Real estate fraud can take many forms. Often, these scams appear convincing enough that it is too late for the victims to sue and claim damages. In February 2019, the British Columbia Securities Commission panel banned and imposed fines on a pastor, his son, another individual, and their companies over a real estate fraud committed. The Surrey pastor and his cohorts siphoned $450,000 from two investors by assuring them their money would be invested in a high-yielding real estate property in Edmonton. The perpetrators misrepresented themselves to the investors and used the money to pay for their mortgage and other personal expenses.
How can you avoid falling victim to real estate fraud?
What is Real Estate Fraud?
Real estate fraud happens when a person uses false information to exploit another person during a real estate transaction. Real estate fraud is a broad term that covers different phases in a deal from appraisal to closing. Fraud regarding real estate can be divided into two categories: lender fraud and borrower fraud.
Lender Fraud happens when the person attempts to gain profit from the transaction through property flipping, misrepresentation, and identity theft. Borrower Fraud, on the other hand, may take the form of falsification of loan applications, provision of false information about credit, and omission of important details during the transaction. Fraudulent real estate activities can also go digital, as there have been incidents of cyber fraud.
How to Protect Yourself from Real Estate Fraud
Buyers can avoid becoming a victim of real estate fraud if they do their homework and check for basic things such as the preliminary title report. This report will give them an overview of the recorded title. Typically, real estate sales through a bank loan will not go through without a clear title. However, for buyers paying in cash, title reports must be personally checked.
Buyers would also benefit by asking for complete disclosures. Often, sellers will attempt to sell flipped properties without disclosing possible issues the property may have. Buyers can protect themselves by investigating the property with the help of professional inspectors.
Buyers engaging in off-market transactions must do so with the presence of an attorney. Attorneys knowledgeable about real estate laws will help protect the buyers against potential scams. Fortunately, there are tons of law firms in Surrey BC that specialize in real estate laws.
Buyers rarely scam sellers, but it is possible nonetheless. The main concern of sellers is that they receive payment for their property, and sometimes they fail to see potential scams. Sellers can ensure they get payments by using the services of an escrow company. Escrow is a means to ensure the seller will not deed away the property until they receive payment. The most common real estate fraud against sellers is when buyers become overly aggressive after entering escrow when they demand discounts or unnecessary repairs. Sellers can avoid this by getting to know the buyer before accepting an offer, by considering all the factors associated with the sale and consulting an attorney to help them arrive at a decision.
Another overlooked consideration by sellers when they put their property on the market is the listing agreements. It is mandatory for real estate property owners to review and negotiate listing agreements, particularly for commercial real estate transactions.
Real estate fraud can occur anywhere and to anyone. For every transaction, the best course of action is to always be defensive by preparing for the possible scenarios that may arise. To many, buying and selling real estate property is often the most significant decision they will make in their lifetime, and it will be such a shame if they will fall victim to a real estate fraud.