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.

“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.

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:


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.

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