January 18th - 2007

Protect yourself from title fraud

Title fraud is a daunting problem for all stakeholders in real estate, and it’s not just an Ontario problem; it affects the industry across Canada and the United States.

Title fraud is a daunting problem for all stakeholders in real estate, and it’s not just an Ontario problem; it affects the industry across Canada and the United States. Investigators at a conference in crime and prevention in Toronto in December called mortgage fraud an epidemic in the developed countries. The Ontario government has responded to increased concern and, in December, passed legislation that will strengthen protections against real estate fraud, with fines increased for $1,000 to a possible $50, 000.
 
In the US, in the fall of 2004 the FBI warned that their open mortgage fraud investigations had increased five times in three years. They reported 533 open files and a single one of those files could be dealing with losses of over $100 Million. In 2005 the FBI reported 170 convictions with losses of over $1 billion.
 
These are big numbers, yes, but real estate transactions always involve huge sums, so why is this crime such a problem now? Kathleen Waters, LL.B., Vice-President of TitlePLUS, suggested real estate has become a commoditized business. “In the 1950s and 1960s it was quite common to know the client,” she said. Clients lived in your community, or you knew of them or their family members. But with more transactions happening with clients that you don’t know “that leads to the possibility that they may not be who they say they are,” she said.
 
Why cheats want you
Real estate professionals are needed to give the deal an air of legitimacy, and so REALTORS® risk being duped or being impersonated. If a deal appears to be a private transaction, for example, lenders and lawyers may give it a higher degree of scrutiny. A fraudster trying to make an agreement of purchase and sale look genuine may steal a REALTOR®’s identity and put his or her name on the document. So you could get called about agreements of purchase and sale that you were supposedly involved in, but you’ll be completely in the dark about it.
 
Fraudsters may want you to sell a property that they don’t own, so they may come to you with a power of attorney that’s forged. The sham could be committed by a spouse trying to get the equity out of the house without the other spouse knowing. An owner may want your help to get an inflated mortgage, or get more than a hundred percent of financing on the property, and need you to draft an agreement of purchase and sale that is misleading and boosts the property’s value.
 
REALTOR® beware
So what are some of the warning signs that you may be dealing with a scam artist? Waters said to keep the old axiom in mind: If it sounds too good to be true it probably is. Examples:

  • The salesperson gets a commission for doing nothing.
  • A client comes out of the blue with the biggest real estate deal in town, and now has several deals that he wants to do.
  • A client is buying an expensive house with a hefty mortgage, yet couldn’t possibly have the kind of job that she told the bank that she has.

Be wary of:

  • People who don’t ask to see the property, or seem to care about the price or the terms of the home inspections, or who just don’t seem to suit the property.
  • Powers of attorney
  • Restrictions on access to the property or refusing to put a sign on the property.
  • People who do not want you to advertise the property, but you are going to be involved in some way because you are still going to get commission.
  • Financial conditions clients want in the agreement, like credits on schedule, or some kind of payment that the vendor is going to get.
  • Deposits that are in cash or from someone else or paid directly to the vendor.
  • Someone trying to impose prohibitions on you, such as requesting that you do not talk to a lawyer if a lawyer tries to contact you on a deal.

Protect yourself
In fraud cases, not only can REALTORS® and brokers face a RECO regulatory proceeding, but you could also face criminal prosecution as an accessory to a crime or civil lawsuits from a legitimate owner or lender, or a lawyer or other third party to the fraudulent transaction. Do what you can to be sure the people you deal with are above board.

  • Check ID: anything that you can do to satisfy that the client is who he says he is.
  • Be wary of someone only willing to give you a cell phone number.
  • Go to their home to see that it checks out.
  • Know your referral sources.
  • Do your agreement of purchase and sale in the conventional way; do not be swayed to do something creative.
  • Work with other professionals that you feel are being as careful as you are.

OREA’s two-hour, two-credit course on mortgage fraud provides examples and case studies and other practical information. Check with your real estate board, or visit the continuing education section at http://www.oreacollege.com/ to find out more about this seminar.
 
Help clients protect themselves
There is no absolute way clients can protect themselves from title fraud, but there are some measures they can take to minimize the chances of a fraudster stealing the rug, and their home, out from under them. Waters suggests that you tell your clients:

  • If people are renting property or leaving it vacant, be careful and watch those properties and the tenants.
  • Be vigilant; check your credit reports regularly. Question any queries that you don’t recognize.
  • Title insurance gives protection for past frauds and on a “go forward basis.
  • Warn consumers about not becoming involved. They may not realize that they are being drawn into a crime.

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Privacy compliance tip sheet updated House price increase to slow in 2007

For more information contact

Ontario Real Estate Association

Jean-Adrien Delicano

Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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