3 common types of real estate fraud involving professionals

On Behalf of | Feb 18, 2024 | White Collar Crimes |

Real estate fraud can cost individuals or financial companies hundreds of thousands of dollars. Fraudulent real estate transactions can lead to an improper transfer of mortgage funds or somebody emptying their savings account, only to not acquire an ownership interest in real property.

Some real estate fraud is actually housing fraud. People who worry about their ability to afford rent or secure a mortgage may decide to intentionally misrepresent their financial circumstances on mortgage paperwork. Other times, real estate fraud involves professionals within the industry. Real estate professionals are potentially in a position to defraud both consumers and companies. The following are some of the most common forms of real estate fraud that may involve professionals.

Title piracy

Digital technology has made it easier than ever before for individuals to trick others into completing a fraudulent real estate transaction. Those who work in real estate may have an easy time accessing official title records and reports and could therefore falsify records to make themselves or another party appear like the current owner on record. Title piracy often targets individuals hoping to make a cash purchase by tricking them into paying for someone’s interest in a property when they don’t actually hold title.

Financing fraudulent transactions

Those in the mortgage industry often make more money when they get more clients to take on mortgages. In some cases, brokers and other mortgage professionals may intentionally overlook warning signs that someone applying for a mortgage does not have the income or resources that they claim. Occasionally, mortgage professionals even intentionally falsify records to help their clients secure mortgages for which they do not technically qualify. Instructing clients on how to manipulate the mortgage application process may seem harmless but can lead to businesses losing huge amounts of money.

Manipulating appraisals

Appraisers are trained professionals who evaluate the condition of a property and the local market to more effectively determine what a specific piece of real estate is likely worth. Appraisers should do their best to return accurate and honest valuations for properties. However, they get paid on a project basis. Therefore, they usually hope to curry favor with real estate agents and others who frequently play a role in real estate transactions. They might alter the final value set for a property based on the leading statements or intense pressure applied by a real estate professional. A manipulated appraisal could lead to a mortgage lender overextending themselves and could culminate in the prosecution of the parties involved.

Mortgage fraud, appraisal-related conspiracies and other white-collar crimes can send real estate professionals to prison and cost them their licenses. Understanding common schemes that may run afoul of the law can help real estate professionals avoid mistakes that could end their careers.


FindLaw Network