Are You a Target? Street Savvy Tips to Avoid Fraud
Last weekend there was a New York Times article with a headline that read, “Real Estate Shell Companies Scheme to Defraud Owners of Their Own Homes.” The piece went on to describe a series of scams perpetrated in my birthplace of Brooklyn, New York, and highlighted the degree to which real estate fraud is prevalent in today’s economy. As I read one outrageous example after the next of how elderly, disabled and otherwise isolated people were targeted and defrauded out of their property – most often the only asset they have ever owned – I became more and more incensed. Of course this story is nothing new, but as the Street Savvy Lawyer, I can’t help but weigh in (and wish that I’d spoken to the victims before they pulled the trigger and imploded their lives by allowing themselves to be taken – and these are people from Brooklyn, no less).
Thanks to my profession, but also to my upbringing, I’ve become a student of fraud and over the years have observed a predictable pattern and come up with the absolute best way to avoid being defrauded.
The very first thing that you need to understand is that you are ALWAYS being targeted. We live in a capitalistic, consumer-oriented society where people sell things. Every business generates income by selling one of four possible things:
- A product
- A service
- An idea
- A person
Since success in business is always reliant upon sales, it follows that becoming educated and finessed in the art of persuasion is what any sales person worth his or her salt needs to do in order to get us to do what they want. For some, this fine pursuit becomes a game, and then ultimately a dangerous weapon of manipulation. In the end you can go from being a “customer” to a “victim” in the bat of an eye.
So, let’s turn our attention to how something like this happens as per the widespread homeowner fraud detailed in the New York Times story. The first task that someone who wants to persuade you (OR scam you) must do is to find you. In our hyper-connected world, there are seven ways to do that:
- In person
- Online (via bogus sign-ups on websites or in your own inbox via email)
- By telephone (call or text)
- On television
- On the radio
- In print (newspapers, magazines, fliers)
- Through the mail
In the case of the Brooklyn homeowners, there were a few ways the shysters found their targets/victims. One was a TV commercial for a company, www.MyHouseIsADump.com, which offered cash money to buy houses in as-is condition and with a one-week close. That’s a persuasive attempt to cast a broad net as television is used for mass communication.
Another technique used by the deed thieves to identify likely targets was to scan legal notices for delinquent borrowers. It’s a safe assumption that those behind in their payments may well be so desperate that they are willing to do anything to get back on track.
Once the potential victims were identified, the next step was to get him/her on the phone, as talking directly can be a very a persuasive tool. The perpetrators knew exactly what their targets needed when they called them, and it was a quick hop from there to make an offer designed to build trust.
At this point, you may be wondering what weapons the scammers had in their arsenals to seal the deals and get what they wanted from their victims. In fact, all they really needed was one approach, which is the most lethal social psychology method of all: The Principle of Reciprocity.
People have a tendency to return favors – in fact, this is something we see in marketing and advertising all the time. It could be something as simple as getting a “free” pen when you open a new bank account, or a “free” toy when you buy a box of cereal.
So imagine when someone brings out the big guns – let’s say you’re in need of a loan, and a sympathetic “lender” cuts you a check right off the bat for $30,000.00 without asking you for a thing in return… not even a signed document. This person extends you his good will AND cash; this act alone goes a long way to create a lot of trust through the Principal of Reciprocity.
Look how nice he’s been to me; look how much he trusts me, you think.
And then everything you’ve been taught about ethics, morality and even religion (The Golden Rule, “Do unto others…”), tells you that you have to respond in kind. So the next time this person interacts with you and asks you to sign documents, you remember that you’re $30,000.00 richer because of his generosity. And what kind of person would repay that trust (and cash) with doubt and suspicion? You then jot down your signature on what you are told by your new “friend” are loan documents, but instead, they end up being title transfer documents.
Just like that, you are no longer the owner of your home. It’s gone. It’s now owned by some phantom “LLC” whose owners cannot be found, whose address is a PO box, and who seem to be ghosts.
This is exactly what happened in the more than 120 cases that New York City’s Department of Finance currently has under investigation. And, as you can imagine, the real numbers are certainly much higher. Many people are too ashamed to admit they were so foolish, and thus they never report it.
The trust that the scammers developed with individuals lead to widespread title theft.
While how fraud is perpetrated is varied and nuanced, there is one very simple way to prevent it from happening to you: Understand that if something seems too good to be true, it almost definitely is.
If you’re not sure why you are getting a great deal on something, don’t just jump – first ask for help from someone you REALLY trust, like a family member, friend, lawyer, colleague, or anyone that you know personally. Show any documents you get to someone else. And do your due diligence. Google the company, and check if they’re connected to the word “scam.” Get business cards from anyone you meet. Notice the letterhead. Check out the email addresses. Everything needs to trace back to the same company, and that business should be found and even better, reviewed on the Internet. If you cannot find them, if there is no telephone number or no address, and/or if the sender addresses on emails you receive don’t jive with the name of the person or people you think you’re talking to, then all of it adds up to be one big red flag.
And finally, above all, don’t be embarrassed. The Principle of Reciprocity is a strong motivator, and very smart, sharp people get caught in that trap all the time.
You think it could never happen to you, but a New York Times cover story says it can.
Photo: Pete, Blundellsands Archers