Homeowners: Beware of equity thieves

Potential buyers should also be careful as Clayco, Southern Crescent prices soar

by Robin Kemp

If you’ve been getting creepy postcards featuring photos of your house and fast-talking phone callers wanting to talk to you about “a house I believe you own,” think twice before taking that quick cash deal. You could lose a lot of what you’ve paid into your own home, plus the added value of rising prices in a seller’s market.

All over the country, the housing market is booming, with some homeowners getting numerous offers. On top of that, Clayton County is the epicenter of high demand for some of the last affordable single-family housing in metro Atlanta. The median sales price for a home in Clayton County this month (April 2021) is $180,000, according to the Georgia Multiple Listing Service. Compare that to the March median sales price in metro Atlanta of $295,000. So far this month in Clayton County, 33 homes are under contract, 181 homes are actively listed, and 261 are new listings.

Here’s a look at total sales volume in Clayton County so far this year:

• January 2021: $40,684,150
• February 2021: $53,439,430
• March 2021: $55,345,462
• April 2021 (as of April 23): $35,845,875

Also, compare what Georgia MLS says houses in Clayton County were going for in March 2020 versus March 2021. One year ago, the average list price was $180,284, with the average sale price slightly lower at $175,569. This March, the average list price was $194,809 and the average sales price was just a bit more at $195,279. As of press time, the average list price for a single-family home in Clayton County is $257,518, with the average sale price slightly lower at $227,075–and that’s with 519 houses under contract and another 160 active listings. In March 2020, 226 houses were sold and in March of this year, 269 changed hands.

Add to that local redevelopment efforts along Tara Boulevard, Riverdale Road, Main Street in Forest Park, Jonesboro’s historic district and a newer development closer to Tara Boulevard, and new subdivisions popping up all over the county, and it becomes clear why the local housing market is attracting potential buyers.

Clayton County homeowners are seeing their property values rise as the rest of Atlanta is priced out of reach. Real estate speculators are buying up single-family homes and renting them out–but not always keeping up the properties or vetting who lives there. And they are eager to snatch up the hard-earned equity in your home for less than it’s worth, then turn around and sell your home on the upswing, making even more of a profit for themselves. The problem disproportionately affects Black and Latinx homeowners, according to the National Equity Atlas.

There goes the neighborhood

As local home values continue to creep higher, area homeowners say they are being bombarded with mailings and calls from people wanting to buy their houses. While some solicitations come from legitimate businesses, including franchises like HomeVestors (many Georgia businesses are registered with the Secretary of State using some variation of the HomeVestor’s name), others may be coming from con artists. It’s on you to do your homework.

Some of the zip codes where homeowners–and even relatives and tenants of homeowners–are getting lots of “we want to buy your house” solicitations include (in no particular order):

• 30297 (Forest Park)
• 30260 (Morrow)
• 30236 (Jonesboro)
• 30273 (Rex)
• 30274 (Riverdale)
• 30215 (Fayetteville)
• 30228 (Lovejoy, Hampton)
• 30344 (East Point, Atlanta)
• 30294 (Ellenwood)

Adrian Mechelle, who lives in Los Angeles, says she gets calls all the time about her parents’ home in Jonesboro, which is in the 30236 zip code. “Yes, every freaking day. And I don’t even own it. My parents do. Every day I get several phone calls about their property.”

Similarly, Mandy Mode told The Clayton Crescent, “My parents own three homes and they get bombarded every day.”

Rochelle Brown Dennis said the calls and postcards are coming more frequently. “Everyday! For about two years now, we’ve been getting calls. For the past year, the calls and postcards are happening several times a month.”

Dennis tried messing with them: “I’ve even thrown out a crazy offer sell number just for giggles and that didn’t deter them at all.”

Carrie Allen added, “We have gotten a few postcards in the mail lately . I’m assuming our close proximity to the new Amphitheater being built in Stockbridge is the reason. I would think maybe home values would increase because of it. Our area code is 30273. Clayton but close to Henry line. Also I had gotten a few calls a few months back, but none recently “

Tanisha Ward said she gets “multiple calls daily. Mail a few times a week. Neighbors as well. They now call my husband, whose number isn’t listed on much of anything. It’s predatory.” Homebuyers want good schools, too. Ward, who lives in the 30228 zipcode, adds, “We are getting hit heavy in South Clayton since there is so many new communities being built. I really don’t understand why they are combining the middle schools when so many people are moving to this area.”

Beverly Ann and Debra Blount say they get six to eight calls per day about their Florida house and that they don’t answer calls if they don’t recognize the number.

“And some texts addressed to my deceased brother-in-law wanting to buy it,” Debra fumed.”Really, folks?”

Things got so crazy in Chicago that they passed a law preventing repeated home-buying cold calls for six months at a time. WABE-FM (90.1)’s Stephannie Stokes did a story last year about how aggressive brokers are the leading edge of gentrification in lower-income neighborhoods. But you don’t have to have a real estate degree to educate yourself about your home’s real value and how to protect it.

Protect your investment: the land contract scam

Kiplinger reported in 2017 that some predatory buyers use “land contracts” to trap unknowing victims who haven’t yet cleaned up their credit enough to buy a house through a mortgage lender. It might sound like a “gentleman’s agreement” but the odds are stacked against buyers (or sellers) who can’t go through normal channels.

Here’s how a “land contract” works:

• Someone who lives in a low-income area wants to buy a house, but doesn’t make enough money and hasn’t cleaned up his or her credit score enough yet.
• The predator–who often lives out of state and owns many properties–targets this area, offering to finance people who the bank turned down.
• The predator also might not actually own the home the victim wants to buy.
• The victim signs a “land contract,” locking them into high interest rates, small payments that cover just the interest and none of the principal. The contract may be longer term than a conventional 15- or 30-year mortgage. It also may stick the victim with a huge “balloon” payment at the end of the term.
• As part of the deal, the predator holds the deed and the title to the house until the loan is paid off.
• The contract is not recorded in the courthouse.
• Sooner or later, the victim misses one payment.
• The predator evicts the victim, who has none of the protections offered by a conventional mortgage lender (like forbearance, refinancing, or the ability to stay in the house before it’s foreclosed upon.)
• Or, the predator might have taken out a mortgage on the property, but not paid it, and loses the house the victim is “buying” from the predator.
• Or, the predator got the victim to sign a land contract on a vacant house that he or she has no rights to whatsoever. When the real owners show up, the victim is evicted.
• In any case, the victim loses every cent he or she put into the house and is put out on the street.
• The predator starts all over again–often using the same house.

A variation on this theme is the “white knight” predator who finds an existing homeowner in financial trouble, offers to buy the house, and rents or leases it back to the owner while taking possession of the title. Maybe the predator didn’t pay off your house–and you wind up paying for a house you no longer own.

The Georgia Department of Banking and Finance says these are some of the most common mortgage scams in Georgia:

• Inflating property values in order to obtain a larger mortgage loan for a “straw borrower”
• Submitting bogus invoices for upgrades or renovations that have not taken place to falsely inflate the value of the property in order to obtain a larger mortgage
• Promising investors that properties will be leased or rented with paid mortgage expenses such as insurance, property tax, and other payments when no lease or agreement actually exists
• Paying straw borrowers or investors to sign and submit documents containing false qualifying information, such as counterfeit drivers’ licenses, pay stubs, tax returns, W-2 forms, rent checks, bank statements, earnest money checks, social security numbers, and verifications of deposits, employment, rent, or mortgage
• Advancing down payment amounts which are falsely attributed to the borrower
• Causing straw sellers and straw borrowers to fraudulently assume the identity of other people for the purpose of obtaining mortgage loan proceeds
• Providing quit claim deeds back to the seller or to a co-conspirator without notice or permission from the lender
• Filing false satisfaction, cancellation, and assignment of security deeds on a number of properties to eliminate the security interests of legitimate lenders, either by fraudulently transferring interest to a co-conspirator or by showing the property to be free of all mortgage liens before obtaining additional mortgage loans on the property
• Filing false or forged quit claim deeds transferring the property from the true owners to straw sellers or straw borrowers, thereby gaining control of the property to use a security for fraudulent loans

Neighborhood Assistance Corporation of America, or NACA, is a non-profit lending group that says it coined the term “predatory lending” in the 1980s. The group requires its members to take part in advocacy efforts and be registered voters in order to access their housing counseling and low-interest-rate mortgages. According to NACA’s website, “The extraordinary benefits NACA Members can access today did not come about by politely asking. NACA’s success is a result of the active participation of its Members and others, including demonstrations and civil disobedience. NACA members stand on the shoulders of the civil rights community where people have fought and died to give us some of the opportunities we have today.”

No shortcuts to home ownership

The first step towards home ownership is to clean up your credit. Don’t fall for “fix your credit file” scams, and don’t pay someone else to do for you what you can do for free.

• Pay your bills on time, every time.
• Pay off any collections on your credit report (research “pay for delete” letters and consult a consumer attorney if needed).
• Keep your job or find a better one at the same or higher pay.
• Do not apply for any new credit cards or loans.
• Save enough for a down payment. FHA loans require 3% of the purchase price. NACA recommends you save the difference between your current and future housing payment. Renting often costs more than buying.
• Saving for a down payment any way you can is crucial to getting into your own affordable home. Consider taking a side gig, selling some of your stuff, and finding creative ways to cut your expenses so you can put that money to your down payment fund instead. Making your own coffee and packing your own lunch is a big way to save money. Throw spare change in a jar until it’s full and then deposit it in a savings account. Save all your $1 bills in a box and do the same thing. Small amounts add up.

NACA offers these tips for people who want to buy a home or who are caught up in predatory lending:

• Know your budget. You can use online calculators like this one from the Federal Housing Administration or worksheets to figure out how much home you can afford. If you want to be sure you can keep your house during future times of financial hardship, calculate for your worst-case income scenario as well as your best-case scenario. Your first house doesn’t have to be your last house if you’re in a position to trade up later.
• Go mortgage shopping. Run away from anyone who says, “You have no other choice.” They are lying. Your better choice may require you to spend a year or two getting your finances together.
• Target your territory. Know where you can afford to live. Will a cheap house in an area with no bus service cost you more in the form of a car note, car insurance, gas, and commute time? Will you be able to pay the note on a more expensive house in a more upscale area if you lose your job?
• Enjoy your dream home. A home you can’t afford, no matter how beautiful, will become your worst nightmare. When you own your own house–no matter how modest–you are building real wealth for yourself and your family.

Another way to buy a home with little money requires that you have that money in the bank, ready to go. That’s the monthly tax sale on the courthouse steps of the Harold Banke Justice Center. Many people in Clayton County lose their homes because they did not or were not able to pay property taxes. Sometimes the houses were owned by people who died without having written a will. The house then becomes the property of Clayton County, which turns around and sells it for the amount of back taxes owed.

However, because many investors go to the tax sale, people end up bidding higher prices for more desirable properties. If you consider buying a house this way, you should be extra-careful to do all your research (“due diligence”) well before the tax sale and not set your heart on a single house. Know what condition each house is in and what repairs it will need. A $3,000 house might need $30,000 of repairs. Check the county real estate files at the courthouse to see whether anyone has put a lien on the property (for example, if the previous owner still owes a contractor for work done on the house). Get a title company to establish a clear title to the property. Better yet, get a licensed real estate agent and/or a real estate attorney to help you with the process.

Not all money is good money

Buying and selling real estate is one way that criminals launder money. A home with an asking price of five to ten times the price of similar houses around it might be wishful thinking on the part of an owner trying to sell without an agent–or it might be a red flag.

You must not be from around here

Plenty of people got into flipping real estate over the past couple of decades, sometimes buying more properties than they could afford to fix up, doing irreparable damage to valuable historic architecture, or taking shortcuts on materials and labor and pocketing the difference, then selling the house for double its original value or renting it out for much more than the monthly note. This did a lot to heat up the market but not much for the neighborhood.

“It’s a shame the investors coming into Clayton buying up all the property, throwing a couple grand of renovating into it and turning around renting it for ungodly amounts of money,” Tiffanie Leanne of Forest Park said. “If I lose my rental, I won’t be able to afford to live anywhere and I have been here my whole life, 30-plus years!”

Trina A. Ko agrees. “Gosh, this makes me sick to my stomach. Clayton County is going places. It’s unfortunate how investors dangle money in homeowner’s faces to persuade homeowners to sell.”

Many absentee landlords–investors from out-of-state who buy more properties than they can maintain–are slumlords who rent to tenants that damage the property, run illegal businesses, or hold frequent, loud parties. Abandoned houses can become an “attractive nuisance,” drawing neighborhood kids, vandals, squatters, or criminals.

While local zoning officials can cite the property owner, it’s more difficult to hold those investors accountable for managing those houses. While the absentee investor makes money, neighboring homeowners who actually live in their houses can suffer lower property values when rental homes are not properly maintained.

Know who you’re dealing with

You can and should look up everyone and everything connected with any house you want to buy or sell. Here are some tools to help you do just that:

• Look up real estate agents, appraisers, and companies to see if they are licensed with the Georgia Real Estate Commission and Georgia Real Estate Licensing Board: https://ata.grec.state.ga.us/Account/Search
• Look up who owns a property in Clayton County with the Clayton County Tax Assessor’s Real Property Search at https://www.claytoncountyga.gov/government/tax-assessor/property-search-information. While the online record is not the official one, it’s generally accurate. You should go in person to look up the records yourself to be 100 percent sure of who actually owns the property on paper. If you don’t know who owns the property, search the address first, then search the name. You may find one person or company owns many properties in your area. That’s perfectly legal and not necessarily sketchy, so dig deeper.
• Search the company’s name in the Georgia Secretary of State Business License lookup at https://ecorp.sos.ga.gov/BusinessSearch to find out more about who owns the company and whether they live outside of Georgia. Pro tip: A lot of people in Georgia also register businesses in neighboring states, like Florida. Check it out at https://www.myfloridalicense.com/wl11.asp.
• Search the individual’s and/or company’s name in Clayton County and other relevant county court records (metro Atlanta or the state where the person or company that wants to buy your house is located) to learn more about their background, then go look at any records in the courthouse. Keep in mind–just because someone was sued over a real estate matter doesn’t mean they were found liable.
• Google the company or person and click the News tab. Do they come up in any stories about real estate scams, predatory practices, or legal battles with buyers or sellers?

Don’t buy or sell your house by yourself

Some companies will offer you cash for your house, promising a quick sale and even offering to clean out any furniture, trash, or junk you leave behind. Expect to pay a higher price for convenience–and that price is often a large percentage of what your house is really worth that you left on the table. For example, if the fair market value of your house is $90,000 and someone offers you a cash deal for $60,000, you could lose $30,000–one-third of the value of your home. And if your mortgage was really small in comparison to what the house is worth now, you’re literally throwing away tens of thousands in free money that could get you into a better house.

A licensed real estate agent and a licensed property appraiser can help you figure out how you can get the most for your home. Should you get a loan to redo the kitchen and bathroom to raise the selling price, or should you leave it alone? Are your DIY jobs too specific to your personal taste or do you need to paint your purple walls white to get the house sellable?

Even if you get a cash offer that’s higher than the current market value of your home (and usually, it’s lower), you don’t want to get into a jam where you sell your house but don’t have another one to move into.

Unless you’re a real estate attorney or a licensed real estate agent, you most likely have no idea of all the pitfalls that can happen when you buy or sell a house. The number one rule to keep in mind is that the person on the other end of the sale may be friendly — but he or she is not your friend. You need someone who has the fiduciary duty to get you the best price and to look out for your best interests.

Yes, you will have to pay something for these services (usually a percentage of the sale price, on average 5.75% in Georgia, which is split evenly between the buyer’s agent and seller’s agent at the closing) but you will pay far less than you would for any legal issues on the back end. Real estate sales are big-dollar transactions and each one involves different complex financial and legal factors. Protect yourself and your money by hiring a licensed professional, who will be motivated to work for you as a paid part of your team. After all, the more they can sell your house for, the more they make, too.

Most important of all: Never, ever sign papers you don’t understand and never sign any documents related to your home–especially not sales, lease agreements, land contracts, loan papers, or DIY contracts–before running them past a lawyer that you hire yourself and who has no connection to the seller.

If you’re in financial trouble and facing foreclosure, you have many options. Talk to your lender about a forbearance, a COVID-19 or other assistance program, or contact FHA, HUD, or the Veterans Adminstration.

Watch this 2010 video from the U.S. Treasury Department to learn more about foreclosure scams:

Protect yourself

To learn more about ways you can protect yourself from predatory lending, mortgage fraud, and other homeowner scams, visit the U.S. Housing and Urban Development’s Predatory Lending: Georgia webpage at https://www.hud.gov/states/georgia/homeownership/predatorylending.

Report suspected mortgage fraud to the Georgia Department of Banking and Finance and to the U.S. Department of Justice Task Force on Market Integrity an Consumer Fraud.

Get on the National Do Not Call Registry to cut down on annoying sales calls.

Learn about real estate records on file with the Clayton County Clerk of Superior Court’s Office at at https://www.claytoncountyga.gov/government/court-services/clerk-of-superior-court/real-estate-division

Report issues with abandoned, derelict houses to your city or county zoning and code enforcement office. They will send out someone to take a look and, if necessary, force the owner to clean up the property.

If you want to buy a house of your own, check with your local bank’s mortgage lending department and the U.S. Housing and Urban Development’s “Buying a Home” webpage. They can point you to approved homebuyer education and counseling workshops to get you on the right track. HUD also has numerous programs, including downpayment assistance, special programs for law enforcement officers, pre-K through 12 teachers, firefighters, and EMTs.