What is Real Estate Fraud?
Real estate fraud refers to any illegal activity with the purpose of misrepresenting information on a mortgage loan application or other real estate-related documents involving the transfer of money. It is also commonly referred to as mortgage fraud, since the mortgage application is usually where the fraud takes place. Predatory mortgage lending, while it is a dishonest real estate practice, is generally not referred to as fraud, in order to distinguish it from fraud that is committed by a buyer. In the United Sates, real estate fraud can carry heavy penalties, including large fines and imprisonment.
There are many ways to commit real estate fraud, especially during times when the price of real estate is on the increase. Some types, because of their simplicity, are seen more often. Others are more complicated and are less common, but no less serious in the eyes of the law.
According to the U.S. Internal Revenue Service (IRS), one of the most common types of fraud in real estate is the preparation of two different sets of settlement statements. In one statement — the one given to the seller — the accurate selling price of the property is reflected. The other statement, which is given to the mortgage lender, depicts a highly exaggerated selling price. When the lender provides the loan in the larger amount, the excess is distributed between the conspirators.
Another common type is the use of fraudulent qualifications when attempting to qualify for a loan. Often, a buyer will be assisted by a real estate agent in this type of fraud, which can include the fabrication of employment history or credit reports. While these two examples involve the blatant misrepresentation of facts, not all fraud is as easy to spot. Indeed, even well-intentioned buyers can commit mortgage fraud if they are not familiar with the law.
Some buyers provide a down payment using money that has been given to them as a gift, often from relatives. This is an acceptable way to make a down payment, but if the buyer repays the gift to the person who provided it, that is considered real estate fraud. In order to be legitimate, a down payment that is gifted cannot be repaid. Accidental failure to disclose financial liabilities on a mortgage application is also considered mortgage fraud if it is not remedied before the loan is given.
I have invested some money on a flip house and it's been two years and the real estate company claims the house has not been sold. It is out of state in California and I have checked with the sale agent in that state and they tell me that the property is not listed as a house for sale. I need advice on what I should do? Please help.
There are also real estate companies who offer shady online mentoring programs in U.S., Canada and Europe with false deceptive promises. This should be forbidden and be as fraud fined. There are some "so called gurus" out. Beware people from those gurus who promise to make a great career with a big income, but in reality, they only cash in on the money for the program.
Author Joe Goodrich wrote a book about his success in real estate. He became wealthy in early 2000 flipping properties in Texas. He was investigated for years and even had to work for the feds for about two years. Goodrich was eventually convicted for money laundering in 2012. The book is called "The King Will Fall".
I bought a property but my sister signed for me due to the fact I had bad credit. I paid for the property for five years and I had the house rented.
I did so many fixes, but finally I moved out. I rented the property and my sister took ownership and claims I had no rights to the property. What would you do? I invested so many years in it.
I thought I was buying this house on a rent to own basis. They never signed the contract. What can I do? I'm still making the house payment.
Anyone stupid enough to purchase a property online that they have never seen deserves to get ripped off. C'mon man, how could someone be that ignorant?
@ Babalaas- I have a family member who fell for an online real estate fraud. He paid about $12,000 for a hunting property in Idaho. The seller advertised the property as a four season hunting camp next to state land. The seller also claimed the property had water, electricity, and up to date plumbing.
He ended up buying the camp sight unseen. He never saw the property until he went on a big game hunt. He won a big horn sheep permit and went for a two-month hunt at his new property.
When he arrived at his "camp”, he found it was nothing but a long abandoned farm house with a freshly painted interior. There was no electricity or water, and half of the windows were broken out. The property was also located at the end of a long defunct stretch of old country road. The county should have condemned the property.
He spent the two months camping on the property, having to buy a generator, and tents to finish his trip. Now he is stuck with a worthless piece of property in the middle of nowhere.
Online real estate fraud has become common in the last few years. Dishonest sellers and scammers have inundated many online auction sites, both big and small.
The fraudulent listings rely on cheap prices, promises of big returns, and inexperienced real estate investors. The sellers often misrepresent the properties by giving false information or omitting information, all in the hopes that the buyer does not personally view the property.
Scammers describe many of the houses as fixer uppers. Fake inspection documents are given, and sellers often have an associate who poses as a reputable local contractor. The contractor will paint a very rosy picture of the property, claiming that s/he can have the property ready to rent for a few thousand dollars.
When the buyer receives the deed, s/he will find out that they bought a property on the verge of being condemned. They will also discover that the "contractor" never fixed anything, the house is in a drug infested neighborhood, and there are years of back taxes owed on the property.
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