If you’re buying a home, make sure you are well informed about closing fees to avoid fraud.
For those of you who are considering buying a home, there are a lot of expenses involved and you need to know about them so you don’t get any nasty surprises later. Unfortunately, there is something else you should know as well and that is about closing fees kickback fraud. This is far more common than you might think, so make sure you are well informed about every financial detail you need to deal with during closing. If you have questions, then contact a Dallas business lawyer.
While federal investigators have put a crimp in several underhanded closing fees kickback rings, these scams/frauds are still rampant in the industry. Unfortunately, kickback fees are really simple for a less than honest real estate agent to pull over on an unsuspecting buyer. Try and avoid situations like that by being an informed buyer.
One way to pull off closing fee kickback fraud is to have a real estate agent set up a corporation that buys an interest in an escrow and title insurance company. Then, a group of rip-off artist home builders set up the same type of corporation and also have an interest in the escrow company. What happens next is the real estate agent and the home builders then refer their clients to their “own” title companies. The title company then pays a finder’s fee/kickback from a percentage of the title and settlement fees to the agent and builder. Slick as heck, not to mention unethical, immoral and illegal.
Padding closing fees is another area you need to be careful of when buying a house as well. Title companies, once they’ve already pulled off their kickback scheme, also tend to seriously pad closing fees. This type of fraud has the full attention of the Department of Housing and Urban Development (HUD). In fact, the department actually has a unit dedicated to real estate settlement oversight – a polite way to say scam/fraud.
Be on the lookout for failure to reveal the true settlement costs, if you get told at all. You need a HUD-1 before closing. If you don’t get it, watch out. You also need to be cautious about companies underestimating settlement costs. They could be doing this intentionally to deceive you. This is like bait and switch at some huge retail shops; you get attracted by a low upfront price which suddenly escalates once you are a customer.
There are many other things you need to be aware of when buying a house, including jacked up fees and kickbacks to the lender. When in doubt about what is going on during your house closing, contact a Dallas business lawyer. Not only will they be able to tune you in, but explain what you need to do to avoid being scammed.