Essential Knowledge: Real Estate Scams
As a real estate expert and mentor, one of your key priorities will be protecting your client base. Despite the good work of real estate agents and public agencies across the country, mortgage fraud remains prevalent. According to researchers CoreLogic, the national mortgage application fraud index - a measure of how likely fraud is to occur - rose for a consecutive fifth time, up 16.9%.
The good news is that real estate professionals can do much to combat this trend. By combining ethical real estate practices, a full assessment of your client’s vulnerabilities and maintaining vigilance through continuous learning, you can act as a safeguard between your client and unscrupulous agents.
Prevalent forms of fraud and the damage caused
According to CoreLogic’s researchers, New York State has historically found itself on the positive end of the mortgage fraud scale. The most recently available aggregated statistics, from October 2017, show only 0-20% correlation with fraud risk. However, mortgage fraud cannot be discounted in New York State, with State A.G. Schneiderman revealing 799 mortgage fraud complaints through 2017 in a March 8th press release. Sickeningly, these scams often target vulnerable demographics such as seniors. The reverse mortgage type scam has been deployed to great effect, with homeowners frequently losing the entirety of their mortgage to the scammer. Ensure you are conducting rigorous independent checks on the value of the home and that both ends of the sale chain.
Another key type of mortgage fraud is income fraud. Often this sort of scheme is more difficult to pick up as it doesn’t entail the direct theft of funds. However, financial institutions and lenders are adversely affected as they are misled into giving out loans that are not issued to those with the proper financial backing to guarantee repayments. According to research by British Southbank Investment Research, income fraud was a key driver behind the 2008 crash. Maintaining vigilance over suspect earnings is crucial to maintaining stability in the real estate chain.
The downsides of technological innovation
The most common mortgage fraud types, explored above, occur due to loopholes in legislation and the insertion of malicious persons into the buying and selling journey. With vigilance maintained over the basic framework of the real estate process, it is then important to turn an eye to the digital element of real estate work. You may have seen the news last year that a NYS supreme judge lost $1m to a real estate scam where a fraudster had posed as the judge’s personal real estate agent in emails. Investigations are ongoing, but this has demonstrated how anybody could potentially be caught out. In order to guarantee the safety of yourself, your client and anyone else involved in the chain, consider using bespoke cybersecurity software and apps to authenticate every member of the purchase chain.
Real estate is a high value business that carries with it a huge level of risk if malicious persons are able to put themselves into the process of buying and selling. The information and statistics to keep protected are out there, and as a top class real estate professional it will pay to stay on your toes and aware of rising threats.