Residents of the state of Indiana whose homes are sold via a tax sale may find themselves as the target of scammers attempting to defraud them of out of money that may be left over after the sale of their homes, the state’s Attorney General warned recently.

According to the office of Indiana Attorney General Greg Zoeller, as well as Clark County Auditor Monty Snelling, some Indiana residents have fallen victim to a “complicated scheme” that stems from the tax sale of a home, which is a sale that takes place when a homeowner falls behind on their property taxes.

In that circumstance, the county will list the property for a tax sale. The minimum bid for these homes is equal to the amount owed in taxes. If the winning bid is more than the amount of the unpaid property tax owed, the county keeps only the tax amount.

The mortgage lender gets their money next, and the original homeowner is then entitled to any surplus amount beyond what may be owed to the lender. This surplus may be considered a rough equivalent to their home’s equity, Zoeller’s office said.

In this scheme, the scammers are allegedly targeting Indiana homeowners that don’t know they are entitled to those surplus funds, and convincing these homeowners that they can “make their delinquent tax problem go away.” All the homeowner needs to do is sign quitclaim deeds, and the scammers will even offer small amounts of money amounts to incentivize the borrowers to bite on the scam.

But instead of making the borrowers tax problem disappear, the scammers simply pocket the surplus amount from the tax sale that would have taken place otherwise.

According to Zoeller’s office, the AG filed a $12 million lawsuit in February against various companies that were allegedly perpetrating similar tax sale scams, bilking some homeowners out of tens of thousands of dollars, in some cases.

In the wake of filing that lawsuit, Zoeller’s office said that it received calls, questions and other information from local agencies throughout the state that helped show that the problem may be more widespread than that.

In other instances, some third-party surplus “finders” have unused their position to take advantage of unsuspecting homeowners who do not realize they have a surplus available to them.

While “finders” are legally allowed to provide this service to homeowners who have not claimed their surplus, these third-party entities must comply with a series of requirements before engaging in any such service, and cannot charge more than 10% of the surplus for this service under state law,” Zoeller’s office said.

Snelling said he has seen an increase in third-party finders contacting county’s office who, despite being a legitimate business, often charge for something that is already available to the property owner for free.

After discovering the existence of these schemes, Zoeller’s office said that the AG worked with members of the state legislature to enact new laws that further protect Indiana borrowers.

The law, SEA 355, took effect on March 24, and ensures that no third-party that acquires an interest in their property will leave the original owner without the equivalent of the surplus.

“My office’s Homeowner Protection Unit continues to investigate this and other related fraud schemes, which we expect have victimized struggling homeowners in many areas of the state,” Zoeller said.

“We urge people to speak up and contact our office if this has happened to them,” Zoeller continued. “It is also important to educate homeowners about these possible scams so they don’t fall victim, and end up losing large sums of money on top of losing a home. Working with county officials has been key in identifying and preventing potential fraud.”