Because of the sub-prime lending crisis and the 2008 Presidential Election, Real Estate and Mortgage Fraud has somewhat moved to the front of the mind. Unfortunately, very little continues to be done at an industry level to ensure that insiders and those who work alongside them are educated and trained in Real Estate and Mortgage Fraud detection and prevention.

In an article that is slated to appear in tomorrow’s edition of The Washington Post, nationally-syndicated Real Estate columnist Kenneth R. Harney writes that despite all the doom and gloom coverage from the media, “mortgage money is plentiful” and “the majority of mortgage products remain relatively unaffected by troubles in the subprime segment.” He also goes on to say:

“…FICO credit-score standards generally are higher than a year ago, stated-income mortgages with no verifications are hard to find and major investors are on the prowl for anything hinting at fraud.“

As much as I beat the drum for more funding at the state and Federal levels for Real Estate and Mortgage Fraud enforcement and education, things are getting better on some levels, but not all. Here on the ground, far away from Wall Street and the major investors Harney alludes to… here in the real world–in the Realtors’ office and at the closing table–education and enforcement are nowhere to be found.

Classic example

Earlier this week, the U.S. Attorney for the Southern District of Florida filed conspiracy charges against a licensed mortgage broker, a title attorney, and a former Wachovia Bank loan officer for their role in a $42,000,000 mortgage fraud scam. Richard Crowder, II, Gary Mills, and Karen Sullivan each now face up to thirty years in federal prison, restitution (which, mind you, they’ll never be able to pay in full), and fines of up to $1,000,000.

Crowder is a licensed mortgage broker and the former owner of America’s Best Mortgage Services, located in Coconut Creek, Florida. Mills is a licensed title attorney and the owner of Four Star Title, located in Deerfield Beach, Florida. And Sullivan is a former loan officer for Wachovia Bank.

As a part of their scam, Crowder identified residential properties, including luxury condominiums on Miami’s South Beach, which were available for purchase. He then recruited buyers for the properties by representing to them that he could obtain 100 percent financing. After locating the buyers, Crowder applied for equity lines of credit on their behalf with Wachovia Bank. To get Wachovia to issue the equity lines of credit, Crowder and Mills prepared fraudulent HUD-1 settlement forms that falsely stated that the buyers already owned the properties. The fraudulent HUD-1s were then given to Sullivan, who used them to facilitate the issuance of equity lines of credit from Wachovia.

Simultaneously, or sometimes soon after obtaining the equity lines of credit from Wachovia, Crowder applied for first mortgages on the properties. Not surprising, his applications overstated the buyers’ assets and income, and included false verification of deposit forms prepared by Sullivan. To further induce the lenders to issue loans, Mills prepared documents falsely representing that the buyers were using their own money for the down payments and closing costs. In fact, if you have not figured it out by now, the buyers were using funds from the fraudulently obtained Wachovia equity lines credit or funds provided by Crowder.

What’s going on here?

An attorney, a bank loan officer, and the owner of a mortgage company, all conspiring to rip off nearly $42,000,000, and no one did anything about it until a U.S. Attorney (who received some help from the FBI) stepped in and put a stop to it? What a shame. For years now, Real Estate Fraud Forensics experts have called for funding to support efforts to raise awareness among consumers and industry insiders alike, but all we ever seem to receive are press releases detailing indictments, arrests and a few successful prosecutions.

As I recently shared with an industry colleague, sadly, our federal government appears to believe that only way to stop Real Estate and Mortgage Fraud is through lengthy and time consuming investigations, forced entries, indictments, and convictions. Very little if anything is being done to educate Real Estate industry insiders and to make them truly aware of the significant harm and short-sightedness associated with fraud.

Homeowners and Real Estate industry professionals alike suffered a major loss today. Noted author and syndicated real estate columnist Robert Bruss passed away earlier today at his home in Northern California, according to Inman News. As a Real Estate industry insider and author, I benefited from Bob’s advice, critical reviews of my books, and his overall way of being. Suffice to say, his sudden passing saddens me.

From Inman:

Bruss…wrote seven real estate columns every week that were published in hundreds of newspapers across the country. For 23 years, Bruss wrote the weekly syndicated “Real Estate Mailbag” question-and-answer real estate column, the “Real Estate Notebook” feature on real estate trends, “Real Estate Law and You” about recent court decisions affecting real estate, and “Real Estate Book Review” features.

Sometimes called the “Dear Abby of Real Estate,” Bruss published two monthly newsletters on real estate law and investing issues. He authored several books, including: “The Smart Investor’s Guide to Real Estate,” “The California Foreclosure Book - How to Earn Big Profits From California Foreclosure and Distressed Properties,” and co-authored with Dr. William Pivar the college textbook, “California Real Estate Law.”

“Bob had a loyal following of readers who turned to him every week for sound real estate advice,” said Jessica Swesey, editorial and content director of Inman News. “Over the years, he helped so many people sort out their various buying and selling questions and was an amazing resource of independent information.

Nearly six years ago, Bob reviewed one of the Real Estate books I wrote. To this day, his review hangs on the wall in my personal office. While he may have made me a better writer, Bob Russ’ legacy will be the impact he made on millions of homeowners. His no-nonsense advice helped more people than I could shake a stick at.

Bob, please accept my apology for that end-of-sentence preposition, and, if they blog in heaven, keep up the good work!

Many novice real estate investors readily call a roofer when the roof is leaking or a contractor to renovate a bath or kitchen, but they often view real estate agents as superfluous overhead. They focus on the agent commissions they have to pay, while overlooking the value that an agent can add to their investment business. As a real estate agent, you can expand your business by proving yourself indispensable to investors who purchase distressed properties.

To appeal to investors, adjust your business model to meet their needs and then market your services accordingly. Following are five ways you can reach out to buyers of distressed properties and expand your business by attending to their needs.

1. Buy distressed homes yourself.

To sell anything, you have to know what your prospective clients need, and there’s no better way to learn what investors need than by becoming one yourself. Start by investing in one property a year. Then invest in two properties a year, then one every quarter. By the fourth year, you should be buying about one property each month. Through investing, you not only build your own personal wealth, but you also establish valuable contacts with lenders and with contractors, which you can share with your clients.

2. Attend monthly real estate investor and landlord meetings.

Show up at the monthly meetings and talk to the investors in your community. Hand out your business cards and let them know what you have to offer. If the meeting includes lunch or dinner, you might be sitting at a table with eight or nine other people, all of whom buy and sell real estate, providing you with a perfect opportunity to network.

Consider hosting a free workshop on buying and selling distressed properties. Far too many agents believe that by giving away valuable information, they are empowering investors to fly solo without an agent. Although this may be the case for a few investors, most soon realize that having you as a resource is worth every penny of commissions you earn. Use your unique knowledge strategically to generate more clients and more business.

3. Help investors find the financing they need.

Investors need cash to purchase and renovate properties. By leading prospective clients to sources of cash, you enable them to buy more properties, and you prove that you’re dedicated to their success. The next time they buy a property, they’re more likely to buy it through you. And once they buy the property through you, they’re more likely to sell it through you later.

Tip: Team up with a mortgage broker in your area and exchange referrals. Not only will this empower the investors you work with, but it will also generate additional business as the mortgage broker sends home buyers and investors to you.

4. Assist investors in finding investment opportunities.

Learn how to use the tools in your MLS system to automate the process of finding attractive investment opportunities. You can set up your MLS system to notify you of bank foreclosures, homes that are priced significantly below market value, and properties whose prices have recently been reduced. If you’re investing in real estate yourself, you’re likely to find more leads than you have the resources to pursue. Don’t be selfish. Share surplus leads with your clients.

Tip: Some of the best opportunities come from networking. Hand out your business card to everyone. Let them know that you specialize in working with clients who buy and sell distressed properties. The more people get to know you as someone who deals in distressed properties, the more likely they are to send leads your way.

5. Create and distribute a handyman list.

Once an investor acquires a property, the next thing she needs is help renovating it. Generate a list of top-notch contractors and handyman, and when you sell a property, provide your handyman list to the buyer as a part of your service. Update the list regularly and ask investors for feedback, so you can remove anyone from the list who is providing less than stellar service.

Remember, rehab investors want the same thing you do–success. Show them that they can be more successful with your services than without them. Prove daily that you are an indispensable contributor to their success, remain in monthly contact with investors and real estate investor groups, and you will build a solid and ever growing base of loyal clients.

I was recently contacted by the San Diego Union-Tribune about a Real Estate-related article they were preparing to publish. Reporters Lori Weisberg and Emmet Pierce wanted to know what I thought about the National Foreclosure Institute’s free workshop focused on strategies that the Institute says are “perfect for the novice and pro investor alike,” and are aimed at getting attendees to fork over $2,995.00 for a three-day follow-up seminar.

Having previously attended one of National Foreclosure Institute’s free workshops and co-authored two related books–”Protect Yourself from Real Estate and Mortgage Fraud” and “Foreclosure Investing For Dummies“–I figured I was just as qualified to comment on the benefits or lack there of, of attending as the guy who stood up at the San Diego workshop and proclaimed, “Three deals, three months; everyone say, ‘cha-ching’. ”

As I told Weisberg and Pierce when they called, the whole course is probably worth $100. Think about it… If the content of the Institute’s three-day workshop is so good that someone can stand up and proclaim that he booked $100,000 in profit from just three transactions—which is what James Gripshover said he did when he rose to say, Everyone say, ‘cha-ching,’–then the National Foreclosure Institute and it’s slick spokeswoman, Ann Goldschmidt, wouldn’t be conducting seminars, now would they. Why not? Well, think about it for a second. If it were so darn easy and profitable, Goldschmidt and the Institute’s staff would be spending all of their time doing it themselves!

Read Weisberg and Pierce’s article here. It appeared in yesterday’s Sunday Edition of the San Diego Union-Tribune. The article, “Seminars promise quick cash in foreclosures,” does a nice job of questioning this so-called institute about its content and the way its conducts business.

For some Real Estate investors, the recent downturn in the housing market looks like opportunity. Some of the most aggressive investors go after foreclosures–homes that people have lost after they have fallen behind on mortgage payments or taxes. In light of the fact that “Foreclosure Investing For Dummies” is now available, The Washington Post’s Mary Ellen Slayter recently interviewed me about the pros and cons of investing in foreclosures and how investors can minimize risks while maximizing returns.

An edited transcript of the conversation follows.

Tips From a Foreclosure Investor

Sunday, July 1, 2007; Page F06

Q. Who is a good candidate for investing in foreclosures?

A. It’s right for someone with a secure job, solid cash flow and lots of cash on hand — someone who wants to make some money on the side. If you’re married, your spouse needs to be on board, too. I like for people to use their own money. But if you don’t have enough cash but you’re willing to do the work, find a partner. My first “bank” was my grandmother. I didn’t pay her interest, but every time I made a deal, I took her out to lunch. If you really want to do it, you can always find sources of investment capital.

And who’s not a good candidate?

Anyone who thinks this is easy money. It’s a myth, perpetuated by all these late-night TV gurus, that you can get rich quick doing this. If you’re in financial trouble, this is not going to bail you out.

Why would someone want to look into this now?

There’s never been quite so many opportunities for individual investors to buy foreclosures. There are just so many of them. Before, the market was chiefly controlled by good old boy networks, through the banks’ brokers.

How does it work in declining markets, which are the ones that are most likely to have lots of foreclosures?

You account for this in the price you pay for the property. You make your profit when you buy, after all; you realize it when you sell. There’s a formula in the book that helps you adjust for a soft or flat market. My wife once pointed out to me that no matter what the economy looks like, people are still going to buy and sell houses. They’re still going to get married and start families. Even if 10 percent of workers are laid off, the other 90 percent are still working. They will still need housing.

Describe the perfect property for the foreclosure investor.

It should be in a good neighborhood. And you should be able to see clearly what you need to do to fix it up and sell it.

What kind of work is usually involved?

All kinds of things, inside and out. Look at the doors, windows, roof, concrete — everything. Properties that are in foreclosure aren’t always in great condition. After all, the owners couldn’t afford the mortgage payments. They probably couldn’t pay for maintenance either. It’s important to have a thorough, professional home inspection before buying. But if that’s not possible, then you should at least inspect the outside of the property yourself — all four sides.

You’ll also need staging (making the property look pretty) to move the property if the market is slow. Once you start working, multitask to fix things up as quickly as possible. Timing is everything. Every day you keep a house off the market, you’re losing money.

What types of properties should investors avoid?

Don’t buy if there are a lot of distressed properties on a block.

Don’t invest in foreclosures long distance. You need to be able to see what you’re buying. And don’t touch pre-construction projects.

Also, avoid any deal in which somebody promises you cash back at closing. This is never legal. Stay away from that.

What are some other things that potential investors should keep in mind?

Always have a Plan B. Not every house on the market sells right away. You may need to rent the place out for a year or two after you fix it up. This isn’t necessarily a bad thing. It can lower the tax rate on your capital gains .

And be prepared to lose money sometimes. Even I don’t hit home runs every time.

What about guilt? Do you ever feel bad that by profiting from foreclosures, you’re making money off other people’s hardship? How should people handle those feelings?

Of course you can feel guilty. So don’t take advantage of people. You’ve got to try to make it a win-win. Sometimes the best thing to do is help the person keep their house. I’ve run into situations like this, including one in which the woman who co-owned the house just got behind after one bad event. She didn’t want to ask for help from her family. But instead of buying the house after foreclosure, we made some phone calls that helped her keep it. You’ll get more opportunities that way than being a vulture. And you’ll sleep better at night.

To order “Foreclosure Investing For Dummies,” go to Amazon.com.

Finally, if you or someone you know is interested in investing in foreclosed properties, please feel free to contact my Real Estate office. My staff and I are ready, willing and able to advise you on the best strategy for your investment-related goals.

There you are, in front of the TV, watching the six o’clock news, and up pops a story about the Real Estate industry. Maybe it is about Real Estate or Mortgage Fraud. Maybe the market has bottomed out and people are having trouble selling their homes. Perhaps your area has been hit hard by layoffs and the foreclosure rate has spiked.

Whatever the case, the reporter is interviewing an expert in the area, and that expert isn’t you. Even worse, the expert really doesn’t know what the heck he is talking about. You could do a better job. Why didn’t they call you?!

The reason is that local news producers and journalists probably have no idea of who you are, whether you would even be interested in doing such a thing, or how good of an interview you could provide. They don’t know you.

Understanding the benefits of being in or on the news

Many Real Estate agents and other professionals pay little to no attention to reporters because they fail to see that free Public Relations could actually boost business. They think that competitor of theirs who is always in the news is just somebody with a big ego. Although that may be true, that guy or gal with the big ego also has a big understanding of how to generate business. Appearing in the news gives you a higher profile and instant credibility. It lets prospective clients know who you are and sends the message that you are a legitimate business owner and expert — someone they can trust.

Establishing yourself as an expert

The first step into making you the guy or gal who appears in or on the news is to start establishing yourself as a local expert. Pick one or more areas to specialize in, and then start producing articles that show to the world that you know what you are talking about. I have several areas of specialty, including sales and Real Estate investing, running a Real Estate business, and advising local and federal authorities on the problems associated with foreclosures and Real Estate and Mortgage Fraud. Your areas of specialty are likely to be different.

After identifying your specialties, start publishing. Here are a few ideas on how to get your material written and published:

• If you write well and enjoy writing, you can write the articles yourself.
• Choose content based on your own experience (first-hand knowledge), which makes it more interesting to the reader, drives home the point, and confirms your expertise.
• If you are not much of a writer or dislike writing, hire a writer to work with you.
• Publish your content on your own blog.
• Contribute content to other people’s blogs and to discussion forums. (Pick the blogs and discussion forums that are most popular.)
• Offer to write articles for other publications (newspapers, magazines, and professional journals) that typically contain content relevant to your specialties.
• Offer to write content for local newspapers.
• Making yourself media-friendly.

Journalists are constantly on the lookout for new sources of information. They want experts who know their stuff, but they also want people who are easy to contact, easy to work with, and play well on TV and radio. To make yourself a more attractive interviewee for the press, keep the following important points in mind:

Be accessible: Reporters cannot afford to wait around for return phone calls. Many expect you to be available within minutes. When I dress down for work, I often pack a suit just in case a reporter calls.

Be a good interviewee: Speak candidly and directly answer questions. When preparing for the interview, think in short sound bites–memorable phrases that capture the essence of what you have to say in as few words as possible.

Establish long-term relationships with the media: If a reporter knows an excellent source who plays well on the news, it’s easier and safer than contacting an unknown source. Invite a reporter to lunch. Let them get to know you!

Introducing yourself to the media

Contact reporters and news producers in your area and let them know that you are available on short notice for interviews. Send over a marketing packet that includes your business card, a photo, your resume or curriculum vitae, along with clippings from any articles you have written or other interviews you have given.

Let local news reporters in your area know your areas of expertise and your availability to do interviews. You have to be ready and willing to give interviews at a moment’s notice, but other than that minor drawback, giving interviews provides you with valuable free press!

Once the reporters get wind of you, word spreads quickly, and could even lead to a call from the producer of a national news outlet. Once while negotiating a large deal with several participants at a high-rise in downtown Detroit, the producer for ABC’s World News Tonight tracked me down and called during the negotiations. That call definitely raised a few eyebrows, and the deal was signed.

Email me and I will send you a list of places where you can start posting your articles for free and establishing yourself as a local expert. This will put you on the path to getting your face on the six o’clock news!

To follow-up on a post I wrote on July 16 of this year, I am in New York City today and tomorrow to moderate a couple of panels at RISMedia’s 18th Annual Leadership Conference. If you are in town for the conference, please stop by and say hello (both of my sessions take place tomorrow, September 6):

Session Title: From A to Z-How Do I Form and Lead a Championship Agent Team?
Date: Thursday, September 6, 2007
Time: 9:00 - 10:15 AM
Track: Recruitment and Training Track

Description: An agent team can consist of a partnership that is as simple as an agent and his or her assistant, or something the size of a baseball team. In this session, industry experts will introduce you to various ways you can structure a team and lead it to achieve whatever goals the team sets for itself.

Moderator: Ralph Roberts, Broker/Owner, Ralph Roberts Realty

Panelists

• Brandon Fairbanks, Realtor/Associate, Montecino & Associates Real Estate
• Domenic Manchesi, Team Leader, Prudential Towne Centre Realty
• Chip Neumann , Partner, Neumann Real Estate
• Marylyn Schwartz, President, Teamweavers

Session Title: A New Opportunity? How Brokers Can Succeed with Agent Teams
Date: Thursday, September 6, 2007
Time: 1:30 - 2:45 PM
Track: Business Development

Description: Oftentimes, brokers are too busy doing business to build a thriving business. In this session, learn about the power of the agent team approach and how it can help you boost sales and profits while having more time and energy to devote to what really matters—family, friends, and community.

Moderator: Ralph Roberts, Broker/Owner, Ralph Roberts Realty

Panelists:

• Bryan Felder, Realtor, The Virginia Realty Group
• Dottie Herman, President & CEO, Prudential Douglas Elliman
• Wayne Turner, Broker, Wayne Turner Real Estate Company
• Julie Vanderblue, President, The Higgins Group

This year’s conference takes place at The Roosevelt Hotel, a prominent landmark situated on Madison Avenue and 45th Street in midtown Manhattan.

I spend a lot of time traveling this great nation of ours, and no matter where I go–from California to New York, and from Colorado to Tennessee–when I tell people that I am a Realtor, I hear heart-wrenching, first-hand accounts from the very people who are caught up in this sub-prime lending/foreclosure mess of ours.

Last Friday, in a widely publicized address from the Rose Garden, President Bush said that a bailout is out of the question: “A federal bailout of lenders would only encourage a recurrence of the problem.” This is certainly true. Bailing out the lenders would simply lay the burden on taxpayers and provide the carpetbaggers with another opportunity to pillage.

The President did reach out to some distressed homeowners–those with good credit histories who could probably pull themselves out of their current crises with a little help from the federal government. The FHA (Federal Housing Authority) will be given more flexibility to assist homeowners who have subprime mortgages. Homeowners may also be spared having to pay additional taxes in the event that the lender forgives a portion of their debt. Perhaps this will encourage lenders to work out reasonable solutions with homeowners.

Nevertheless, what about all the other consumers–what about hard-working American families who are too deep in debt to be saved? What about the children of these people who are going to be uprooted from their neighborhoods and the school districts where all their friends go?

Government officials, lenders, and people who have not been victimized by the shoddy lending practices of the last decade are quick to judge. After all, they are not the ones paying the price. The people who are suffering are the same people who usually suffer in these situations–consumers. These are the people who were sold ARMs (adjustable-rate mortgages) that ended up costing an arm and a leg. They were told that they could refinance before the rates went up or could build higher credit scores by making their payments on time and then refinance with a low interest rate mortgage later.

Then, the bottom dropped out of the housing market, making it nearly impossible for these hard-hit homeowners to refinance. Some of these loans even came with stiff prepayment penalties to further discourage people from refinancing. These folks were led down this path simply because they trusted an “expert” in a fancy suit with a silver tongue who failed to warn them of the looming trouble and the risk they were taking on. Where are these smooth talkers now? Probably out of work and seeking more fertile fields to ply their trade. They turned the American Dream of Homeownership into a nightmare, but they certainly are not the ones having to wake up to it.

Instead of letting them off the hook, they should be forced to take ownership of the problem they created. Instead of waiting around to see whether the federal government is going to bail them out, they should be actively pursuing the homeowners they led astray and offer them real solutions that can help these distressed homeowners regain their financial footing.