A real estate transaction involves significantly large sums of money. With that, there is always some risk of becoming a victim of a scam or fraudulent activity. They can be anything like a contractor who overcharged you by several hundred dollars or an investor who steals thousands. The best way to stay protected is to be informed. Here are some things to stay on the lookout for.
1. Title Fraud
Though not as common, this is one of the most devastating types of fraud, which has its roots in identity theft. The thief will steal the identity of the owner, use forged documents to transfer the property to his own name and get a mortgage for this property. After stealing the money from the fraudulent mortgage, the scammer leaves the unsuspecting owner to pay the mortgage off. A house that is clear of any mortgage is more likely to be chosen by the scammer, since getting a new mortgage on it would be easier. To stay protected, you may want to look into title insurance, which will protect you against this type of fraud. The easiest and less expensive way to stay protected, however, is to keep your personal information safe. For example, you can protect your identity by shredding any documents that contain personal information before throwing them out and by not leaving your mail unattended. This could also protect you from other forms of identity theft, such as credit card fraud.
2. Foreclosure fraud
When a home owner is experiencing financial difficulties and is unable to, for example, make their mortgage payment, a scammer may take advantage by approaching him and offering a loan in exchange for upfront fees and a title transfer. This constitutes foreclosure fraud when the person giving the loan keeps the payments without paying bills and taxes as promised, like a legitimate debt consolidator would. Usually, the fraudster would remortgage the property, take the money and leave the owner without a home and tons of debt. Many homeowners who fall victim to this criminal activity end up losing their home to foreclosure. To avoid such fraud, get to know your lender well and make sure that they are not asking you to do anything that sounds fishy, such as covering up your income or avoiding taxes in unusual ways. Look into reviews from their previous clients to ensure he is legitimate.
3. Online rental scams
These scams involve a property advertised online on websites such as Kijiji, and usually for lower than the competitors’ prices. The fraudster would take pictures from an existing ad and pretend to be the legitimate owner or the owner’s real estate agent. He will then get the tenant to sign an agreement to lease and then collect rent. Of course, the property they are offering is not theirs and may very well be already occupied. To avoid a scam of this sort, make sure that you see the property before signing and paying anything, and do not trust excuses regarding why you cannot visit before the deal is complete. As a homeowner, make sure that you use a watermark or logo of some sort before you upload pictures of your property online. You could also use Google Image Search to see if someone has stolen your pictures.
4. Contractor scams
The scammer may knock on your door and offer you an unbeatable price for some home improvement service. For example, they may offer to repave your driveway or fix up your porch using leftover materials from a previous job. They will then take your money and will not complete the job as promised. To protect yourself, remember that if it sounds like it is too good to be true, it probably is. Also, avoid urgent offers and “one-time” deals. Take the contractor’s business card, look up his company’s name and address, and put any promise or money exchange on paper in the form of a contract. Finally, look online or ask around to hear reviews of the contractor’s work, ensuring that he will do what he promises to do.
What to do if you have become a victim of real estate fraud
As per the Financial Consumer Agency of Canada, you should contact the Canadian Anti-Fraud Centre (CAFC). You can reach them at 1-888-495-8501 or email@example.com. Following, you should report what happened to the police and get them to file a report. Report the fraudulent activity to TransUnion and Equifax. Finally, find out what laws are in place to protect you and contact your bank.
Source: The Globe and Mail