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Archive for the 'Real Estate Fraud' Category

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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January 11, 2016

geo1Real estate fraud continues to be a scourge that plagues the real estate industry in general. Real estate fraud costs us all because it leads to more regulation and to lenders ultimately losing most often, which makes them lend more stringently. The only way to combat mortgage fraud is to make it a priority, perhaps through something like a professional New Year’s resolution.

There was a great article in the Globe and Mail that sums up the 6 most common forms of real estate fraud which we thought is worth a second look because being aware of these schemes makes you more equipped to spot them and act accordingly.

Title fraud – this fraud is blatant and generally stems from identity theft. The fraudster will falsify documents, posing as the property owner. Then they arrange to transfer ownership of the property, then they obtain a mortgage against the property and so on… Title insurance is an excellent way to protect clients against this type of fraud. Closely scrutinize ID and match it against a Parcel Register*. Just as the bank will ask you security questions about your history, ask a questionable client things about the history of the property that a fraudster likely doesn’t know.

Home equity and foreclosure fraud: The Financial Consumer Agency of Canada (FCAC) warns that foreclosure fraud occurs when a property owner who is having difficulty making mortgage payments is approached by a criminal offering a loan to cover expenses and consolidate loans, in exchange for upfront fees and an agreement to transfer the property title. However, “in contrast to real debt consolidation programs”, the FCAC says, “the criminal will keep all the payments made by the owner and ignore bills and taxes. The criminal then remortgages the property and absconds with the money, leaving the former property owner without the home but still in debt.” You have to watch out for this because it is more common than you could imagine and is even an area of fraud of interest to organized crime.

Rental/Resale scams – This is where the fraudster steals your listings and impersonates you re: posting your listings on other websites to get calls from tenants and buyers to extract money. What to do – Google yourself every single month, as well as the addresses of your listings. This will not only catch this type of fraud but will also help you identify if there is anything negative online about your listing.

Knowing what types of fraud exist is half the battle. We hope we’ve helped when it comes to your New Year’s resolution to fight fraud with these quick tips.

To learn more about tools to help combat fraud, please visit www.geowarehouse.ca today.

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

 

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October 14, 2015

geo2Here at Teranet, we are constantly blogging about real estate and mortgage fraud because it is the biggest plague that exists in the real estate industry today. Fraud really does cost us all with more regulation, the burden to do more due diligence, and mortgage lenders being more stringent both when approving and funding mortgages for financing.

Mortgage fraud impacts every professional across the mortgage industry from real estate sales professionals, to mortgage professionals, to lenders, insurers and more. As an industry, we must collectively work together to combat real estate fraud.

You, the real estate sales professional, are the first line of defence against mortgage fraud! Often you are the deal originator because the entire sequence of transactions follows you engaging a client to buy or sell real estate.

Along the way, you’ve probably encountered real estate fraud either where you stopped it or suspected it but were not certain enough to take action.

Being a real estate fraud buster is easy and comes down to collecting and independently verifying some of your client’s information to ensure that there is nothing amiss.

After completing a preliminary interview with your client and gathering their basic information – there are 3 main things you will want to do to flag potential fraud:

  • What are the parties to the transaction and what is their relationship to one another?
  • Who is the legal homeowner of the property?
  • How is the client financing their purchase? Where is the money coming from?
  • What is the sales history of the property – previous owners and timing of transactions?

This is as simple as performing a property search using a tool that can validate all of the above in a single instance.

If something fishy comes up – it doesn’t necessarily mean your deal is dead in its tracks. It may just mean you need to ask more questions to either determine that a serious problem exists or that there is an innocent explanation for something that appears offside at an initial glance. For example – a property may have passed hands through related parties a couple of times in a short period of time, but upon further investigation the original owner was a grandparent so the property passed to an aunt and then the grandchild. On the other hand, a property changing hands a number of times in a short period of time between related parties, especially a lawyer, could signify a fraud scheme.

Your client will appreciate you for it because digging deeper shows them that you are a real estate sales professional who follows a high code of ethics and professional standards which is a big plus!

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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August 26, 2015

geoPreventing real estate fraud is a major challenge that most real estate sales professionals, and even lenders for that matter, encounter. Real estate fraud presents itself in many forms – some more common than others.

Title fraud: Though this doesn’t happen often, it is a costly form of fraud that one hopes they are protected against with their title insurance. As a real estate sales professional, do you want to be associated with the origination where title fraud is present on a deal? Absolutely not. The best ways to combat title fraud are to meet the borrowers, request identification, independently verify who is on title to the home and ask them questions about the home, sales history, even things in the area that may help you identify if something seems a bit off!

Value fraud: in a recent publication, the Law Society of BC had an excellent example of this type of fraud that we thought it would be prudent to share.

“Value fraud in this situation, back-to-back purchases of the same property are arranged from a legitimate vendor. The first purchase is for the arranged sale price — say $300,000. Then a subsequent (fraudulent) deal (from one fraudster to another) is arranged (i.e., a “flip”) for $400,000. Both purchases are set to close on the same day. The fraudster arranges for a high-ratio mortgage on the basis of the second deal. The high-ratio mortgage funds are used to close the real estate deals, since the amount of the mortgage (95% of $400,000 = $380,000) is enough to cover the deals. The fraudsters are counting on the financial institutions not doing their full due diligence or having an on-site appraisal done of the property to verify the stated property value. Sooner or later, the balance of the mortgage funds and the fraudster disappear, leaving the bank holding a mortgage for far more than the property is worth.”

“A second value fraud occurs when a legitimate agreement of purchase and sale is entered into between a vendor and the fraudster, say for $350,000. The vendor and the fraudster then sign a one-page amendment that provides a credit of $50,000 against the purchase price (stated to be for repairs). The fraudster does not disclose this credit in obtaining high-ratio financing. The deal closes and the mortgage payments stop shortly thereafter. The fraudster disappears with the balance of the financing leaving the bank with a mortgage greater than the value of the property.”

Check out the full article here: https://www.lawsociety.bc.ca/page.cfm?cid=1347&t=Practice-Tips:-Fighting-back-against-fraud-%E2%80%94-the-risks-in-real-estate.

Here are some red flags that can help you to suss out a real estate fraudster:

  • A client is making a large property purchase with cash and cannot evidence this from the sale of another property.
  • The client has documents to confirm the property transfer but not the original purchase and sale agreement.
  • The property’s sales history is showing multiple recent purchases – each showing the value increasing.
  • The client doesn’t want to provide identification, or will, but doesn’t want you to make a copy of it.
  • The seller indicates that there was a deposit made that was not recorded on the purchase and sale agreement – with payment being made directly to the seller and not through you.
  • The client wants the transaction closed very quickly.
  • The client wants you to indicate a higher purchase price on the agreement than the actual purchase price.
  • The sale price is unreasonably greater than that of other homes in the area.
  • The title shows a history of mortgages being registered and then discharged in short time spans.

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.

For more information about tools you can use to identify real estate fraud please visit www.geowarehouse.ca.

 

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January 19, 2015

real estate fraudFraud continues to be rampant in the real estate industry. All parties to a transaction have to make their best efforts to avoid fraudulent deals. The Globe and Mail released an article from 2013 that we continue to share because it highlights some of the most common types of fraud you may encounter today. Check it out here: http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/top-6-real-estate-scams-and-how-to-avoid-them/article13108985/?page=all.

Some of these are more impactful to lenders and brokers while some are more important for you– we look at the ones relevant to you and cover each to explain how you can leverage your tools to mitigate the chance that it could happen to you:

Title fraud: This could be flat out identity theft or simply undisclosed parties on title. You can avoid this by asking for identification when you sign up a new client and also requesting a search to verify home ownership information. The ID could be fake! Another idea is to Google the person’s name with address and you may discover that your client doesn’t look the same as another person with the same name and address.

Title insurance is far more common these days and is an effective way to also protect against real estate fraud – but that will only occur after the lawyer has cleared the property. Many times the lawyer will catch title fraud and in turn the deal won’t close after legal fees have been spent.

Home improvement scams. This is a big one that impacts many real estate sales professionals because your client may expect you to list the house for much more than it is worth. You can run a sales history report or look at sales comparables in the area and if the value isn’t there, sometimes it is better to take a pass than to get caught up with someone who is trying to commit fraud.

Realtor® Magazine also released an article on the topic of mortgage fraud recently, highlighting some great tips for avoiding real estate fraud: http://realtormag.realtor.org/law-and-ethics/law/article/watching-out-for-fraud. A couple great points that discuss dealing with other real estate sales professionals include:

  • When first working with another real estate sales professional that you haven’t worked with before – obtain their complete name, license number and check their license status. If the other agent doesn’t want to meet in person – this is a major red flag!
  • Pay attention to names! If the real estate sales professional is a party to the deal this is non arms-length and could be a flag.

Unfortunately, fraud costs us all – not only in money but also time. Take advantage of the available tools that are money well spent – especially when they protect you and your client. GeoWarehouse has those tools – check them out at www.geowarehouse.ca.

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