Foreclosure Scams are on the rise because of the increasing number of foreclosures. It's very important as homeowners to know about these scams and avoid them like the plague. They may cause you more harm and headache as they prey on desperate homeowners looking for solutions.

Common Foreclosure Scams

1. EQUITY SKIMMING

You are in a situation where you can't make payments anymore on your home. You are desperate and put your home up for sale. You are approached by a "buyer" who offers to buy your home at full asking price. The potential buyer claims he will solve all your financial problems by "promising" to pay off your mortgage. He claims to take over the existing mortgage and give you a sum of money after the property is sold. But in order to do so, he suggests that you move out right away and deed the property over to him. So you move out and assume the "buyer" will continue to make the mortgage payments. However, the "buyer" collects rent for the next 6 - 8 months and does not make any mortgage payments. The lender has no choice but to foreclose and all the while you have no idea what's happening because you've moved out. Now your credit is shot for the next decade and explains why you couldn't qualify for a credit card.

As a homeowner, you need to know there is a right way and a wrong way of doing this. Taking over a property "subject to" the existing loan is a great technique and is used by many investors. Signing over your deed to someone else does not relieve you of your obligation on your loan. Your name stays on the loan until it's paid off. So if someone ever tries to take over your property promising to make the payments, you need to be involved. Don't just walk away thinking everything will be fine. One of the most common things to do is set up some sort of a loan servicing company or trust company to collect and disburse the payments. This way you know the payments are being paid.

2. THE BAIT-AND-SWITCH

Very similar to taking over "subject to", but the acclaimed buyer is only after the equity. The buyer tells the homeowners he will bring the mortgage current and tells them they can stay in the home. But in order to do so, he must have a few documents signed that protect his interest and gives him ownership of the property. Then a few weeks down the road, the homeowner receives an eviction notice. Again, you've got to protect yourself.

3. THE BAILOUT

Again very similar to the previous two, where the homeowners sign over the deed with the assumption that they will be able to remain in the house as a renter or lease it back from the buyer and eventually buy it back over time. The terms of these types of scams are so harsh that they make it nearly impossible to buy-back which was the plan to begin with. The homeowner is left with nothing and the buyer walks off with most or all of the equity.

This is a common strategy used by investors but the terms must be appropriate. This strategy can be very effective if used the right way and is a great way to help homeowners. It's unfortunate a few have to ruin it for the rest of us trying to do good. Make sure you sign a contract with the potential rescuer and if there are any terms you're not sure about and don't know what they mean, go see an attorney.

4. PHANTOM ASSISTANCE

Typically these are online companies claiming to have the magic touch in stopping the foreclosure auction. They know all the ins and outs and what to say to the lender to stop the auction. Then these companies charge outrageous fees for simple phone calls and paperwork the homeowner could have done themselves at no cost and the end result is the same. You actually end up no better off then you were before, except your credit card bill is higher now. This predatory scam gives homeowners a false sense of hope and prevents them from seeking qualified help.

5. COUNSELING AGENCIES

Some groups, most of them online, calling themselves "counseling agencies" may approach you or ask you to submit your information for a personal consultation to review your situation. They then proceed to offer certain services for a fee. Most of the time these "special services" you are paying for are FREE, such as negotiating a new payment plan with your lender, working out a forbearance, or lowering your interest rate. These are all things your lender will assist you with at no charge. Be careful giving ANYONE money online who claims they can assist you out of foreclosure. There are dozens of good, non-profit organizations and free counseling agencies who are ready and willing to assist.

One of the largest foreclosure assistance programs right now is 888-995-HOPE. This is available to any homeowner in America having trouble paying their mortgage. It is provided free of charge by the Homeownership Preservation Foundation, a nonprofit dedicated to preserving homeownership.

If you are facing foreclosure, more than likely you will be contacted by someone wanting to assist or help you out of your situation. Being an investor, I know some of these companies or individuals mean well and want to help, while others are out there preying on desperate homeowners. So how can you determine which ones are out to take advantage of you and who is out there to help. We have outlined a few things you can look for in determining a foreclosure scam and ways to avoid them.

Here are a few things you can do to avoid foreclosure scams...

• DON'T SIGN any papers that you don't fully understand, or you could make bad matters worse.

• DON'T SIGN any papers that you feel pressured into signing. Take your time.

• DON'T MAKE mortgage payments to anyone other than your lender.

• DON'T SIGN over the deed without some closure or agreement for your protection. Talk to your attorney or title company if you need help.

• DON'T EVER pay anyone who claims to stop foreclosure. You can stop the auction yourself. There are several foreclosure assistance programs all over to assist you for free.

We hope this information is helpful for you if you are facing foreclosure. If you would like to know more about your options, please look for the free report Options of Homeowner in our free report section.