Fraud in Real Estate
Avoid legal entanglements by being honest in your dealings with buyer or seller.
With the recent boom in the Real Estate market it has opened the door to alot more fraudulent behaviours.
Over the past few years a booming real estate market has made mortgage fraud and other phony real estate schemes seem more appealing. The perpetrators of these schemes range from mortgage brokers looking to get rich quick, to criminals looking to launder there crime proceeds.
Every year these fraudulent transactions victimize businesses and individuals. This includes many low income families lured into home loans they can't afford, legitimate lenders hurt by over inflated mortgages and real estate investors losing there valuable investment dollars.
The IRS began an investigation into some of the more common schemes, according to its publication FS-2005-12:
Property Flipping - This is when a buyer buys a piece of property for a low price and sells it for a much higher price. This may be legal, however when it involves false statements to a lender, it is not.
Two Sets of Settlement Statements - One settlement statement is provided to the seller displaying the true selling price. Then a second fraudulent statement is provided to the lender showing a highly inflated selling price. The lender then provides a loan in excess of the property value, and after the loan is finalized, the proceeds are often split among the conspirators.
Fraudulent Qualifications - real estate agents assist buyers who would not otherwise qualify by fabricating their employment history or credit record.
The penalties for fraudulent real estate transactions are quite stiff, so be aware if you are a buyer or a seller participating in a fraudulent transaction. You may be assessed fines, or jail time and the financial institution can immediately rescind its funds and sue for damages.
For sellers you may run the risk of loosing your home to lengthy legal transactions, without payment. If you decide to participate in a fraudulent transaction you could suffer the same legal ramifications as the buyer.
As with any legal dealings that involve contracts due diligence is your best defense. Make sure that you represent yourself honestly. Making proper disclosures about the home and to your lender are your best way to avoid any legal entanglements.
