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Thursday, 12 December 2019
Agent Resource Center
Agent Resource Center

Common Real Estate Fraud Scenarios, and What to Look Out For!

Written by Posted On Monday, 18 November 2019 10:14

Real estate fraud is something that is much more widespread than most agents, landlords and tenants may realize, which is why it’s so important for everyone within the industry to fully understand these certain criminal scenarios so you can do your due diligence to recognize and litigate against this type of criminal activity.

Real estate fraud is a serious crime no matter where you live, which is why we’ve teamed up with the Mario Madrid Law Firm to assist us in creating this list of the common scenarios in which real estate fraud occurs, and what you should look out for in terms of avoiding these types of stressful situations.

Below are some of the common instances in which real estate fraud permeates itself throughout the industry, so go through this list in order to better understand what you should be looking out for when evaluating, selling and purchasing properties!

Fake/Inflated Rent Rolls

This is by far one of the most common forms of real estate fraud, and it’s something that doesn’t get justified in countless scenarios. Buyers should never receive any kind of misrepresented information pertaining to a property’s previous tenants, leases, building information, or any other restrictions involving the property.

The sad truth of the matter is that many real estate professionals will try to slide past this type of information in order to maintain the overall appeal of a property, but when they do this they are technically breaking the law. This type of lack of transparency is of course many times difficult for buyers to recognize, until it’s all too late and they’re stuck with a contract or property with problems they didn’t know about prior to closing.

This type of lack of transparency will commonly apply to rent control and zoning laws, and sellers who omit this type of information are subject to criminal penalties!

Property History Omissions

Any past information about a property is a necessity when it comes to the overall evaluation of a property, and some sellers may try to get away with omitting certain information that may be detrimental to their asking price or overall property value.

Any type of omission or lies about this crucial property information is grounds for real estate fraud, and can certainly lead to a lawsuit. Some of the common omissions we have seen that relate to a property’s history include:

  • Any type of zoning restrictions attached to a property
  • Past structural damage that may have occurred during a natural disaster or other catastrophic situation
  • The overall presence of “undiscovered” nuisances like insects or noxious fumes
  • Mold damage or other types of toxic damage
  • Any other significant historical facts that could affect a property’s value, including the past history of crimes on the property

Syndicator Fraud

Syndicators are companies or even individuals who essentially pull large sums of money together from investor groups when it comes to purchasing commercial or residential properties, typically for investment purposes. This isn’t illegal, but there is a significant gray area of the law when sellers don’t exactly know whom they’re selling to because of the large investor group that a syndicator may represent.

The typical fraudulent situation here is when a syndicator collects any sum of investment money towards a property purchase when there isn’t a concrete investment opportunity readily available to the investors. These crimes also commonly occur when a syndicator persuades investors into a property purchase when they simply don’t have anywhere near the amount of capital that’s needed to actually make a purchase.

Buyer Misrepresentations

Property buyers are also potentially liable in terms of committing certain kinds of real estate fraud, and this typically happens when they purposefully omit crucial information when it comes to a property purchase. These omissions can lead to legitimate financial damages to a seller, which are grounds for a lawsuit.

One of the most common fraud situations here is when a buyer misrepresents themselves when looking at purchasing a property, and then subsequently assists in having a seller miss other legitimate opportunities due to the fraudulent buyer’s misrepresentation.

 

There are countless other real estate fraud situations that everyone in the industry needs to look out for, and having a professional litigator on your side will help you when these types of legal issues arise!

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