How to Perform Your Own Real Estate Fraud Check

August 8th, 2016

geo1Fraud happens every day in the real estate industry and the last thing that you want is to find your name intertwined into one of these transactions. In this blog we will review some common forms of real estate fraud and how you can stop and deal with it, should it come up. There are simple searches and steps that you can take at the time of engagement that will help you not only know more about your customer and the property in question but also identify potential fraud.

Type of Fraud: Non-disclosure of material facts.

Often this is cited more as a mistake than intentional fraud, especially when clients claim they were unaware of certain information. However, if a property has been used as a grow op in the past or has had repeated floods with hidden water damage, this could end up costing everyone in the long run, for a variety of reasons. If the seller hides this information and you present the property as clean, that responsibility has now been transferred to you!

Solution: An insurance claims history report is a quick and easy way to find out if there was a particular type of insurance claim or repeated insurance claims that could signify an issue. This particular report will also reveal if a property has been used as a grow-op.

Type of Fraud: Title fraud

In all cases, title fraud begins with identity theft. This is where the fraudster pretends to be the property owner, transfers a property to his or her name and then obtains a mortgage against it, or, if unoccupied, sells it! This can happen especially where new construction purchases are concerned.

Solution: How can you catch this type of fraudster? Even if you ask for ID they may have ID with their photo in the homeowner’s name. There are a few things you can do. You can obtain the Instrument Image of the original transfer and mortgage registration. If the document contains a signature, you can match it against the fraudster’s ID. Another thing that you can do is obtain a Parcel Register*. Using the information in the Parcel Register* you can ask any applicant strategic questions that only someone who owned the home for a long time would know.

Type of Fraud: Foreclosure Fraud

There are companies out there who prey on people with problem credit and financial problems. They will often agree to advance mortgage financing for astronomical fees and will even demand to be on title to the home, either with or in some cases without the homeowner on title (they want the title transferred completely). Anticipating that the borrower will struggle with payments, their goal is to take possession of the property. If a homeowner who is involved in this type of mortgage approaches you, you could be in for a surprise and learn that the lender is on title to the home.

Solution: To identify and deal with this situation, the best approach, as soon as you engage a new client, is to either review a property details report which will reveal current homeowners, or, as we mentioned earlier, review a Parcel Register*.

We hope that you have found this blog useful so that you can perform your own veritable fraud check to protect both you and your clients. Don’t get caught with a deal that can land you, and others, in a heap of trouble.

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*An official product of the Ontario government pursuant to provincial land registration statutes.