What do I need to know about real estate-related fraud?
Given that March is Fraud Prevention Month, that is a particularly timely question.
Let me preface by saying that for most of us a real estate transaction is the single biggest financial undertaking we will ever take on. So, it is absolutely crucial for consumers to do their due diligence before entering into any law-binding agreements.
With financial stakes being typically high, real estate in Ontario can unfortunately be prone to many kinds of illegal activities. The one we hear about most often is mortgage fraud, which typically involves providing false information to manipulate a financial institution into loaning funds that it otherwise would not. This has become even more common in the current market due to the higher interest rates and tougher stress tests which have made it increasingly challenging to get approved for mortgages.
So, my advice is to please remember that if something sounds too good to be true, it probably is. For instance, someone asking you to apply for a mortgage in exchange for cashback, or to share profits from reselling a home, are red flags and I would highly recommend that you avoid considering them at all costs. Choosing to pursue such options will likely result in you being left with significant debts to repay and perhaps even criminal charges or lawsuits after the fraudster has run away with the mortgage funds.
This is why if you’re looking into getting a mortgage, I would encourage you to keep the following tips top of mind.
- Never sign a document unless you have reviewed it and thoroughly understand all the fine print.
- Never sign blank documents that could later be filled in with incorrect or misleading information.
- Always seek the expertise of licensed professionals such as mortgage brokers, home inspectors or real estate lawyers so that you can make informed decisions.
- Always retain a copy of any documents that require your signature.
Now I would like to point out that mortgage fraud does not just involve con artists or swindlers. Consumers can also partake in mortgage fraud by not being completely truthful with their lender. For example, they might exaggerate their income, not disclose debt obligations, falsify the amount or the source of the down payment, buy a rental property and falsely claim it’s owner-occupied, or even alter their profession or job title. The consequences of such misrepresentations are dire, and consumers who engage in such behaviour can face serious legal repercussions.
If you believe that you, or somebody you know has been the victim of real estate fraud, the Real Estate Council of Ontario is here to help. Contact us at 1-800-245-6910. I would also suggest that you reach out to the Canadian Anti-Fraud Centre at 1-888-495-8501, and your local police service.
Next week, I will write a column about identity theft, which is another type of fraud we have seen in real estate.
If you have a question for Joe about the home buying or selling process, please email email@example.com.
This column is for general information purposes only and is not meant as legal or professional advice on real estate transactions.
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.