Most of us have become fairly savvy when it comes to identifying a telephone scam: if the caller wants you to send money to Nigeria, or announces that you’ve won $1,000,000 for a survey you never entered, hang up the phone! But how much do you really know about real estate fraud?
Real estate fraud is a criminal offence. It is also big bucks for criminals. Estimates show it is costing lenders and insurers millions, if not billions of dollars, in losses in both Canada and the United States. Real estate fraud affects us all because it increases insurance rates, whether you are directly victimized or not.
There are different types of real estate fraud. Fraud can be as outrageous as discovering that a mortgage has been added on your property without your knowledge, or as seemingly innocuous as misrepresenting yourself on a mortgage application. Two of the more common types of fraud are value fraud and title fraud.
In a value fraud the value of the property is inflated and usually a third party (ie. bank) advances money on the strength of the higher value. The fraudster then runs off with the funds. These transactions most frequently hurt the financial institutions that lend the money.
In a title fraud, also known as identify fraud, the fraudster misappropriates the identity of someone to facilitate the fraud. This fraud directly affects homeowners. In this case the fraudsters use stolen identities or forged documents to transfer a registered owner’s title to another person. Can you imagine discovering that your house was unknowingly sold while you are on vacation?! Or how about purchasing a seaside time share in Florida and discovering that the address leads to a parking lot?! This is scary stuff.
So, what can you do?
- protect your personal passwords and identification (I recommend a shredder)
- create difficult passwords NOT 123456
- ask questions and dig deeper, especially if facts are inconsistent
- resist being rushed into making a decision
- avoid cash transactions
- always purchase title insurance – it can help you recover title or be compensated
- work with trusted professionals that you have independently retained and avoid multiple representation
Fraudsters can be very convincing so you need to arm yourself with knowledge and a trusted real estate professional. A real estate professional will be familiar with real estate fraud red flags and will have access to the property’s transactional history. It is incumbent upon real estate professionals to adhere to strict policies with respect to the practice of real estate. It is your responsibility to seek advice.