The legendary boxer, Muhammad Ali, once proclaimed, "your
hands can't touch what your eyes can't see." Although
he probably was not pondering the intricacies of fraud in real
estate when he uttered those words, he still offered prudent advice
to anyone interested in preventing fraud. In the realm of real
estate, one can only prevent fraud if one can perceive how it
Fraud does not stereotype or discriminate. It preys upon
everyone – simple or sophisticated – including
financial institutions, corporations, real estate lawyers, buyers,
and even sellers. As technology increases, the incidence of fraud
proliferates. Historically, fraud was typically confined to when a
homeowner who acquired a mortgage loan against property that the
borrower owned but where a fraudster executed the mortgage as a
co-owner or consenting spouse. Today, fraud appears in myriad
shapes and sizes. That is why it's in everyone's interest
to prevent fraud by first learning how to recognize it.
The first common type of fraud is "value fraud". In a
value fraud, the value of the property is inflated, and usually a
third party advances money on the strength of the higher value. In
other words, a fraudster purchases real property and then flips the
property to a complicit purchaser at an artificially inflated
price. This flip at an artificially inflated price would deceive a
bank or mortgage lender about the true value of the property when
securing a mortgage loan.
The second common type of fraud is "identity fraud".
In an identity fraud, the fraudster borrows the identity of a third
party to facilitate the fraud. Typically, the fraudster poses as
the owner of a property that he or she does not own. He or she then
either secures mortgage financing from a lender or sells the
property to an innocent third party. The fraudster vanishes once he
or she receives the mortgage funds or property proceeds. Along with
misappropriating the identity of the property owner, fraudsters
also commonly misappropriate the identity of a lawyer, a corporate
owner, and even forge bank drafts and certified cheques.
Now that you understand how fraud can occur, it's time to
find ways to prevent it. The Ontario Ministry of Government
Services and the Canadian Bankers Association provide several
strategies to safeguard yourself from fraudsters preying upon
Do not give out personal information on the phone, through mail
or over the Internet unless you have initiated the contact or know
with whom you are dealing.
If it sounds too good to be true, it probably is — before
you reveal any personal information, find out how it will be used
and if it will be shared.
Pay attention to your billing cycles. Follow up with creditors
if your bills don't arrive on time.
Guard your mail. Deposit outgoing mail in post office collection
boxes or at your local post office. Promptly remove mail from your
mailbox after delivery. Ensure mail is forwarded or re-routed if
you move or change your mailing address.
Minimize the identification information and number of cards you
Keep items with personal information in a safe place. An
identity thief will pick through your garbage or recycling bins. Be
sure to tear or shred receipts, copies of credit applications,
insurance forms, physician statements and credit offers you get in
Give your Social Insurance Number (SIN) only when absolutely
necessary. Ask to use other types of identification when
Don't carry your SIN card; leave it in a secure place.
Check your credit report regularly to ensure there are no
Reviewing your credit report can help you find out if someone
has opened unauthorized financial accounts in your name. There are
two credit reporting agencies in Canada: Equifax Canada and
TransUnion Canada. You can request free copies of your credit
report from credit reporting agencies by mail. Online versions of
reports are also available for a small fee.
You can also conduct a property search at your province land
registry office to ensure that the title to your home is in your
Fraudsters are very active around holidays when firms are
short-staffed and banks are closed. They even know when real estate
lawyers are under deadline pressures. Be able to recognize fraud
and don't play. In the game of fraud, don't become a
Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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