After the Sale:
Avoiding Scams
Get ready for the junk mail! When
you buy a home, the sale is listed in the county records which are
available to the public. So businesses who want to sell things to
new
homeowners go through the home sale records and create a mailing list
of all the new homeowners. Sometimes a mailing list company will
compile the names and addresses and then just sell that information to
businesses who want to try to sell stuff to new homeowners.
There's
nothing you can do about this, so get ready for the junk mail.
Not all of the junk mail is bad, though.
Often
the mailings you receive will contain valuable coupons, such as 10-20%
off at a home improvement or home furnishings store. You'll also
get
offers for credit cards with attractive promotional rates (e.g., 0% for
six months), which can help you finance repairs or initial purchases
for your new home.
On the other hand, some of the mailings are worse than junk
mail, they're actually scams. And they're not even obvious
scams, either — it's very, very easy to be taken in by them.
They'll
have a company name that sounds impressive and may even sound like some
kind of government agency, to try to get you to sign up for their
homestead, finance, or insurance services. Often, there's no
appeal
letter, just an official-looking form, worded so that you think it's
official and that you have to return it.
Homestead scams
Many tax jurisdictions give you a small break on your
property taxes for the house that you actually live in (as opposed
to any rental property you might buy). This is called a homestead
exemption. You have to file for the homestead exemption to
get it,
but it's a simple one-page form that you can probably even download off
the Internet from your state government's website, and it's completely
free.
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“I saw your page on the Homestead Recording Service
scam...after
I fell for it. I paid $35 and they just sent the standard form
you can get from the government for free. And after they send you
the form, they ask for an additional $25 to file it.” -- Brent L.
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But scammers will try to get you to pay them to send you the
form, and to file it for you. Right after I bought my last
home I
got a mailing from the "Homestead Recording Service", with an
impressive downtown address. It contained an official-looking form
titled, "Designation of Homestead Request Form". In bold it says:
Property Record Date: 4/30/2004
Our Records Show Filing: None
Now, right away, it seems official, because they know the
date
I bought my house. But remember, that's public information and anyone
can get it.
The bit about "Our Records Show Filing" is to get you to
think
that they're the ones who are supposed to keep track of homestead
filings, but they're not. Your dentist doesn't have any records
of your
homestead filing either. It's not his/her job.
To look even more legitimate, the reverse side of the form
is
completely filled with the relevant text from the Texas Constitution
and the Texas Property Code about homesteads. Scammers aren't usually
in the habit of quoting the law, are they? So that seems to add
to the
credibility. Also, instead of begging, like most sales letters,
it does
the opposite. The form says, in all caps, "YOU MUST USE THIS FORM
OR WE
WILL NOT PREPARE YOUR DESIGNATION OF HOMESTEAD."
You're supposed to include a $35 fee to get them to file the
paperwork to declare your home a homestead. But this may not even
be
the same thing as appyling for a homestead tax exemption, and
in any event, as I mentioned, you can do this yourself for free.
Mortgage scams
Other scams try to get you to sign up for a biweekly
mortgage payment schedule, with each payment being half what you
normally pay. The idea is that you'll effectively make 13
payments
per year instead of 12, so you'll pay your loan off sooner and save on
interest. The thing is, you don't have to pay your mortgage
company or
anyone else to set you up on such a system. If you want to pay
down
your loan quicker, you can make an extra principal payment at any
time.
Just send a separate check when you make your mortgage payment and
write "For prepaid principal" in the memo field.
The worst mortgage scam tries to get you to send your
mortgage payment to someone else. You'll get a letter saying
your loan has
been transferred to another bank, and that you should start sending
your payments to the new bank instead. Now, your loan might
really be
transferred to a new bank, but don't take the letter's word for
it.
Call your bank using the phone number on your loan documents (NOT the
number on any letter you receive about the transfer!), and ask them to
confirm that your loan was really transferred to who the letter says it
was transferred to.
Insurance scams
Some scams try to sell you overpriced life or disability
insurance. They promise to make your house payments for you in case
you become unable to work, or if you die — so that your family won't
lose the house because they can't afford to make the payments.
Insurance of this kind can actually be beneficial. What's scammy
about
it is that it's usually overpriced. You could often get a better
deal
just by calling an insurance agent and buying normal term life
insurance. Plus, their sales pitches are usually deceptive.
Today I got a letter from "Home Mortgage Group". Sounds
official, huh? The top of the letter lists the details of my
mortgage — which bank I owe and how much. That also can mislead
people into
thinking it's legitimate because they list the particulars of your
mortgage. But the truth is, it's public information and anyone
can get
it at the county courthouse—or buy it from some company who's
already done so. The text of the letter includes strong language
such
as "It is important that you respond to this offer at this time," as
though it were some kind of obligation.
The insurance they're offering is overpriced, too.
I
went online and the first price I found was almost half what
was offered in the letter.
I got a similar offer in an unmarked envelope, no return
address. The letter inside has no letterhead. Instead, the top says: "Important
Notice - Complete and Return". Under that in large letters it says:
Lender: JP MORGAN CHASE BANK
But the letter didn't come from the bank, it came from the
scammer. They just put my bank's name on it to make it look official.
The name of the bank holding the mortgage is part of the public
records—anyone can get it.
If you need insurance, get some quotes online and buy from an
insurance agent, not from some deceptive come-on in a junk mailing.
Home warranty contracts
You might be surprised that just like you can buy an
extended warranty for your TV, you can buy one for your entire home.
The catch is that there's a huge list of things the warranty doesn't
cover, you don't get to choose the service providers who will actually
fix the problems (the home warranty company does that), response time
is often slow, and the work performed is often poor. As a result,
home warranty companies have a terrible reputation. On Angies List, home warranty companies have received
more complaints than any other kind of company—for seven straight
years. Forty-six percent of reviewers gave their home warranty
company a D or F grade.
If you liked this site then you might like some of my other sites:
How to Find Cheap Airfare
How to Save Electricity
Slot machines demystified
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Michael Bluejay Inc. • All information is "use at your own risk" Contact
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