Log In

  1. Courses
  2. ›Business of Law Course
  3. ›Avoiding Fraud Learning Module
  4. ›Real Estate Frauds (continued)

Real Estate Frauds (continued)

Tips on Fighting Value Fraud

Some tips on recognizing and fighting value fraud include:
  • Be cautious about flips—many are legitimate, but in any situation where the seller on the contract is not the same person as the registered owner, ask questions to find out the background to the transaction and assess its legitimacy.
  • Insist on obtaining proper documentation and evidence.  You need to be satisfied of the legitimacy of the transaction and of the parties.  Read and follow the Rules on Client Identification.
  • If you suspect that the flips have been happening on separate occasions using different lawyers each time, verify the historical search to see if there have been repeated sales at progressively higher prices over a short period of time.
  • In any situation where you are being asked to represent both a buyer and a lender, you should review the provisions of rules 3.4-5 to 3.4-9 of the Code of Conduct and Appendix A – Lawyer Acting for More than One Client in a Real Estate Transaction with your clients.  Ensure that you are familiar with rules 3.4-12 to 3.4-16 of the Code of Conduct, which deal with acting for both a borrower and a lender.  You will then be able to advise the lender, in advance of releasing mortgage funds, about any material information that is relevant to the transaction.  This may include advising the lender of any unusual features of the transaction without fear of breaching client confidentiality (e.g., tell the lender that the transaction involves a flip, that there are two contracts and one has a much lower price, that there have been a number of rapid turnovers of ownership with prices rising in each case, that a power of attorney is being used to execute the mortgage, etc.). Having advised the lender, obtain and confirm further instructions in writing before proceeding with any advance under the mortgage.  In essence, tell all clients that nothing can be kept in confidence one from the other and that you will be disclosing all relevant information to both parties. Document that advice in your file and it will go a long way toward allowing you to tell both clients all salient information.

Identity Fraud—Impersonating an Owner

Quite simply, an identity fraud sees the fraudster pose as the owner of the property.  He or she will use fake identification to assume the identity of an existing property owner.  The fraudster then either secures mortgage financing or sells the property and pockets the proceeds. Once the mortgage funds or property proceeds are received, the fraudster disappears.