The first step in protecting yourself from becoming a victim of real estate fraud is to understand what it is.
There are two main types of real estate fraud: title fraud and foreclosure fraud.
Title fraud starts with identity theft. According to the Financial Consumer Agency of Canada, there are several ways for someone to steal your identity without your knowledge. These include:
- Dumpster diving: Going through your trash to gather information from old documents
- Mail theft: Stealing confidential information right from your mail box
- Phishing: Attempting to trick you into giving away confidential information by posing as a legitimate company
- Computer hacking: Accessing information stored on your computer without your knowledge
When you bought your home, you also bought the title to the property. Once your identity has been stolen, a criminal can pose as you and assume the title on your home. There are a number of things that can happen next: the criminal could transfer the title, secure a larger mortgage or even sell your home. Once the money from a sale or new mortgage is secured, the criminal can take it and leave.
All this can happen before you even know what’s going on. You might not find out until you’re contacted by your mortgage company for missing payments, or worse—by someone claiming to be the new owner of your home.
The second type of real estate fraud is called foreclosure fraud. In this scenario, the criminal takes advantage of a homeowner having financial difficulties. A homeowner unable to make mortgage payments runs the risk of having his or her home foreclosed on. This is when the mortgage lender takes possession of the home and sells it to make up for the debt owed by the homeowner.
Foreclosure fraud occurs when a criminal offers desperate homeowners a phony debt consolidation program—a loan to help them pay off their debt and keep their home. In exchange, the criminal requires the homeowner to pay upfront fees and transfer the property title to the criminal’s name. The criminal will pocket the payments made by the homeowner with no intention of helping to pay off debts. Since the criminal also has the property title, he can also sell or re-mortgage the home and disappear with the money, leaving the homeowners without a home and with serious financial woes.
How to Protect Yourself from Real Estate Fraud
Because Title Fraud starts with identity theft, you need to minimize your risk of identity theft:
- Shred documents containing personal or financial information before you throw them away
- Cut up expired or unused credit cards
- Don’t carry important identification cards (like your passport or SIN card) on you if you don’t need to
- When someone asks for personal information, make sure you know why it is needed
- Make sure you’re using different PINs for all your bank cards
- Create complicated passwords for online accounts
To protect yourself from Foreclosure Fraud:
- Never give someone else the right to deal with your personal assets without contacting your lawyer first.
- Regularly check your credit report to make sure the information is accurate.
- Get in touch with your mortgage lender if you’re having difficulty making your mortgage payments.
Consider getting title insurance
Title insurance protects you against financial loss from defects in your home’s title—including fraud and forgery. According to an article posted on the Edmonton Real Estate blog, other issues title insurance covers can include the gap between submission and registration of documents, deficiencies not covered in Real Property Reports (RPRs) and hidden defects (like issues with underground septic tanks).
Although it’s much less common than debit or credit card fraud, real estate fraud is a serious issue that can leave you homeless and in dire financial straits. If you’re an Alberta homeowner, be aware and heed these tips to protect yourself from real estate fraud today.