March is Fraud Prevention Month so could you tell me how consumers can avoid becoming victims of real estate-related fraud? (Part One)
There are many types of real estate-related crimes, and one of the most common is mortgage fraud, which may involve tricking a financial institution into lending money when it otherwise wouldn’t. If somebody ever asks you to apply for a mortgage in exchange for cash, or a promised share of the profits from reselling a property, don’t do it: the most likely outcome is that you’ll get stuck with crippling debts to repay and possibly criminal charges or civil lawsuits after the con artist absconds with the mortgage funds.
Buyers should always perform the necessary due diligence when they buy a home or apply for financing. Your best defense against fraudsters is common sense: if a deal sounds too good to be true, it probably is. That’s why you should:
- Never sign a document unless you’ve read and thoroughly understand it;
- Never sign blank documents that could later be filled in with false information;
- Always use licenced or accredited professionals such as mortgage brokers, home inspectors or real estate lawyers; and
- Always get a copy of any documents you’re asked to sign.
One reason mortgage fraud is so common is that it doesn’t always involve smooth-talking criminals attempting to fleece innocent homebuyers. Consumers can also commit mortgage fraud on their own when they attempt to buy a home they can’t really afford and they aren’t completely truthful with their lender.
Whenever you’re required to fill out a mortgage application form, you should be completely honest, even if it means the lender will likely turn you down. Mortgage fraud can consist of knowingly inflating your income, failing to disclose debt obligations, misrepresenting the amount or the source of your down payment, buying a rental property and falsely claiming it’s owner-occupied, or even misstating your job title. The consequences are extremely serious: you can be held both criminally and financially liable for any misstatements when you apply for a mortgage.
Real estate transactions can be tricky, so I strongly recommend working with a real estate salesperson or broker when you’re ready to buy or sell a property. The reason is simple: they are required to register with RECO to practice their profession and they are obliged to comply with the Real Estate and Business Brokers Act, 2002 (REBBA), its Code of Ethics and other applicable laws.
If you suspect that you, or somebody you know has been the victim of real estate fraud, contact RECO, your local police service and the Canadian Anti-Fraud Centre at 1-888-495-8501.
If you have a question for Joe about the home buying or selling process, please email firstname.lastname@example.org.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.