Protect Yourself from Real Estate Fraud

Written by Sukhman Sandhu

Sukhman Sandhu is the Founder & Managing Director of Sukh Law. Sukhman's practice focuses upon complex real estate and commercial law transactions and related litigation. Licensed to practice law in the Province of Ontario, Sukhman currently represents individuals, small businesses and large institutions and maintains a great track record of obtaining successful results.

July 8, 2024

Real estate fraud is a significant concern in Ontario, with various scams targeting homeowners, buyers, sellers, and renters. Understanding these scams and knowing how to protect yourself is crucial to avoid financial losses and legal complications. As a real estate lawyer, I’ve seen firsthand the devastating impact these scams can have on individuals and families. This article aims to shed light on common real estate fraud schemes and provide practical advice on how to safeguard your interests.

Common Types of Real Estate Fraud

Title Fraud

Title fraud, also known as deed fraud, occurs when criminals forge documents to transfer property ownership without the owner’s knowledge. They might sell the property, take out a mortgage on it, or rent it out for profit. An example of this is when a homeowner discovers their property was sold fraudulently while they were abroad. This type of fraud often starts with identity theft, where personal information is stolen and used to create fake identification documents.

Mortgage Fraud

Mortgage fraud involves fraudsters using false information to obtain a mortgage in your name. This can involve identity theft and forged documents. For instance, a bank might demand payment for a mortgage the homeowner never took out, leading to a stressful and costly process to prove the fraud. This type of scam can be particularly damaging as it can affect your credit score and financial standing.

Foreclosure Fraud

Foreclosure fraud targets homeowners struggling with mortgage payments. Scammers trick these homeowners into transferring the property title in exchange for a loan. The fraudsters keep the payments and the title, leaving the homeowner without their property. An example is when homeowners facing foreclosure are duped into signing over their property under the guise of receiving financial help.

Rental Scams

Rental scams involve scammers posting fake rental listings using information and photos from legitimate real estate websites. They collect deposits from unsuspecting renters and disappear. For example, renters might arrive to find the property is not for rent and is occupied by the true homeowners. This type of scam is particularly prevalent in high-demand rental markets.

Closing Wire Fraud

Closing wire fraud occurs when scammers intercept wire transfer instructions during a real estate transaction, redirecting funds to their accounts. Buyers or sellers can lose large sums of money intended for closing a real estate deal. This type of fraud often involves sophisticated crime organizations that can hack into email accounts and monitor communications.

How to Protect Yourself

Title Insurance

Title insurance protects against losses from title fraud and covers legal expenses to restore property rights. This insurance is a small price to pay for the peace of mind it provides, knowing that you are protected against potential title issues.

Verify Identities

Always verify the identities of all parties involved in a transaction. Use secure methods to confirm personal details and be wary of suspicious behaviour.

Secure Personal Information

Regularly check credit reports, secure sensitive documents, and be cautious about sharing personal information. Shred old documents rather than throwing them away. As a lawyer, I can’t stress enough the importance of protecting your personal information. Identity theft is often the first step in many real estate fraud schemes.

Use Licensed Professionals

Deal only with licensed or accredited mortgage and real estate professionals. Fully read and understand all documents before signing. Ensure that when you are obtaining a lawyer, don’t go with a lawyer that the other party recommends as the lawyer that they recommend might have a prior relationship with the other party. This is crucial in avoiding conflicts of interest and ensuring that your interests are fully protected.

Monitor Property Listings

Regularly check online platforms for unauthorized use of your property’s information. This can help detect and prevent rental scams. In my experience, staying vigilant and proactive can save you from potential headaches down the line.

Consult Legal Experts

Consult with a lawyer before giving anyone the right to deal with your home or other assets. This ensures you understand the implications of any agreements. If some things don’t add up, consult a lawyer, and if it doesn’t make sense for a lawyer either, ask questions from the other party to make it make sense. If it still doesn’t, walk away. It might not have been fraud, but better safe than sorry.

Report Suspicious Activity

If you suspect fraud, document all actions taken, contact financial institutions, file a police report, and notify credit bureaus. Report the fraud to the Canadian Anti-Fraud Centre. Quick action can prevent further damage and aid in recovery.

Conclusion

Real estate fraud can have severe financial and legal consequences. By understanding common scams and taking proactive steps to protect yourself, you can reduce the risk of becoming a victim. Regular vigilance, secure handling of personal information, and consulting with professionals are key strategies in safeguarding your real estate investments in Ontario.

If you require legal advice or representation with your real estate property purchase or refinancing, or have questions about residential or commercial real estate law in general, contact us at Sukh Law.

Sukh Law publishes articles for information purposes only and is not intended to constitute legal advice.

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