By Livia Khemmoro, Esq., Hirzel Law, PLC
Recent investigations across Michigan have exposed a coordinated pattern of predatory practices targeting homeowners in foreclosure. Unscrupulous third-party firms lure vulnerable homeowners with “rescue” deals or bargain sales, only to strip away equity and statutory rights. These schemes generally fall into three categories: (1) pre-sale equity‑stripping deeds, (2) post-sale surplus‑proceeds fraud, and (3) deceptive “ghost” probate filings. Each tactic exploits confusion and procedural gaps to deprive owners and heirs of significant value. This article summarizes documented tactics and provides practical guidance for real estate attorneys.
Pre-Foreclosure Schemes
After the publication of foreclosure notices, predatory third-party firms approach distressed homeowners with offers of quick cash, reinstatement assistance, or assurances that they may stay in their homes. These solicitations commonly involve quitclaim deeds or contract packets that conceal the true nature of the transfer. County investigations show numerous instances where homeowners believed they were entering temporary agreements but instead conveyed full title. In several cases reviewed by Berrien County, individuals received only nominal payments—sometimes under $500—while unknowingly forfeiting significant equity and all future rights associated with the property.
Pre‑foreclosure exploitation also includes forged documents. The Michigan Attorney General warns that scammers may record falsified quitclaim deeds to seize control of property, take out new loans, and leave the true owner with the burden of clearing title. Once recorded, forged or misleading deeds cloud title, create barriers to refinancing or sale, and force owners into expensive corrective litigation. These practices target seniors and financially distressed individuals unfamiliar with redemption timelines and foreclosure procedures.
Post-Foreclosure Schemes
After the sheriff’s sale, predators shift their focus to surplus funds. Under MCL 600.3252, former owners and heirs are entitled to any excess generated by the foreclosure sale. Many are unaware that surplus funds exist or that they must take affirmative steps to claim them. Predatory actors monitor auction results and immediately contact potential beneficiaries, offering to “help” recover surplus proceeds while demanding substantial contingency fees or assignments of the entire amount. County officials have reported agreements requiring homeowners to surrender significant portions of their surplus or sign documents transferring all rights. In one documented case, an elderly heir accepted a small payment ($100.00) in exchange for signing papers later used to divert more than $10,000 in surplus proceeds.
Ghost Probate Schemes
A related tactic uses deceptive probate filings—“ghost probate” cases—created not to administer an estate but to pressure heirs into transferring rights to property or surplus funds. Investigations have identified probate petitions filed without notice to family members, with third‑party petitioners seeking control of estate assets. Once the equity or surplus is extracted, these cases are often abandoned, leaving heirs without recourse and estates in disarray.
Practice Tip
Real estate attorneys play a critical role in preventing these losses. Practitioners should closely review any deed, assignment, or contract presented to a homeowner after publication of a foreclosure notice and ensure clients understand the consequences for redemption, occupancy, and surplus rights. Attorneys representing heirs should verify the legitimacy of any probate filing and encourage clients to seek counsel before signing documents presented under pressure. Enrolling clients in county property‑record alert systems can also help detect unauthorized recordings.
Conclusion
Foreclosure does not extinguish a homeowner’s rights, but those rights can be lost quickly through misinformation or coercion. By understanding how these schemes operate, advising clients clearly, and intervening early, Michigan real estate attorneys can help preserve homeowner equity and prevent avoidable financial harm.
[1] Michigan Attorney General, Consumer Alerts – Home Lending and Foreclosure Rescue Scams. https://www.michigan.gov/consumerprotection/protect-yourself/consumer-alerts/credit/home-lending-foresclosure-rescue
[2] Berrien County Corporate Counsel Report (Oct. 31, 2025).
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