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Real Estate Fraud

The purchase and sale of real estate typically involves a great deal of money changing hands. Unfortunately, real estate fraud is on the rise. Real estate fraud is a type of financial crime that involves the use of false or misleading information to obtain money or property through the sale or financing of real estate. It can take many forms, including mortgage fraud, title fraud, and deed fraud. In this article, we will discuss the different types of real estate fraud, the signs to look for, and what you can do to protect yourself.

Mortgage fraud. Mortgage fraud occurs when someone provides false or misleading information on a mortgage application in order to obtain a loan or a more favorable interest rate. This can involve fabricating income or employment information, overstating the value of the property, or hiding debts or liens. Mortgage fraud can be committed by borrowers, lenders, or real estate professionals.

Years ago, when a few folks cheated on their loan applications, the mortgage business looked the other way as long as the payments were being made. This is no longer the case. Now secondary market investors such as Fannie Mae and Freddie Mac actively seek out patterns of fraud in their loan portfolios in an attempt to catch the loans before they go into default. Many cases that they investigate occur when someone creates a phony file giving the property an inflated value. The lender funds the loan for the larger amount and the proceeds are divided among the conspirators.

Fraudulent qualifications are also on the rise. If an employment or credit history is fabricated so that the loan will be approved, someone is bound to get into legal trouble. Some fraud occurs when a buyer is attempting to launder money. For instance, if someone is dealing drugs, they may try to use the illegal proceeds for the down payment and closing costs in an attempt to avoid paying taxes.

Title fraud. Title fraud occurs when someone falsely claims ownership of a property or transfers ownership without the owner’s knowledge or consent. This can involve forging documents, using stolen identity information, or misrepresenting the ownership status of a property. Title fraud can have serious consequences for the victim, including the loss of the property and damage to their credit.

Deed fraud. Deed fraud occurs when someone forges or alters a deed in order to transfer ownership of a property without the owner’s knowledge or consent. This can involve creating a fake deed or altering an existing deed and can be done by individuals or organized criminal groups. Deed fraud can have serious consequences for the victim, including the loss of the property and legal action to regain ownership.

A particularly insidious scam is when con artists rent out homes that aren’t theirs. They target vacant homes, collect a month’s rent and security deposit, then disappear. The tenant is then ousted by the rightful owner, losing their place to live along with a considerable amount of money.

There are several steps you can take to protect yourself from real estate fraud:

  • Use a reputable real estate agent or lawyer when buying or selling a property
  • Verify the identity of the person you are dealing with
  • Review all documents carefully before signing them
  • Get a professional appraisal of the property
  • Check the title history of the property
  • Report any suspicious activity to the authorities
  • Also important: always be sure to get title insurance.

It may seem like common sense to avoid the situations described above, but some swindlers are charismatic and believable. Sometimes greed or desperation can interfere with clear thinking. In some cases, it’s simply the bad luck of being in the wrong place at the wrong time.

It is particularly important to deal with a reputable real estate company that has been around awhile. Working with an agent can help safeguard against these risks. When giving an deposit, the law says the real estate company needs to place the earnest money into a trust account.

In conclusion, real estate fraud is a serious financial crime that can have serious consequences for victims. Anyone can be a victim of real estate fraud; by being aware of the signs of real estate fraud and taking steps to protect yourself, you can help to prevent becoming a victim. The emotional and financial toll of being cheated can be avoided with a little extra caution.

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