions to alleviate their immediate financial concerns. By employing high-pressure sales tactics and emphasizing the urgency of the offer, they create a sense of scarcity and manipulate emotions, making homeowners believe they have no better options.
But my home was damaged and needs a lot of work.
These scammers exaggerate problems with houses, making them appear more significant and expensive than they truly are. They may bring in so-called "inspectors" or contractors with vested interests who intentionally inflate repair estimates, claiming that the property requires extensive and costly renovations. By doing so, they create an illusion of substantial hidden expenses, which can be overwhelming to homeowners already facing financial stress.
This manipulation not only drives down the perceived value of the property but also adds to the emotional pressure, making homeowners more likely to accept the lowball offer, believing it to be a way out of what seems like an insurmountable problem when, in reality, they are being deceived and their equity is being stolen.
I know what my home is worth. They really are giving me a good offer.
This speaks to another disheartening tactic employed by these unethical companies - the practice of initially making fair to gain homeowners' trust and secure a deal. Homeowners may feel relieved that their property is being valued fairly, only to experience shock and dismay when, just days before closing, these companies suddenly and substantially lower their offer.
This last-minute price drop leaves homeowners feeling trapped and with little recourse but to accept the lower figure, fearing the collapse of the deal and the prospect of starting the selling process all over again.
Is there anything I can do? I already signed a contract.
Homeowners should know that they have options, and it's NOT TOO LATE to protect their interests. If you've entered into a contract with a corporate buyer, there is still hope.
The team at Home Equity Guardian is here to provide guidance and support every step of the way. Our team has decades of experience with the largest corporate buyers and can advise on how to ensure you receive a fair and equitable offer. We understand the complexities of these situations and are dedicated to helping homeowners preserve their property’s true value and secure a better outcome. Don't hesitate to reach out; we're here to help you make informed decisions and safeguard your financial well-being.