Buying a home is an exciting time for any prospective homeowner, but it is important to educate yourself on the types of fraud in real estate to ensure that your dream purchase does not turn into a nightmare. Earlier in 2023, the Canadian Broadcasting Corporation published an article on increased real estate fraud in the Greater Toronto Area. This article reported on a worrying trend wherein organized crime groups were selling and mortgaging properties without the real owners’ knowledge.
This blog post will discuss some of the most common types of fraud in real estate and what homeowners can do to protect themselves.
When you purchase a property, you obtain “title” to the property with the help of your real estate lawyer. This documentation makes you the registered owner of the property in question.
In title fraud scams, a fraudster impersonates a homeowner and fraudulently transfers the title into their name. This could be done by forging documents, stealing the homeowner’s identity, or even manipulating title records. From there, the fraudster may attempt to sell, mortgage, or take out loans against the property, depending on their objectives.
Protecting Yourself from Title Fraud
Remaining vigilant with respect to your personal information is the best step for avoiding title fraud. According to the Canadian Anti-Fraud Centre, there are several steps that homeowners can take to protect themselves from identity fraud and, subsequently, title fraud, such as:
- Be mindful of who you share personal information with and be wary of any unsolicited emails, text messages, phone calls, or mail you receive asking you for personal information;
- Check your credit reports and banking statements regularly for any suspicious activity;
- Collect your mail regularly to minimize the risk of mail theft; and
- Notify your post office, financial institutions, and service providers as soon as possible if you move.
Obtaining title insurance is also a critical aspect of a real estate transaction. These policies protect property owners against losses relating to property ownership, including title fraud. While having a title insurance policy will not prevent fraud from happening, it helps homeowners mitigate the risks associated with title fraud.
Mortgage fraud is another common type of fraud in real estate and covers multiple types of scams. In some cases, a fraudster impersonates a homeowner and obtains a mortgage against their property without their knowledge to collect the cash value of the mortgage. In other cases, fraudsters may trick homeowners into signing high-interest mortgages and registering them against the property.
Protecting Yourself from Mortgage Fraud
As discussed above in our section on title fraud, homeowners must remain vigilant by protecting their personal information to avoid the risk of mortgage fraud.
Additionally, with respect to high-interest mortgages, it is essential to ask critical questions if you are approached regarding a new mortgage or debt consolidation program. Furthermore, if you decide to proceed with any mortgage document, be sure you understand what you are signing and ask questions. Do not allow an individual or organization to pressure you into signing something on the spot. Be sure to consult with your real estate lawyer if you have questions or concerns about the terms of a mortgage.
Email Phishing and Wire Fraud
Email phishing and wire fraud are types of real estate scams that can come up during a real estate transaction. In these cases, fraudsters may impersonate a real estate agent, lawyer, or other party involved in the transaction. They will send fraudulent emails instructing a buyer or seller to wire funds relating to the real estate transaction to a fraudulent account.
Protecting Yourself from Email Phishing and Wire Fraud
Thankfully, real estate agents and real estate lawyers are well-versed in common types of fraud in real estate and have the experience and professional judgment to identify and navigate potential fraud.
Nevertheless, it is important for all parties – including homeowners – to exercise extreme vigilance when receiving email instructions relating to real estate transactions (especially if they come from a person or organization you are unfamiliar with). Be sure to work with an experienced realtor and real estate lawyer and let them know if you receive any suspicious messages relating to your real estate transaction.
Foreclosure scams can arise for homeowners facing foreclosure. In these cases, a fraudster might exploit your financial hardship by offering fraudulent assistance to help you save your home from foreclosure, such as negotiating with your lender or persuading you to transfer your property title to them temporarily.
Protecting Yourself from Foreclosure Fraud
To avoid falling prey to foreclosure fraud, it is important to:
- be skeptical of any unsolicited foreclosure assistance, especially where the individual or organization is seeking upfront fees or title transfers; and
- speak with your lawyer if you are contacted regarding any proposed foreclosure assistance before committing.
Final Thoughts on the Types of Fraud in Real Estate
Unfortunately, the types of fraud outlined above are only a handful of many. Understanding the common types of fraud in real estate is critical for safeguarding your property and avoiding financial loss.
In any case, it is crucial to take preventative steps to safeguard your personal information and minimize the risk of fraudsters exploiting this information for their own gain.
It is also essential to have a healthy level of skepticism regarding any unsolicited advice or proposals you receive relating to your property. Chances are, if something sounds “too good to be true”, it probably is.
Contracts are another area where homeowners must always be vigilant. Never sign a contract unless you understand the terms, obligations, and potential consequences of entering into that contract or agreement. Take your time when reviewing documents and do not hesitate to reach out to an expert for advice before signing on the dotted line.
Finally, be sure to work with reputable professionals, such as an experienced real estate lawyer. Lawyers have the legal knowledge to identify potential risks, propose solutions to mitigate fraud, and help you navigate real estate fraud claims if they arise.
Oakville Real Estate Lawyers at Campbells LLP Help Guide Buyers and Sellers Through Commercial and Residential Transactions
Whether you are buying a home or a commercial property, the trusted real estate lawyers at Campbells LLP have the experience to assist you at every step along the way. We work closely with clients throughout the transaction and can provide an extra layer of security to avoid real estate fraud. Should a dispute arise before the transaction closes, we will provide you with an explanation of all available options, review all relevant paperwork and contracts, and negotiate on your behalf.
To meet all of your real estate needs, we offer a wide range of legal services related to buying and selling property. To speak with one of our experienced real estate lawyers, contact us online or call us at 905-828-2247.