Fraud continues to be rampant in the real estate industry. All parties to a transaction have to make their best efforts to avoid fraudulent deals. The Globe and Mail released an article from 2013 that we continue to share because it highlights some of the most common types of fraud you may encounter today. Check it out here: http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/top-6-real-estate-scams-and-how-to-avoid-them/article13108985/?page=all.
Some of these are more impactful to lenders and brokers while some are more important for you– we look at the ones relevant to you and cover each to explain how you can leverage your tools to mitigate the chance that it could happen to you:
Title fraud: This could be flat out identity theft or simply undisclosed parties on title. You can avoid this by asking for identification when you sign up a new client and also requesting a search to verify home ownership information. The ID could be fake! Another idea is to Google the person’s name with address and you may discover that your client doesn’t look the same as another person with the same name and address.
Title insurance is far more common these days and is an effective way to also protect against real estate fraud – but that will only occur after the lawyer has cleared the property. Many times the lawyer will catch title fraud and in turn the deal won’t close after legal fees have been spent.
Home improvement scams. This is a big one that impacts many real estate sales professionals because your client may expect you to list the house for much more than it is worth. You can run a sales history report or look at sales comparables in the area and if the value isn’t there, sometimes it is better to take a pass than to get caught up with someone who is trying to commit fraud.
Realtor® Magazine also released an article on the topic of mortgage fraud recently, highlighting some great tips for avoiding real estate fraud: http://realtormag.realtor.org/law-and-ethics/law/article/watching-out-for-fraud. A couple great points that discuss dealing with other real estate sales professionals include:
- When first working with another real estate sales professional that you haven’t worked with before – obtain their complete name, license number and check their license status. If the other agent doesn’t want to meet in person – this is a major red flag!
- Pay attention to names! If the real estate sales professional is a party to the deal this is non arms-length and could be a flag.
Unfortunately, fraud costs us all – not only in money but also time. Take advantage of the available tools that are money well spent – especially when they protect you and your client. GeoWarehouse has those tools – check them out at www.geowarehouse.ca.