• Watch out for “problem solvers.” With a soft market, be suspicious of a mortgage broker who says he has borrowers lined up and 100 percent financing or that he'll buy the properties and turn around and sell them for you. Such a broker “might have straw buyers lined up,” Brawley says.
  • Beware the phantom buyer. Builders are accustomed to dealing directly with the customer. If you have an elusive buyer with an intermediary who insists that all contact go through him, it's a strong sign of potential fraud.
  • Avoid deals that are too good to be true. If someone approaches you and offers you more than the listing price, or a real estate agent wants to list the house for more than you're asking, there's a good chance the person is a fraudster with a crooked appraiser lined up to inflate the price. Ask for a copy of the appraisal and the comparables they're using to come up with the price.
  • Check out those lender pre-approval letters. All too often today, lenders will issue pre-approval letters without checking the information the borrower has provided. Call the lender and make sure the borrower's identity, income, and address have been verified. Straw buyers often inflate their income to qualify for a higher loan amount or steal the identity of someone who will qualify.

    • Unfortunately, builders, too, sometimes commit mortgage fraud, Brawley says, in what is called the builder bailout scheme. It works like this: A buyer doesn't have any money to put down on a house, so the builder says he'll carry a 20 percent loan for the down payment. He inflates the value of the house to cover the difference. It's then presented to the lender as an 80 percent loan with a second lien for owner financing. The second lien is never filed or is satisfied a day or so after closing. The homeowner never has to pay back the 20 percent.

    “The lender thinks there's equity in the house,” Brawley says. “As the economy continues to get depressed, the first time the homeowner misses a payment, it's easier [for the buyer] to walk away, because they have no equity. Plus now, within this neighborhood, you have an artificial market.”