Real Estate Frauds

Again, there is no limit to the schemes that fraudsters may devise related to real estate. The preponderance of real estate frauds involving lawyers fall into two categories: value fraud and identity fraud. In addition, criminals who have already committed a crime (e.g., drug trafficking, human trafficking, fraudulent transactions) may try to launder their ill-gotten gains through real estate (e.g., for a purchase, private mortgage, phony builders’ lien claim). While the following examples are directed at real estate, it is possible that similar frauds can occur with any type of valuable property.

Although fraud and money laundering are different, indicators of fraud and indicators of money laundering frequently overlap. For example, you may see some of these indicators in connection with either of them: 

  • You have difficulty obtaining information to identify and verify the client’s identity. 
  • The client refuses to provide their own name on documents or uses different names on offers to purchase, closing documents or deposit receipts. 
  • The client does not care about the property, price, mortgage interest rate, legal fees, or brokerage fees. 
  • The client offers to pay higher than usual legal fees for the legal services. 
  • The client is out of sync with the property (occupation, personal wealth, level of sophistication). 
  • A stranger who appears to control the client attends to sign documents. 
  • Your contact with the client is only, or primarily, through email. 
  • The head office of a corporate client has recently been changed to an address that does not make sense. 
  • The client who is purchasing property has been named in the media as being involved in a criminal organization. 
  • The transaction is presented as a private agreement – no realtor is involved, or the named realtor has no knowledge of the transaction. 
  • The transaction involves a power of attorney. 
  • The transaction includes a large vendor take-back mortgage.

Over the next couple of pages, we’ll look at two common types of real estate fraud: value fraud and identity fraud.