*** Defend Yourself from Scams and Flimflams

"I went to a foreclosure auction the other day," said a woman who called our offices last week. "And do you know what? There was no point in bidding on any of the houses, because they were the same ones that I had already seen on realtors’ Websites and in newspapers. Other people didn't seem to realize that and they were overbidding. And the whole time, the auctioneers were pressuring everybody to bid immediately, sight-unseen, claiming it was the last chance to buy these foreclosed homes at rock-bottom prices."nnNow, you might say that those auctions were not truly scams - just aggressive sales to help banks dispose of foreclosed property. And I suppose that it true. But the fact remains, buying a property in a rushed, impulsive way is unwise, especially when there are better ways to buy the same property at the same price.nnHere are some pointers that our real estate faculty recommends for financial self-defense:n

n
• Always base your valuation on hard, current comparables - or on realistic estimates of future prices. An auctioneer might claim that a property was worth $350,000 only six months ago - and then claim that you can steal it now for $250,000. That is faulty figuring. The question is, what are current comparables like? You either have to be able to document the value of a property against current sales - or have some realistic idea of what you can really expect to sell it for in the future. As a rule of thumb, add up the price you are paying and cost of the repairs that the property will need; If that figure exceeds the value of current comparable sales, you just might be paying too much.n n
• Keep an eye on cash flow. Can you really rent out a property until the market turns around, for example? Look at other rental properties in the area. Are there a lot of vacacies? Even if you can rent it, will you be able to generate enough rental income to cover monthly expenses? Deficient cash flow can kill you - even if your properties have good long-term appreciation potential.n n
• Always get the help of an experienced real estate attorney if you are considering foreclosures or other properties with troubled pasts. Former owners or mortgage-lenders can appear out of thin air, claiming to have rights to your property. You need to be protected.n n
• Never shortchange property inspections, title searches and other fundamental steps that are part of all good real estate transactions. Should you move quickly to seize a great opportunity? Yes, if need be. But that is not the same thing as moving recklessly. In your gut, you know the difference.n

nIncidentally, there's an enteertaining slide show on Forbes.com that highlights some of the scams that have tricked naïve real estate investors. It’s a good reminder that even though a sucker might be born every minute, there is no rational reason to become one too.nnI wish you every success!