Since the housing crisis started five years ago, nationwide more than four million families have lost their homes to foreclosure.
Buying foreclosures or the rights to properties on the verge of foreclosure can be a big business. If you're not careful though, scammers can take advantage.
U.S. Postal Inspector Kevin S. Freeman says, "This scam involved properties that were delinquent on their taxes, and what happens is, after a certain period of time, when your property is delinquent, the county seizes your property and sells it for back taxes."
If someone buys that lien on the property they then get the first option to also buy that property if it is heading toward foreclosure. In this case, scammers bought the liens and then turned around and sold bogus or duplicate first options to others at inflated rates. Victims were easily duped into making what seemed like a good deal, sometimes shelling out six figures only never to see a return.
Freeman says, "It was people who wanted to invest and buy property, used as rental property, and there were people who just wanted to buy a home, for cheaper than the market value."
Investigators were tipped off to the scam after reviewing fraud complaints filed against the individual or company.
"We also had an undercover operation, where we we sent someone in to pose as a customer to purchase a tax certificate."
When done legally and properly, buying a tax lien certificate can be profitable. But it requires homework. Call the courthouse and learn how your county handles foreclosures and tax defaults. Know what you are bidding on. Check out the property and the records, and be aware that just because you buy the tax lien, it doesn't mean you will automatically get the house. Many times the house will never go into foreclosure.
Consumer advocates suggest speaking to your county's tax assessor to get you educated on purchasing tax certificates. Also consider hiring an attorney to walk you through what can be a confusing process.
Copyright 2012 Scripps Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Also in the headlines
The FBI says it has found no sign of the remains of former Teamsters union leader Jimmy Hoffa and is ending a dig in suburban Detroit.