While the vast majority of real estate agents and brokers are fair and honest, there will always be a few that look for an opportunity to make money even if means breaking the law. Many of these individuals will do so by committing fraud when closing a real estate deal. Those that do could wind facing civil or criminal charges, sometimes both. Examples of real estate fraud include:
1. Knowingly failing to reveal the square footage of the home or building being sold is not the same as what was listed.
2. Failing to reveal an interior wall leak, which could result in mold problems.
3. Failure to disclose that mold exists on the property.
4. Failure to reveal cracks in a home or building’s foundation that have been hidden or patched.
5. Failure to reveal that the property purchased by the buyer is subject to environmental regulations, rezoning, or other laws that could prevent the buyer from using the real estate as intended.
6. Assisting a buyer in misrepresenting his or her credit reports, salary, or employment history in order to qualify for a home loan.
Other methods used to commit real estate fraud include:
Mortgage fraud, which according to the U.S. Internal Revenue Service is the preparation of two separate sets of mortgage documents – one for the seller, reflecting the accurate price of the property, and one for the lender, with an elevated selling price. After the funds are provided, the extra is divided between the co-conspirators, usually the real estate agent who prepared the paperwork and the buyer who receives the funds.
Constructive fraud, which happens when a real estate agent gains an unfair financial advantage using deceitful methods, with or without intent.
Foreclosure rescue scams are common examples of real estate fraud, and many of them were rampant after the housing crash. Homeowners desperate to save their home became victims of scams including:
Title fraud, when investors offer a “temporary title transfer,” claiming the owner can lease the home with the intent of buying it back at a later date, only to find that the home’s been sold, and the homeowner is still sitting on the original mortgage.
Equity stripping, which involves the homeowner giving up ownership of the house but continuing to pay rent that they believe is going toward the mortgage but is instead being pocketed by the investors.
Renegotiating scams, during which the homeowner believes a company is negotiating on their behalf but is in fact negotiating with the lender to buy the home at a lower price.
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