The Different Types of Fraud in the Real Estate Industry

Are you interested in investing in real estate? If so, there’s never been a better time to get your feet wet.

After all,  contrary to predictions, it’s a booming industry that doesn’t show any signs of slowing down.

The key to success in this sector is twofold.  First, you need to know why you’re doing it and how to invest in homes safely, and we have a few articles on this topic.

Secondly, you need to know how to avoid fraudulent activity in real estate investment. Thus in this article, we are honing in on real estate trickery.

You need to understand the different types of fraud that are common in the real estate industry. Fortunately, you’ve come to the right place for help.

This article takes a look at the kinds of fraud you’re likely to encounter if you don’t pay attention. Keep reading to get the inside scoop.

False Listings

What is a false real estate listing? Great question.

This type of real estate fraud is where the scammer extracts information about a property from a website or some other source and then lists it for sale. They have no authority to discuss or sell the property, yet they make their listing look authentic.

When this type of listing appears, a potential buyer could end up making an offer and sign a contract, eventually making payments on a home that was never actually for sale.

This type of scam commonly takes place completely online. Thus the buyer never actually sees the property first-hand.

The key is to never buy a property without seeing it in person and never provide your credit card or banking information online.

Syndicator Fraud

Syndicator fraud involved an organized group of investors who pool their money together to purchase properties. Although this type of investment group can be perfectly legal, there is always the potential that one or more of the investors will take advantage of the other investment group members.

The key to avoiding this type of fraud is paying close attention to all transactions and making sure you understand each real estate deal’s nature.

Foreclosure Relief

Foreclosure relief occurs when a company claims to help people reduce their mortgage in return for a significant upfront payment. The problem is that the scammers vanish when they receive the payment, leaving the homeowner shocked and confused.

Here is a resource that can help prevent real estate fraud.

Omissions of a Property’s History

Before investing in a property, it’s crucial to be aware of the property’s full history. For example, there could be zoning restrictions, structural damage, mold or other forms of toxic damage, or unpleasant historical facts such as grisly crimes that would reduce the property’s actual value.

Inspections

Doing your due diligence on a property before committing to it is vital, so there are no surprises that may cost a lot to repair or replace.  For example, a building inspection by a qualified builder will let you know the condition of the roof, cladding, and vulnerabilities like leaks, or rot.

You can get the pipes, wiring and heating system inspected.  Homes cost hundreds of thousands, so you can never be too cautious and prepared for the unexpected.  If you have a substantial ‘repair fund’, then you can skip inspections.

Misrepresentations By the Buyer

This is the reason why it’s imperative to work with an experienced and knowledgeable real estate professional. When buyers misrepresent their finances, including a lack of funds, it could cause serious issues down the line, which is obviously a huge headache for everyone involved.

A Guide to the Different Types of Fraud In Real Estate

Investing in real estate can be exciting yet stressful. Fortunately, this guide to the types of fraud in real estate will help you avoid bad situations.

Keep scrolling to discover the more great real estate and lifestyle advice on this blog.