Top 3 Real Estate Scams – How To Protect Yourself

Be alert these these common scams to avoid losing your time and money

Be alert these these common scams to avoid losing your time and money

Top 3 Real Estate scams. Yes they do exist. Why do they exist? Very simple. The Real Estate market is one that carries with it a lot of opportunities for criminal organizations to cash in on. The current housing market in the province of Ontario is unbelievable. This is a seller’s market folks! When you list your property on the professional market, BEWARE. Your home will be sold in only a record number of days and will sell for at least $30,000 to $40,000 above asking price. This is out current state of affairs. It’s great for home sellers, but even greater for the criminal fraudsters out there. With that being said, I have come up with the 3 most common real estate scams that are prevalent in our society. Please take a read and make yourself aware of the types of frauds that exist.

1. TITLE FRAUD

One of the least common frauds for property owners is title fraud. This type of fraud starts with identity theft. The criminal will use false documents to pose as the property owner, registers forged documents transferring a property to his or her name, and then gets a new mortgage against the property. After securing a mortgage or line of credit, the criminal takes the cash and leaves the owner on the hook for future payments.

While an identity thief may get a forced discharge of an existing mortgage, it is generally held that fraudsters are more likely to go after homes that are free and clear of mortgages: these have fewer complications and they tend to be held by older people who may be less aware about how to guard against identity theft.
Title insurance is the best protection against this type of fraud. As well as protecting against title fraud, it also guards a new owner from against existing liens against a property’s title (such as unpaid debts from utilities, mortgages and unpaid property taxes), encroachment issues (a structure on a property needs to be removed because it is on your neighbour’s property) and errors in surveys and public records.

2. Power of Sale and Home-Equity Fraud

Criminals and crime groups can take advantage of property owners who find themselves in a cash crunch, being short on funds for liabilities such as mortgage payments or other purposes. Two common scams that exploit a victim’s need for cash are power of sale fraud and home-equity. Power of sale fraud occurs when a property owner who is having difficulty making mortgage payments is approached by a criminal offering a loan to cover expenses and consolidate loans, in exchange for upfront fees and an agreement to transfer the property title.

However, in contrast to real debt consolidation programs, the criminal will keep all the payments made by the owner and ignore bills and taxes. The criminal then remortgages the property and takes the money, leaving the former property owner without the home but still in debt.

Property owners or investors seeking money can be vulnerable to other scams or suspect behaviour’s to tap equity. There is always risk when leveraging properties, but a legitimate bank, broker or private lender should be forthright when explaining risks. However, those looking to borrow on equity should be alert for less suspicious lenders, such as those who invite owners to embellish their application by exaggerating income, down payment or property assessment value sources in order to secure a larger loan.

3. ONLINE RENTAL/SALES SCAMS

In these scams, rental property is advertised on online classified sites like Craigslist or Kijiji. The ads use information and photos describing the property that has been “scraped” from legitimate ads, such as those on the MLS. A scammer will impersonate the landlord, property manager or estate agent and will respond to emails and calls from prospective tenants. The scammer indicates he or she is unable to meet a prospective renter at the property, and instead proposes a meeting off site to exchange keys, sign a tenancy agreement and collect rental deposits. Victims may only learn they’ve been scammed when they show up at a property to discover that it is already occupied.

Property owners can search for the addresses of their units on search engines and they can use services like Google Image Search to help discover if a scraped picture from MLS or another online source is being used illicitly. Property owners should also digitally watermark any photos they use in rental ads, including business contact details and website.
While rental scams are common, online classified advertising and social media have also been used for investment scams and property fraud. Things to be alert for in such listings include claims of urgency, such as “must sell now,” promises of high returns or “low-cost/no-cost” financing. These sort of claims are usually too good to be true, and they also can be prevalent in off-line scams.

It is my hope that you glanced through this article long enough to realize that there is potential for criminals to infiltrate our industry and can cause serious damage to our reputations and clients. We must educate ourselves and open our eyes to the vulnerabilities that exit in this industry so as to better protect ourselves.