Most high schools don't teach students best practices in real estate. In turn, young buyers are often completely in the dark when it comes time for them to find their first home. Along with that comes far greater risks than someone who's shopping around for a second or third home. One risk that can have an impact on any potential homebuyer, however, is fraud. Here are some of the most common real estate fraud schemes:
Mortgage Fraud - This is a wide term that is used to describe any sort of misrepresentation or omission on a loan. It generally falls into two categories: fraud for profit (committed by someone in the industry) and fraud for housing (committed by a borrower), according to the FBI. Below are some tips to avoid becoming the victim of mortgage fraud. You can read the rest of our tips here.
- Ask your REALTOR® to refer you to a reputable lender (keep in mind, though, that do not have to use the lender he or she recommends). Consult your local regulatory agency to confirm the lender's licensing and other credentials.
- Be honest and transparent when completing a loan application. Do not include false information in the application, even if another party attempts to convince you otherwise.
- Read (and re-read) all mortgage documents before signing them, or have a third party review them with you. Assess the information in the documents for accuracy. Do not sign documents that are blank or incomplete.
Wire Fraud - With transactions as long and complicated as those in real estate, it isn't difficult to make a misstep. This inevitably makes an individual vulnerable to wire fraud when the transfer of such huge sums of money is taking place. Jon Goodman, a real estate attorney with Frascona, Joiner, Goodman and Greenstein, P.C., recently spoke about wire fraud at the 2017 REALTORS® Conference & Expo. Here are his tips on avoiding wire fraud:
- Seek to work with people you know. Ensure you can recognize their voice and know something personal about them that you can ask to confirm their identity.
- Do not be the direct source of wire instructions to clients, and let clients know that you will not be the source of those instructions.
- Educate clients to not rely on wiring instructions that come through e-mail or from a website. Wiring instructions should come from a secured system or confirmed verbally from a voice the buyer knows.
Identity Fraud - This is far more broad than the other two types of fraud schemes noted above, but can be far more devastating to an individual. Frank Abagnale, author and film subject of Steven Spielberg's "Catch Me If You Can," recently spoke at RISMedia's Power Broker Reception & Dinner. He discussed, among many things, the current state of cybersecurity and how to keep your identity safe. Here are a few of his tips:
- Be careful with social media. "Ninety-eight percent of stealing a person's identity is just finding their date of birth and an image of them," said Abagnale. Facebook and other social media pages are the easiest way for fraudsters to get this information.
- Don't own a debit card. The credit card is the safest form of payment on Earth because the liability is always zero. People that use debit cards are making themselves vulnerable.
- Don't write a lot of checks. Anyone who sees the information on a check—bank account number, routing number, name and address—can wire money out of that account.
You can read the rest of Abagnale's tips here.