Despite the financial crises that could arise and in the face of a rising health and economic recovery, after the Covid-19 pandemic, real estate continues to be an alternative for those investors who are looking for safe tools to grow their capital, but also to citizens who need to invest in their assets at a lower cost, taking advantage of the announcement of bank auctions on some properties where their owners died, got divorced, lost their jobs or had another type of mishap that forced them to stop paying; however, this is a segment where more and more fraud is found.
To understand how this investment model has been subject to scams through offers on social networks and the Internet, it is first necessary to explain how bank auctions work: in general terms, mortgage auctions are precisely a last offer on a property that is not He finished paying through a mortgage loan, where the bank’s client fell into a non-performing portfolio backed by real estate.
However, although the legal process does increase the return on investment by offering said portfolio to the public for the sole purpose of its recovery, it is very common to see incredibly cheap options on digital platforms that raise fraud alerts.
According to data from the firm Coperva, In Mexico City alone, fraud related to real estate auctions shot up to 500 percent in 2021where so-called “legal advisers” promise homes for less than 50 percent of real market prices
In addition, the fact that most citizens do not know how to acquire a mortgage auction – which must always come from a loan originated in a financial institution – has also increased the number of victims of fraudsters in recent years; Crime incidence data in CDMX from 2019 indicates that an average of six mortgage frauds were committed per month, while in 2020 and the first quarter of 2021 the figure grew to 36 cases per month on average.
Likewise, the Mexican Association of Real Estate Professionals (AMPI) has alerted citizens to hundreds of advertisements on real estate and second-hand sale-purchase platforms, since 17 percent of all real estate frauds are concentrated in bank auctions.
This is what mortgage foreclosure scams look like
Ximena Cruz Gutierreza LinkedIn user identified as Investment Management at PROFIT & HOME, opened the debate in the social network of professionals about internet ads that promote real estate auctions and where it is important to identify the “red flags” of possible fraud.
The ad found on the web by Ximena said:
We are a company specialized in real estate, our experience supports us.
The property is recovery, no credits!
MORE INFORMATION AND APPOINTMENTS IN BRANCH
Call me or send a message, find out all the information and schedule an appointment to personally see what this property has to offer you and yours. Set it aside with only $250,000 and the rest you pay in 6 months upon delivery of your assignment.
House in Gustavo A. Madero, 5 bedrooms. Price: $785,000 MXN
Analysis of a potential foreclosure fraud:
The publication of the professional, who claims to work in a company that has more than eight years of experience in mortgage auctions, alludes to at least three “red flags” in the advertisement and alerts the nearly 20 people who have shown their purchase interest:
- In mortgage auctions, houses cannot be set aside, you must make a single payment for 100% of the value of the transfer of rights to the bank so that it is now yours.
- The signing of the assignment before a notary public takes about 20 – 30 days, in which the notary gives us the appointment and the bank sends all the documentation.
- The auction price must be 2/3 of the real value of a house so that you can award it to yourself (that is, keep it and be the new owner of the house), if the debt does not reach that amount, then you are still only owner of the DEBT, but the judge is not going to let you collect on the house. This house in the ad must be worth at least $4,500,000 so at auction it would have to cost $2,200,000 to be a good deal, less than that is ridiculous.
Likewise, the expert is open to more extensive contributions about the modus operandi of the scammers, who mostly pose as lawyers or simply by management companies that give erroneous information about the process to be carried out and the times it takes between banks, notaries or courts.
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