In this type of scam, a "buyer" approaches you, offering to get you out of financial trouble by promising to pay off your mortgage or to give you a sum of money when the property is sold.

The "buyer" may suggest that you move out quickly and deed the property to him or her. The "buyer" then collects rent for a time, does not make any mortgage payments, and allows the mortgage company to foreclose.

Remember that signing over your deed to someone else does not necessarily relieve you of your obligation on your loan.

Key Elements of an Equity Stripping Scam

• You deed your home to a so-called investor.
• You sign a rental agreement.
• The scammer offers you an option (lease-option) to purchase the house back sometime in the future. The buy-back price, sometimes called the strike price, is always higher than the price you sold the house for.
• The investor collects rent you pay.
• No payments are ever made.
• You are surprised by another collection letter from the lender asking for their payment.

Equity Stripping Variations

Variations on the Equity Stripping scam include the “Trust Agreement” and the “Escrow Loan.” Both of these schemes rely on your faith in “escrows” and “trusts.”

Remember that all scams rely on gaining the marks “confidence.” “Con” is just short hand for confidence.

How the Escrow Con Works

In the escrow con, the scammer prepares a “deed in escrow loan.” You deed your house to a supposedly neutral third party who holds it while an investor provides you with a loan to bring your mortgage current. The moment you are late on a payment to the investor, he records the deed and evicts you.

How the Trust Scheme Works

The trust scheme variation is similar to the escrow, except the scammer offers to place the deed in trust.

You sign your house over to the trust, with the scammer as the trustee. At that point, the scammer owns the property and you’ve lost your house.

Conclusion

It’s hard to believe people fall for these ruses, but distressed homeowners are desperate and con artists are extremely good at what they do.