How to protect yourself from real estate fraud
Recent news reports have highlighted the dangers of real estate fraud, which occurs when fraudsters or scammers steal ownership of a home in order to take advantage of its value.
Yesterday, CBC News reported on a Toronto family who was able to thwart an attempted scam where someone used fake IDs to impersonate the 95-year-old owner and convinced real estate agents to put the house up for sale without their knowledge or knowledge family permission.
The case looks like an ongoing trial Toronto Police Investigationin which police say two homeowners left Canada for work in January 2022 only to learn months later that their property had been unknowingly sold by people using fake IDs.
So what is title fraud and how can you prevent it from happening?
What is title fraud?
Title fraud occurs when someone uses fake IDs or documents to steal the identity of a property owner and take away their “title” or legal ownership of a property.
Once fraudsters get their hands on title to a property, they can mortgage it again, sell it to an unsuspecting buyer, or otherwise extract value from it and withdraw the proceeds.
Owners often don’t learn what happened until they receive a notice of missed payment or try to sell, title insurance company First Canadian Title (FCT) says on its site. website.
It can take a lot of time, money and effort to deal with the need to restore your title and/or remove any fraudulently registered mortgages.”– First Canadian title insurance company
Victims of title fraud lose the right to mortgage their homes, can no longer leverage equity and cannot sell the property until they restore their property rights in court, according to FCT.
“It can take a lot of time, money and effort to deal with the need to restore your title and/or remove any fraudulently registered mortgages,” FCT writes on its website.
Morris Cooper, a civil litigation lawyer in Toronto who successfully litigated a landmark case in 2006 that shifted responsibility for securities fraud from victims to lending institutions, said seniors and people who renting their homes to tenants may be at high risk of title fraud. .
But homeowners can take steps to protect themselves.
Take steps to protect your identity
Impersonating someone is often the first step in title fraud.
Government-issued identification documents, including driver’s licenses, passports, birth certificates, social insurance number (SIN) cards, and citizenship cards, can all be used to apply for mortgages or to take steps to buy or sell a home.
The Canadian Anti-Fraud Center offers the following tips to prevent identity theft:
- Beware of people with whom you share personal information.
- Regularly check credit card reports, bank and credit card statements and report any irregularities.
- Shred documents containing personal information before throwing them in the trash.
- Limit mail theft by regularly retrieving mail.
- Inform the post office, financial institutions and other service providers of your new address when you move.
For more information on how to prevent identity theft, visit the following links:
Obtain title insurance
Title insurance is an insurance policy that protects homeowners and their lenders against losses related to title or ownership of the property, including title fraud, according to the Services Regulatory Authority of Ontario. financial institutions (FSRAO).
Although this cannot prevent you from being the victim of fraud, it is the most important thing to mitigate the consequences.
“Title insurance will step in and save you in a situation like this,” said Varun Sriskana, a Toronto-based real estate agent, property manager and housing advocate. “It protects you in case someone scams you.”
Title insurance can cover legal costs incurred by homeowners seeking to restore their right to title to their property, according to FCT.
It protects owners against fraudulent claims on their property and pays legal fees to restore the owner’s title rights.
If a buyer unwittingly buys a home that has been fraudulently listed, insurance should also protect them. In such cases, the true owner will likely get their home back and the unwitting buyer will get their money back.
Know who you are dealing with
People on both sides of a real estate transaction should make sure they are comfortable with the identity of the person on the other side of the transaction, said Stephen Moranis, former president of Toronto Regional Real Estate. Board.
That means potential tenants should make sure the landlord actually owns the property, while landlords should check references and request documents such as credit scores to verify potential tenants, Moranis said.
“Each party has to be very, very careful to check and make sure that the other party they’re dealing with is actually in a position, in a legal position, to rent or sell the property they’re considering,” Moranis said.
Murtaza Haider, professor of data science and property management at Ryerson University, said he spoke to neighbors the last time he was looking to buy a home, asking them about the property and the current owners in a search for potential red flags.
Simply Googling a person’s name and cross-checking photos from social media can also help detect any irregularities, Haider said.
Preventing title fraud by tenants
Landlords who rent their homes to tenants could be at a higher risk of fraud because the tenants have physical access to the home.
Landlords should take steps to ensure documents containing personal information such as driver’s license renewal applications or tax returns don’t fall into the wrong hands, Haider said.
“Make sure your mail stays with you. Make sure you have a forwarding address,” Haider said. “Make sure they don’t end up in the hands of people you don’t want but yourself.”
Haider said landlords can also search their property online from time to time to see if it’s listed for sale inappropriately or on a rental website like AirBnB.
“It’s always a good idea to verify the address, check it in various places on the internet to see that your property is being used for its intended purpose,” Haider said.
Landlords should also rely on banking information rather than cash payments, as it adds another layer of due diligence, Haider said.
The Ontario government also offers a free online tool which allows any member of the public to check the validity and current status of a driver’s licence. Diver license numbers that show up as invalid could be a red flag.