Archive for the 'Real Estate Fraud' Category

Your Go-To Guide for Using Property Data for Background Checks, Real Estate Fraud Investigations, and More

When you need to conduct a property investigation, time is of the essence. You want as much information about a property as possible, as quickly as possible. And the data must be accurate.

With a GeoWarehouse Property Details Report, you can get all the information in one place.

A Property Details Report tells you:

  • Who owns the home.
  • The value of the home.
  • Mortgage registered against the home.

From this you can tell if your client appears to be honest, or if you need to dig deeper.

Red flags you’ll want to examine further include:

  • Other people on title who weren’t disclosed to you.
  • Many transfers of the property.
  • The values of these transfers.
  • Odd transferees – non-arm’s-length, companies, etc.
  • The mortgages registered – are there lots of them? Who are the mortgage lenders? Etc.
  • Is there enough equity for you to get paid?

The value of these property reports can go beyond your peace of mind. It’s important that you execute due diligence and catch potential problems. Even if there is a reasonable explanation for a red-flag item, it’s still better that you know about it early on.

Whether you’re conducting a background check, investigating potential real estate fraud, or conducting your due diligence, the property report is a vital part of the process. That’s why we’ve made GeoWarehouse property reports convenient for you.

With a GeoWarehouse Property Details Report, you:

  • Get your report sent to you instantly — no unnecessary wait times.
  • Can trust the data you’re getting. We take our property data from POLARIS, the Province of Ontario Land Registration Information System, so it is kept up-to-date, complete, and accurate.
  • Receive a comprehensive report. All of the above items are included, making it easy for you to know where to dig deeper.

Property investigation in 15 minutes (or less) is completely possible with GeoWarehouse. We help you save time and money by making you the property expert.

Get started today. Give us a call to begin your property investigation right away. Contact 1-866-237-5937 or visit www.geowarehouse.ca.

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Have you been working with real estate deals financed using syndicated mortgages? If so, it may be time to re-evaluate.

Syndicated mortgages are investments where a developer finds several private lenders to invest money in a property, instead of getting a loan through a bank.

Syndicated mortgages have been linked to mortgage fraud, including more than 120 people in the Greater Toronto Area who allegedly lost millions during a syndicated mortgage deal in 2017, as reported by the CBC.

In February of 2018, the Financial Services Commission of Ontario (FSCO) issued $1.1 million in fines as part of a settlement with four mortgage brokerage companies involved with syndicated mortgages tied to real estate projects for Fortress Real Developments Inc. and revoked five broker licenses.

The Government of Ontario has created new regulations to hopefully minimize these types of occurrences. As of July 1, 2018, provincial regulatory changes to syndicated mortgage transactions in Ontario are in effect under the Mortgage Brokerages, Lenders, and Administrators Act. Under the new rules, non-qualified syndicated mortgages will have to comply with expanded requirements.

What is a qualified syndicated mortgage?

Let’s first look at what counts as a qualified syndicated mortgage:

  • Negotiated or arranged through a mortgage brokerage.
  • Secures a debt obligation on a property that is used primarily for residential purposes, includes no more than a total of four units, and (if used for both commercial and residential purposes) includes no more than one unit that is used for commercial purposes.
  • At the time the syndicated mortgage is arranged, the amount of debt it secures, together with all other debt secured by mortgages on the property that have priority over, or the same priority as, the syndicated mortgage, does not exceed 90% of the fair market value of the property relating to the mortgage, excluding any value that may be attributed to proposed or pending development of the property.
  • Limited to one debt obligation whose term is the same as the term of the syndicated mortgage.
  • The rate of interest payable under it is equal to the rate of interest payable under the debt obligation.

A syndicated mortgage that secures a debt obligation incurred for the construction or development of property is not qualified.

What’s changing?

As of July 1, 2018, mortgage brokerages dealing with non-qualified syndicated mortgages (anything not complying with the list above) will be required to:

  • Collect and document specific information related to a potential investor’s or lender’s financial circumstances, needs, objectives, risk tolerance, and level of financial and investment experience using a new FSCO form.
  • Undertake and document a suitability assessment, using specific criteria, for each potential investor or lender using a new FSCO form.
  • Collect and document expanded disclosure information using a new FSCO form. This includes information regarding the property appraisal and, in the case where the borrower is not an individual, the borrower’s financial statements.
  • Observe a $60,000 limit on non-qualified syndicated mortgage investments over a 12-month period for investors or lenders who are not part of a ‘designated’ class of investors and lenders. The regulation defines the designated classes of investors and lenders as those that have already met higher income and asset tests.
  • Report written complaints received by the brokerage related to non-qualified syndicated mortgages to FSCO’s Superintendent of Financial Services within 10 business days of receiving the complaint.

What real estate sales professionals can do

If you are aware of a deal being financed with a syndicated mortgage, do your due diligence. Make sure that it’s compliant with the above regulations.

You can also independently verify the property value. For example, our GeoWarehouse tools make it easy to validate that information and more.

View the full text of the new FSCO regulations here: https://www.fsco.gov.on.ca/en/mortgage/Pages/smi-amendments.aspx

With the FSCO cracking down on syndicated mortgages, it’s more important than ever to exercise due diligence. GeoWarehouse can help.

Learn more about how our tools can help detect mortgage fraud. Visit www.geowarehouse.ca.

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What is due diligence in real estate? As a real estate sales professional, you already know that performing real estate due diligence is an important part of your daily routine in mitigating the risk of real estate fraud. With due diligence, you can unearth significant transaction issues that could have meant serious problems had you missed the warning signs early in the process. But what is due diligence in real estate, really?

Every real estate professional’s worst nightmare is not catching real estate fraud. Without the proper tools and knowledge of what to look for, it can be all too easy to miss the problematic details. You need to learn how to use the right tools to mitigate risk and not find yourself in the middle of real estate fraud. Everyone in the real estate business has to constantly be on their toes.

Due diligence is your best tool to avoid fraud. What types of real estate fraud might you encounter? The most common are title fraud and value fraud.

Title fraud can mainly be avoided with title insurance. However, due diligence is easy in this case – even though you should independently verify who is on title to the home, you also need to interview the borrowers. Be thorough in your interview by asking for identification, questions about the home, sales history, even things in the area that may help you identify potential problems.

Another situation you should be watching for when performing real estate due diligence is value fraud. This is a form of mortgage fraud where the value of a home is deliberately appraised above its market value. The overstated value is commonly used to help a seller get a better price than the market would warrant.

Whether you are trying to prevent fraud or simply keep a deal viable, performing your due diligence starts at the application stage. What is due diligence in real estate? It starts with verifying the buyers’ and sellers’ information:

For sellers:

  • Ask to see your client’s identification.
  • Confirm that your client is the legal homeowner.
  • Check that your client is the only legal homeowner (and if they are not, make sure you know who all other legal homeowners are before proceeding).
  • Ensure that there is enough equity to cover closing costs – including your commission – on registered mortgages.
  • Review the property’s sales history for suspicious activity or other issues.

For buyers:

  • Ask to see the client’s identification.
  • Ensure that your client is able to finance a mortgage.
  • When a client tells you that the purchase depends on another property’s sale, check that there’s enough equity on the other property to finance another purchase (including land transfer taxes and related closing costs).

As a real estate sales professional, you know it pays to do your due diligence from day one on every transaction. You work hard to do your research, using the right tools to validate your clients’ information first to ensure a successful deal and eventual close – make it count.

Even if the most trustworthy client provides all the right documents, such as a recent MPAC assessment, it doesn’t mean you shouldn’t independently verify a prospective client’s information – it’s not only due diligence, it’s smart.

What is due diligence in real estate? It’s about leveraging online tools and technology, like GeoWarehouse, to mitigate the risk of fraud and save substantial time and money. Not a GeoWarehouse subscriber yet?

Learn more about how you can use this powerful resource to easily and efficiently perform your due diligence, visit www.geowarehouse.ca.

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December 4, 2017

Straw buyers in real estate represent a common form of fraud where someone convinces someone else with good credit to act as a “straw buyer”. These are often very hard to spot. Lenders, brokers, and real estate professionals of all kinds have been fooled, primarily because straw buyers work very hard to look like real buyers. Their documents look right, they have a social insurance number, an address… everything on paper makes them look like a real buyer.

How can you spot straw buyers in real estate? Often, straw buyers are tricked into believing they will not be responsible for the mortgage payments. They may be told that they’ll get a cut of the sale profits if they participate. Sometimes straw buyers are willing participants in real estate schemes, with criminal intent or not, but it’s always illegal.

Fraudsters use straw buyers in property transactions for several reasons, including:

  • Fraud, such as constantly flipping a home to falsely appreciate the value.
  • Hiding the property from the government for tax reasons.
  • Using the home for illegal activities, such as marijuana grow-ops or meth labs.

What is a straw buyer in real estate? Here are some common signs of real estate transactions involving straw buyers:

  • The sale documents list the selling price way too high.
  • A lot of flipping over a short period at increasingly higher prices.
  • Inflated appraisal.
  • Misrepresentation of property characteristics or purpose.
  • Multiple-unit property presented as single dwelling, or having fewer units.
  • Misrepresenting a buyer’s intention to live in the property.
  • Rental property represented as owner-occupied.

The most common straw buyer scenario is Person A wants to buy a property and convinces Person B to act as the buyer to obtain terms that Person A couldn’t get.

Sometimes straw buyers are victims of identity theft and have no idea they’re a straw buyer! In this scenario, Person A steals B’s identity, and forges all of their information on the purchase and loan papers. There are a number of ways to prevent identify theft you can find online here: https://www.ontario.ca/page/how-avoid-or-recover-identity-theft.

In any scenario, it pays to do your due diligence as a real estate sales professional in order to avoid any transactions involving straw buyers. It begins by educating yourself to spot the signs of a straw buyer scheme. You also need to have access to the right tools and technology to quickly and efficiently identify real estate fraud as early as possible in the application process.

If you are not already a subscriber, then you may not be aware of the powerful suite of tools and technology available through GeoWarehouse.

Visit www.geowarehouse.ca today to learn how you can identify straw buyers in real estate.

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November 27, 2017

Real estate fraud is something every real estate professional wants to avoid; no one wants to get caught in the middle of a scam. Take the first step in avoiding fraud and educate yourself to spot the different types of fraud, and learn how to use the right technology to detect fraud before it’s too late.

We’re going to look at one particular type of fraud in this post: appraisal or valuation fraud. We’ve talked about fraud many times before, and how to detect appraisal fraud. It’s one of the many reasons for leveraging automated valuation model (AVM) technology. With an AVM report, you can independently audit any suspicious property appraisals you come across to ensure all the information checks out.

Your client will appreciate your efforts to dig deeper because it demonstrates your dedication as a real estate sales professional who follows a high code of ethics and professional standards, such as doing due diligence to weed out fraud.

There are all kinds of unethical homebuyers and sellers who are out to commit real estate fraud and scam their way into a bigger mortgage or better selling price. Greed, desperation, or opportunity drive scammers who have been caught inflating salaries on mortgage applications, posing as a legitimate property owner, or even taking out numerous mortgages and then dashing with the cash while the real owner is left to clean up the mess.

Here are some basic fraud prevention tips:

  • Know your client.
  • Know your market – heated markets are hubs for fraud.
  • Exercise due diligence in your research — property flips, sales/listing history, and exposure time can tell a story.
  • Issue letters of engagement with every assignment but particularly with unfamiliar clients.
  • Password-protect your reports and only give the password to your client.
  • Decline if it doesn’t feel right – providing a reliance letter to a new intended user is not a mandatory requirement; you have the right to decline – it is an extension of risk.

Appraisal fraud is often an effort to artificially and deliberately raise property value with an above-market appraisal. Maybe the appraiser is in on the scam, but often they are also unwitting fraud victims. Their report can be doctored after they’ve completed it, without the appraiser knowing.

Founded in 1938, the Appraisal Institute of Canada grants the Accredited Appraiser Canadian Institute (AACI™) and Canadian Residential Appraiser (CRA™) designations. To prevent valuation fraud, they suggest:

  • Looking for signs of altered data alteration such as: typed in data (value conclusions in the Direct Comparison Approach, Cost Approach or Income Approach, adjustments of comparable sales), blank fields or fields where information appears to have been “whited-out”;
  • Thoroughly reading the appraisal report to understand the data, the analysis and the comparable properties relied upon to arrive at the final value;
  • Engaging a professional appraiser to conduct an on-site inspection or drive-by of the property to validate information supplied as part of the mortgage application;
  • Asking the professional appraiser for a reliance letter if you are not the original client or intended user of an appraisal report. Reliance letters are critical to the mortgage process. They are issued by the author of the report/appraiser and provide a great cross-reference tool to validate the value conclusion and data from the original report.
  • Contacting the appraisal professional if you suspect any fraudulent activity.

Above is just a short list of behaviours that can occur that can mean fraud. Your ears might be ringing but here come the words again: due diligence saves the day, most of the time. Think of water, forcefully flowing from the tap as your deals, now think of the spatter that escapes the stream as representing these instances when something on a deal is off. Maybe in these cases it is better to dig a little deeper and perhaps pass on a deal rather than getting caught in the middle of a fraud scheme that can not only get you in trouble, but also put your relationships with your partners at risk.

Use GeoWarehouse to conduct this due diligence and stop real estate fraud and all the resulting consequences.

Visit www.geowarehouse.ca today.

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Real estate fraud costs the industry more and more each year. A recent article in the Globe and Mail revealed that Equifax found that the number of mortgage applications flagged as potentially fraudulent has risen 52% since 2013 in Canada – that’s a major concern for all real estate sales professionals.

Typically, you, as the real estate sales professional, are the first professional in a chain of professionals who work on a real estate transaction to encounter a fraudster. This places you in a position to save yourself and the professionals you work with a significant amount of time and potential financial damages by identifying when something nefarious is taking place on a deal.

A property’s sales history is one way to quickly identify real estate fraud. Here are some tips on how you can use the property’s sales history to identify fraud:

  • Has the property changed hands several times in a short period of time?
  • Is the previous owner a corporation or have a series of previous owners been corporations?
  • Are strange entities on title, such as a mortgage holder?
  • Are the sales prices on property transfers strange and not consistent with similar properties in the area?

These are all things that the mortgage lender will likely look at. They are fraud indicators and could impact mortgage financing after you have done all the work to get the property sold and to negotiate the offer and acceptance. These are also things that mean the time may be right to ask further questions and start digging deeper.

How about identity theft? A fraudster may be able to obtain identification in someone else’s name – but will they likely know information about a property’s sales history that only a homeowner would know? Maybe not. Asking questions in this regard can be quite revealing.

When strange things come up on a property’s sales history, does it always mean that fraud is taking place. Often no, and many incidences can be explained with a little more research. However, sometimes those things that seem problematic, are. This is your signal to ask your client or the other real estate sales professional further questions and perform further due diligence. When no fraud is present, key questions will have been answered so you can package a stronger deal. If real estate fraud has taken place, your questions and increased due diligence will hopefully result in the fraudster running for the hills, leaving you and your colleagues and clients out of harm’s way.

The tools available from the NEW GeoWarehouse make identifying fraudulent activity using the property’s sales history easy. Find out more today by visiting www.geowarehouse.ca or calling 1-416-360-7542.

Source: http://www.theglobeandmail.com/real-estate/mortgage-fraud-rising-in-canadas-hottest-housing-market/article33570435/

 

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August 8, 2016

geo1Fraud happens every day in the real estate industry and the last thing that you want is to find your name intertwined into one of these transactions. In this blog we will review some common forms of real estate fraud and how you can stop and deal with it, should it come up. There are simple searches and steps that you can take at the time of engagement that will help you not only know more about your customer and the property in question but also identify potential fraud.

Type of Fraud: Non-disclosure of material facts.

Often this is cited more as a mistake than intentional fraud, especially when clients claim they were unaware of certain information. However, if a property has been used as a grow op in the past or has had repeated floods with hidden water damage, this could end up costing everyone in the long run, for a variety of reasons. If the seller hides this information and you present the property as clean, that responsibility has now been transferred to you!

Solution: An insurance claims history report is a quick and easy way to find out if there was a particular type of insurance claim or repeated insurance claims that could signify an issue. This particular report will also reveal if a property has been used as a grow-op.

Type of Fraud: Title fraud

In all cases, title fraud begins with identity theft. This is where the fraudster pretends to be the property owner, transfers a property to his or her name and then obtains a mortgage against it, or, if unoccupied, sells it! This can happen especially where new construction purchases are concerned.

Solution: How can you catch this type of fraudster? Even if you ask for ID they may have ID with their photo in the homeowner’s name. There are a few things you can do. You can obtain the Instrument Image of the original transfer and mortgage registration. If the document contains a signature, you can match it against the fraudster’s ID. Another thing that you can do is obtain a Parcel Register*. Using the information in the Parcel Register* you can ask any applicant strategic questions that only someone who owned the home for a long time would know.

Type of Fraud: Foreclosure Fraud

There are companies out there who prey on people with problem credit and financial problems. They will often agree to advance mortgage financing for astronomical fees and will even demand to be on title to the home, either with or in some cases without the homeowner on title (they want the title transferred completely). Anticipating that the borrower will struggle with payments, their goal is to take possession of the property. If a homeowner who is involved in this type of mortgage approaches you, you could be in for a surprise and learn that the lender is on title to the home.

 
Solution: To identify and deal with this situation, the best approach, as soon as you engage a new client, is to either review a property details report which will reveal current homeowners, or, as we mentioned earlier, review a Parcel Register*.

We hope that you have found this blog useful so that you can perform your own veritable fraud check to protect both you and your clients. Don’t get caught with a deal that can land you, and others, in a heap of trouble.

Find out more by visiting www.geowarehouse.ca.

*An official product of the Ontario government pursuant to provincial land registration statutes.

 

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June 27, 2016

geo2Real estate fraud is real and impacts thousands each year- this, unfortunately, is well known. Organizations from the police to regulatory bodies have made great strides in raising awareness about fraud prevention, and we too have always made this a mandate.

Uncovering and investigating potential real estate fraud on a deal can be like peeling away the layers of an onion. With each layer of due diligence you complete, you learn more which will help you make more informed decisions. We see this stage in 3 processes with 3 distinct actions that can mitigate the chances that a fraud can sneak by you.

Perform top level research. A property details report will tell you the property’s sales history, who owns the home and registered mortgages. This is usually enough to set-off alarm bells. Does something seem up? Proceed to step 2, validating information.

Validate up to the date in question: the homeowners and types and percentages of ownership. Too many transfers and transfers between related parties, even companies, may be problematic. Look at transfer dates and amounts but also what mortgages were registered. Check the property for liens. The best way to do this is through a Parcel Register* which derives data from the Province of Ontario Land Registry Information System – the most current and accurate source of housing data in Ontario. Something come up on your Parcel Register*? Proceed to step 3, checking registered documents.

Check registered documents. Something has come up on title and you want more information, such as who the registering party was. You can do this by obtaining an Instrument Image. An Instrument Image is an image of the document used to register the item and can be obtained by having the registration number of the item registered on the Parcel Register*.

At this point you:

  • Should be in a position to determine whether your suspicion is grounded. If fraud is present you should pass on the deal (and therefore take the necessary steps required to alert the appropriate institutions).
  • You are armed with more information and your client is able to explain the occurrence and provide you with satisfactory explanation to move forward.
  • You know more about the property you are selling because, if you uncovered this information, likely the buyer’s agent will too and it is your responsibility to disclose material facts to a transaction.

The great thing about doing your due diligence is that, when it turns out that your client is clear and there is no fraud present, your client can see that you are serious about what you do and protecting your clients and the public at large.

Get as much information as possible, as soon as possible. GeoWarehouse has the tools that make due diligence and preventing real estate fraud easy.

Find out more by visiting www.geowarehouse.ca.

*An official product of the Ontario government pursuant to provincial land registration statutes.

 

 

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April 18, 2016

geo2Real estate fraud is rampant and emerges in so many forms. The only way real estate professionals can combat real estate fraud is to be aware of it. Due diligence is key in this regard.

Do we need extra due diligence because there are lots of consumers out there looking to mislead you? No. We need to do extra due diligence because fraud can often occur because of an omission that a homeowner sees as innocent. More commonly, some homeowners aren’t even aware of some matters as they relate to their homes.

In the spirit of Fraud Awareness Month, we thought we’d cover some ways that you can use your tools to dig deeper and know everything possible about a deal you are working on.

  1. The property’s sales history – this can reveal a lot, including owners, timing and amounts of transfers. Too many transfers in a short period of time or transfers between parties that are non-arms length could be a red flag and worth inquiring with your client about.
  1. The property’s insurance history – this can reveal problems in a property that the homeowner may or may not be aware of. Repeated claims for the same things are a sign that the property could have issues.
  1. The property’s past use – did you know that there are even searches now that can reveal if a property was previously used as a grow op or meth lab. Knowing if your client’s property or a property your client is buying has been used for nefarious acts is basic due diligence.
  1. Who owns the home – ensuring that your client(s) is/are the only legal homeowner(s) is critical to mitigating real estate fraud. Ask for ID and check ownership independently to be sure.

A big part of catching potential fraud is independently validating the information provided to you. In many instances, issues can come up that are not fraud but could impact your deal. Mitigating fraud has the side benefit of giving you the ability to learn more about your deals and to help your client through resolving challenges.

Even if something does come up on a deal where a client has withheld something, such as not telling you about a lien – finding out through the course of due diligence improves the level of service you offer. A lien won’t go away by itself, so you knowing about it means that you can help the client figure out what to do about it.

Being aware is your first step towards combatting real estate fraud. GeoWarehouse has the tool that make that easy. Visit www.geowarehouse.ca today.

 

 

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geo1Valentine’s Day is here and love is in the air. We know that not doing our due diligence with respect to a Valentine date can mean a bad Valentine’s Day surprise and real estate is no different. First impressions can be scary because not everything ends up being how it appeared at first glance.

You hope that when you meet your clients they will have all their information, be forthcoming and have a clear vision about what they want – but that is often not the case.

Really on any deal, some investigation concerning the property and homeowner will need to take place. This will mean assessing key issues from a due diligence perspective.

Where a homeowner is concerned, your commission will come out of the sale of the property. You definitely want to ensure that there is enough equity in the property being sold to cover commission and closing costs. If you are representing a buyer then you will certainly want to run a search on the home being purchased to ensure that the seller has sufficient equity to cover closing and real estate fees.

Also, is your client the legal homeowner/the only legal homeowner? So often parents or other people show up on title and the homeowner honestly didn’t realize or forgot. Other times this non-disclosure can bare a more sinister undertone. Verifying who the legal homeowner of a property is ensures that you have connected all the dots.

On the topic of real estate fraud – it is not unlike a Valentine’s date with a player. The fraudster has their agenda and they are willing to pull the wool over your eyes to achieve it. Pay particular attention when performing due diligence to the parties to the transaction. If a lawyer or lender will end up on title to the property, something may be amiss.

Also – did you know that a property details report is like a veritable credit report on a property? Think about it – when you call into your bank they ask you verification questions such as how long have you banked here, is anyone else on your accounts, what was the biggest transaction you made last month, etc. You can do the same using what you know about the property to suss out fraudsters.

The financial and sales history on a property is also important – too many transfers, strange transfer amounts and related transferees are all signals that something could be amiss.

TO avoid a bad Valentine’s Day surprise, whether with a date or with a house, the best thing that you can do is be alert. Due diligence in real estate can help you protect yourself as well as your client.

Don’t get set up – get GeoWarehouse, and do your due diligence in real estate. Visit www.geowarehouse.ca today.

 

 

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