What you need to know about real estate fraud
Mar 7th, 2017 | By FCT
Real estate and legal professionals need to stay vigilant as criminals are getting craftier with real estate fraud today. We take fraud seriously at FCT and strive to combat it at every step in the process. We have a certified fraud examiner on staff specializing in early detection and protection. We also underwrite for it in our policies, and we defend our clients who fall victim to it.
March is fraud prevention month, so we’ve included a round-up of the real-estate scams to look out for:
- Title fraud and forgery: The ownership or title of a property is fraudulently changed or documents are forged to allow a fraudster to illegally sell or refinance the property.
- Mortgage fraud: A mortgage is obtained from a lender under false pretenses. This is also known as application fraud.
- Value fraud: A lender is led to believe a property is worth more than it really is through concealment or intentional misrepresentation of the property’s attributes and value.
- Foreclosure Fraud: A homeowner in default on their mortgage is deceived into transferring their property title either in exchange for a loan or for assistance with their mortgage. The fraudster imposes payments that are not sustainable for the homeowner and they end up losing their property and equity along with it. The homeowner’s payments are not used to pay off the mortgage and the fraudster can resell or remortgage the home.
- Shadow flipping: A realtor or investor sells the same property multiple times at increasing prices before the initial sale closing date. The initial seller ends up making less while the last buyer pays an inflated value for the property.
While you cannot prevent fraud from occurring, you can protect yourselves and your clients by carefully reviewing the details of all your deals and by following our recommended best practices.
The best way to protect against title fraud is to get both an owner and lender title insurance policy from FCT.
With a title insurance policy, owners can rest easy knowing their title will be defended in the event it is ever challenged* and they will be protected from other issues like survey and title defects. Lenders will be protected against losses associated with the priority and enforceability of the mortgage, title and survey defects, municipal issues as well as title fraud. Lawyers can rest easy knowing that all parties are protected and FCT has their back in the event of fraud.
Have you come across any fraudulent transactions lately? Tell us about it in the comments section below!
* Insurance by FCT Insurance Company Ltd. This material is intended to provide general information only. For specific coverage and exclusions, refer to the applicable policy. Copies are available upon request. Some products/services may vary by province. Prices and products/services offered are subject to change without notice.