lawyer's hands while explaining real estate fraud

How to Identify Real Estate Fraud

We define the two most common forms of fraud—and how to avoid them.

Your clients have worked hard over the past few years to save money to purchase their perfect home, a two-story Cape in their preferred part of town. But last-minute wiring instructions sent from a hacker pretending to be you, their agent, can derail their homebuying dreams in an instant. With real estate fraud on the rise in recent years, and hackers after your clients’ hard-earned funds, it’s imperative that real estate agents alert buyers to suspicious activity and provide tips for avoiding it. Below, we break down the two most common forms of fraud, and offer advice for how you can make sure your clients’ dream-home scenario doesn’t turn into a nightmare.

1. Wire Fraud

Real estate transactions are complicated and involve large sums of money. Your clients are likely already on edge about transferring thousands of dollars at a time, and the fear of a hacker taking off with their money doesn’t help.

Encourage your clients to only work with bankers they know. That way, they’ll recognize their voice, should the banker call with questions about financial details, or email correspondence.

Be sure to inform your clients that wiring instructions will always come from a secured system, or will be confirmed in-person, early on.

If your clients do receive a suspicious-looking email from an email address they’re familiar with, encourage them to call the bank or business directly to confirm and verify the enclosed instructions. Make sure your clients use the contact information they already have on-file, rather than what is listed at the bottom of the email.

Never send banking information or social security numbers over email. This advice goes for you and your clients. Hackers can enter email addresses and pull out sensitive information, which they can then use to steal your client’s funds.

Last-minute changes to wiring instructions are a huge red flag. Your clients should always confirm with you, their agent, or lender before pushing through large sums of money.

Finally, encourage your clients to speak up anytime they receive an email or phone call that they’re suspicious of. This is especially true if there’s a request for secure information; you can verify if the request is, in fact, legitimate.

2. Mortgage Fraud

Mortgage fraud covers any lies or omissions on loans, and is committed by someone on the bank side, or by the borrower. Your clients should always work with reputable lenders that come with referrals. Advise your clients to ask the local regulatory agency about a lender to confirm its credentials and license before proceeding. Before signing any mortgage documents, they should give them a thorough reading and be on the lookout for the following red flags: missing details, misleading phrasing, blank sections or pages.

If your clients are the ones committing fraud, however, it may be harder to detect. Look out for answers on loan applications that don’t seem honest or fit with what you already know about them.

Of course, it isn’t up to a real estate agent to protect their clients from fraud, and buyers should not rely on them to do so. There are specialized attorneys to help with that. An experienced attorney can spot red flags on paperwork quickly, and won’t miss small signs of fraud that someone not well-versed in contracts could. Buying a home is a huge commitment, so make sure your clients know common warning signs of fraud, and encourage them to work with an experienced attorney at ALA on all paperwork to avoid losing thousands of dollars to scams.

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