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Beware: Some Current Scams Out There


May 28th, 2013

Our practice affords us the opportunity to see various proposals that are sent to our clients, which they often in turn forward to us for review. Here are three scams that we’ve seen quite frequently, which we advise avoiding completely.

Sweepstakes and Lotteries

One of the most vicious schemes, which seems to be targeting residents of retirement communities, are unsolicited sweepstakes and lotteries, which appear to guarantee the targets that they have won hundreds of thousands, if not millions, of dollars. The notices look official, with enclosures that resemble stock certificates guaranteeing eligibility.  One such notice that was forwarded by one our clients is headed “Certificate of Eligibility — Absolute Positive Identification of 100% Eligible Candidate.” The notice is full of reassuring words such as “guaranteed,” “positive,” “verified,” “absolute,” and “official.”

Not surprisingly, a careful reading of the flier shows that there is no actual guarantee of payment, but rather that the target is guaranteed to receive information. In very small print on the back of one flier we reviewed, it reveals that the sender “does not conduct sweepstakes, lotteries … and this is not a prize notification. This is an offer to provide you with a report of available sweepstakes and contests.  You must enter these contests yourself …”

As is the case with most scams, there is a quick deadline for response — 72 hours to 10 days — before the offer is withdrawn and your chance will be awarded to someone else. And of course, to claim the apparent prize the target must pay a fee — $29.99, $39.99, or more. Checks and credit cards are accepted. Of course, if a target responds to one of these ads, he or she will be inundated with similar notifications. We are aware of one resident of a local retirement community who was receiving an average of 20 solicitations per day.

In addition to failing the “too good to be true” test, these notices often include no return address shown on the envelope, and have been mailed from outside the U.S. (Hong Kong, the Carribean and Canada are common).  If you or someone you knows receives a notice like this, our recommendation is that you forward it to the U.S. Postal Inspector.

TIMESHARE RELIEF

Having fallen for a high-pressure sales pitch extolling the virtues of timeshare ownerships, many clients discover that timeshare ownership did not work out as advertised. In addition to high initial purchase costs (we recently learned of one development that was selling a single week at a two-bedroom condominium for $65,000 — that works out to $3,380,000 for that one unit if all 52 weeks were sold), timeshare owners find that maintenance fees are high and increase every year.

The experience seems to be the worst for those buyers who buy their timeshares with the idea of exchanging their time for the use of timeshares at other resorts at other times. Those owners who try to exchange their weeks, after having paid a significant annual fee to belong to the exchange company, often find that no exchange is available. If an exchange week is available, it’s for an additional hefty fee. When all is said and done, timeshare ownership becomes much more expensive, and less flexible, than simply renting a place at your favorite resort.

Many frustrated timeshare owners stop paying their annual assessments, which in turn means that the timeshare association must raise assessments on all of the other owners to make up the deficiency, which causes more owners to stop paying, which leads to higher assessments, etc. in a never-ending cycle.

If you search online for timeshares for sale by current owners, you will find that the prices asked are a fraction of the original sales prices. You will even find a number of timeshares that current owners are willing to give away just to get out from the annual fees.

Of course, whenever someone is in financial distress, a scammer will not be too far away. Many timeshare owners receive phone calls and letters from various companies promising relief from their timeshare burdens. Just as the case with the lottery scams, the timeshare relief scams usually rely upon an urgent need for your response. They will often claim that there is an upcoming sales event and they need more inventory for timeshares in your development. They will ask how much you want to get for your timeshare. Despite the non-existent market for timeshare resales, they will tell you that they have buyers eager to pay more than what you paid to the developer.

They will say (by phone) that they guarantee your timeshare will be sold — with no commission.  All you have to do is pay an up-front marketing fee of $500–$1,000. What? “If this is a guaranteed sale, why can’t you just deduct your fee from the soon-to-be-realized sales proceeds?” you may ask them. “That’s because [insert name of state here] law prohibits the payment of a commission on a timeshare resale.” (It does not.)

If you do agree to let them “sell” your timeshare, you will receive a bunch of paperwork in the mail. Although you distinctly recall that in the phone call the sales representative guaranteed that the timeshare would be sold or your money back, a closer reading of the materials you get will show that the guarantee is only that your timeshare will be listed for sale — i.e., all they are legally obligated to do is to post your timeshare on some website somewhere with thousands of other timeshares that other people are trying to get rid of.

Run, don’t walk, away from these deals. Common scam traits: promised high sale price, urgency, and up-front money from you.

DEED PROCESSING NOTICES

For estate planning purposes, clients often change the ownership of real property, whether that is by adding someone to the title, deleting someone from the title, or transferring property to a trust. Any change of title is accomplished through recording a deed in the public land records, whereby the old owner(s) convey the property to the new owner(s). Once we have recorded a deed in the land records for a client, the clerk will (eventually) send the original deed to us, which we will in turn forward to our client.

Unlike a stock certificate, a deed is not a negotiable instrument. Once a deed has been recorded in the land records, it has no further legal validity. Contrary to common misconception, there is no need to keep a recorded deed in your safe with other vital papers. In Maryland, both real property records and recorded deeds are available online to the general public (Maryland real property tax records are available online here; Maryland deeds are available online here).

Preying on this common misconception, we have seen a recent phenomenon where, shortly after a deed has been recorded in the land records, an official-looking document will be received in the mail by the owner. This official-looking document offers to send the homeowner a copy of the recorded deed (which we will be sending back to our clients anyway) and property profile for the very reasonable fee of $83. To enhance its credibility, various details about the real property (all available online) are included in the notice.

Of course, in the fine print on the back, the notice reveals that the sender is not a government agency, and that the information being offered is a matter of public record. Various legal definitions and Q&As are on the same page as the disclosure, which makes the disclosure less noticeable.

These are, of course, only a small sample of the types of scams out there. Remember that the usual tip-offs are (1) the deal sounds too good to be true, and (2) there is high pressure to respond within a very short time frame.

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