Avoid Housing Schemes

Authored By: Iowa Legal Aid

If a Real Estate Deal Sounds Too Good To Be True, Call Iowa Legal Aid.

Housing is expensive. Many Iowans struggle each month to come up with enough money to pay the mortgage or rent. If an individual gets the chance to buy a house for a very small amount of money or sell a house for a large amount of money, that individual should always take advantage of the opportunity, right? 
Many real estate deals that seem too good to be true really are too good to be true. The number of Iowa homes in foreclosure has been high for several years, and homeowners experiencing foreclosure can be easy victims. The following scenarios are not all scams – but these situations likely will not be a “good deal” for individuals buying or selling homes. Individuals experiencing any of these situations should be extremely cautious and should contact attorneys at Iowa Legal Aid before selling or purchasing real estate.

Selling Real Estate in Foreclosure

An out-of-state attorney offers to “save your house” for a fee
Homeowners who have received court papers for a foreclosure lawsuit may get many mailings from attorneys or organizations offering representation for a fee. The attorney may state “legal representation is necessary to save the house” and guarantee he/she will be able to save the home.
Many of these solicitations from out-of-state attorneys and organizations are not legitimate. If an attorney or organization claims to have the ability to end a foreclosure for a fee, do NOT pay the fee. A foreclosure lawsuit cannot be resolved with a one-time fee – the process involves a close examination of the homeowners’ current income and lengthy negotiations. In addition, many of the attorneys who solicit homeowners in foreclosure are not based in Iowa. If an attorney is not licensed to practice in Iowa, that attorney likely does not have the ability to represent and assist with an Iowa foreclosure lawsuit.
If you have received mail from an organization or attorney that you believe is not legitimate, contact the Iowa Attorney General’s Office or Iowa Legal Aid. You likely will not be able to recover money you paid to the organization, but you may be able to prevent others from being taken advantage of. If you receive foreclosure papers, you should contact Iowa Legal Aid or the Iowa Mortgage Help Hotline.

You receive mail from an individual who buys homes in foreclosure
After receiving foreclosure papers, many homeowners receive handwritten notes with offers to buy the home. The notes typically have only 1-2 sentences such as, “Contact me at 555-5555. I buy homes cheap.” 
The individuals or companies buying homes in foreclosure may have the ability to offer you a small amount of money for your home. However, these individuals likely will NOT be able to explain your rights under Iowa law. After you receive foreclosure papers, you likely will be able to reside in your home for at least 4-6 months. If you agree to sell your home at an extremely low price, you may be forced to move soon after the foreclosure begins. You will not make any money from the sale, and you will be forced to rent other housing after you move out of the home.
A third party wants you to sign a quit claim deed or warranty deed to your home
A third party may agree to loan you money if you sign over the deed to the home. Unless you have discussed the situation with an attorney or real estate professional, DO NOT sign a quit claim or warranty deed and give the deed to a third party. Signing a quit claim or warranty deed gives ownership of your home to the third party. After you sign the deed, you will no longer own your home.

You want to sell your home in a “short sale” to avoid foreclosure
Foreclosure lawsuits are stressful and scary. You may decide to sell your home in a short sale to end the foreclosure as soon as possible. A short sale involves selling your home to a buyer at a price less than the amount you owe the mortgage company. Your mortgage company will need to approve a short sale. However, even if your mortgage company approves a short sale, a short sale may not be the best financial decision. If you sell your house in a short sale, you will have to move soon after the sale, and you will not receive any money from the sale. If you remain in your house during the foreclosure lawsuit, you likely will not have to make monthly mortgage payments for several months. Therefore, you may be able to save money by remaining in your home during the foreclosure lawsuit. After most foreclosure sales in Iowa, you will not owe any more money on the foreclosed mortgage. Even if the house sells for less than what you owe on the mortgage, you will often not owe any more money on the mortgage. In that way, a foreclosure sale may be like a short sale. However a foreclosure sale often takes several months longer than a short sale. Therefore, you can continue to live in your house for several extra months. However, you should contact Iowa Legal Aid or the Iowa Mortgage Help Hotline if you are facing foreclosure. You can only receive complete and accurate legal advice by allowing an attorney to review your foreclosure papers.
Purchasing Real Estate


A foreclosure will lower your credit score, and it will be very difficult to get other mortgage companies to approve a mortgage. The creditors who may be willing to loan you money will likely only do so at an extremely high interest rate. Therefore, renting a home or apartment is usually the best option after a foreclosure. 
Individuals with a recent foreclosure or poor credit history may look at the following methods of purchasing real estate. These methods of buying real estate can be risky and may not be good financial decisions.

A home is listed on Craigslist at a very low price
Craigslist may be a great place to buy and sell small items, but Craigslist is usually not the best place to buy or sell a home. Individuals selling real estate on Craigslist may not own the title to the house. If you buy a home from an individual who does not have the legal right to sell the home, you will have no legal right to the home you just purchased. Before purchasing a home on Craigslist, contact Iowa Legal Aid or another attorney or real estate professional.

A person living in another country wants to sell real estate in Iowa
This may sound like an outrageous situation, but this situation has occurred in Iowa. An individual from Africa claimed he needed to sell his property in Iowa. The property was reasonably priced, so the individual assumed she was getting a good deal. However, the “seller” did not really own the property. If the buyer had given money to the seller, she would not have received legal rights to the home and likely would not have been able to get her money back. If you are contacted by a seller from another country, contact Iowa Legal Aid before signing papers or giving money to the seller.

Seller will sell real estate to you if you waive the inspection
If a seller agrees to sell real estate to you only if you waive an inspection, you should assume the home has major defects the seller does not want to reveal. After you purchase a home, you are responsible for major repairs such as roofing, electrical, sewer, and foundation repairs. You may not notice the need for these repairs during a walk-through, but an inspector should be able to tell you which areas of the house are in need of repairs.

Seller will only sell real estate on contract 
Individuals who cannot get a good mortgage may be able to purchase a home on contract. However, buying a home on contract can be riskier than buying a home with a mortgage. Contracts may contain terms that are not favorable to buyers, and buyers can be “forfeited” out of contracts and lose equity they had in the home. Homeowners who are buying on contract can often be evicted from their homes quite quickly if the seller forfeits the contract. A contract can often be forfeited if the buyer falls more than thirty days behind on payments. Homeowners buying on contract have fewer rights than homeowners with mortgages. You should contact a real estate attorney or Iowa Legal Aid before signing a real estate contract.
In every sale and purchase of real estate, it is important to know what you’re signing. If you don’t understand the terms of the mortgage or contract – don’t sign the paperwork. The individuals assisting with the purchase or sale should be able to explain the documents. If they are not willing or able to answer your questions, contact Iowa Legal Aid or private attorney.


Resources to Help Deal With Housing Schemes

Iowa Attorney General Consumer Protection Division

Fax: 515-281-6771


The Consumer Protection Division protects consumers from fraud and ensures fair competition in the marketplace. The Division enforces a number of laws that protect the buying public from false or misleading advertisements or sales practices. It also enforces laws that make sure consumers get information to help them make important decisions, like credit disclosure laws that help consumers compare loan offers.


Iowa Mortgage Help Hotline

Iowans who are having trouble making mortgage payments, or who think they may have trouble in the near future can call the Iowa Mortgage Help Hotline. You can also reach the Hotline at www.IowaMortgageHelp.com. Call! You may be able to avoid losing your home. The Mortgage Help Hotline is free, confidential, and open to anyone.

Iowa Legal Aid


Free legal help for eligible clients. Information on topics including housing and consumer issues can be found at iowalegalaid.org. To apply for help from Iowa Legal Aid, call during intake hours. Hours for telephone intakes are from 9 to 11 a.m. and 1:30 to 3:30 p.m., Monday through Friday, except Thursday afternoon. Emergencies are taken during regular office hours.

Last Review and Update: Jan 02, 2023
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