Red Flags for Fraud In Real Estate Transactions

For lawyers practicing residential or commercial real estate fraud is a very serious and widespread problem. Fraudsters often target legal professionals through their sophisticated schemes and have duped many in the past including real estate lawyers in Mississauga, Toronto, and Brampton.

To avoid becoming a victim of fraud one must get familiar with information that is vital to the recognition of a fraud. There are certain red flags that one should look for when carrying out a real estate transaction. However, the presence of these indicators does not certainly mean that there is a fraud going on or about to happen, but they should ring some alarm bells and warrant further investigation.

Red Flags:

• Flip transaction: The vendor acquires the property and sells it for a higher price within a short period of time.
• Purchaser does not contribute significant amount of funds towards the purchase price or the balance due on closing.
• Parties are trying to conceal a non-arm’s length relationship or colluding regarding the purchase price.
• Funds from the sale are directed towards unrelated parties to the transaction.
• Third party involvement that is suspicious or repeated.
• The lawyer is asked to act for both purchaser and the vendor.

Fraudsters may affect fraud using fictitious parties who do not exist or whose identities have been stolen or purchased illegally. The list of red flags mentioned above is not exhaustive, all parties involved in the transaction should exercise caution and be on the lookout for any indicators that might warrant a further inquiry. Real estate lawyers in Mississauga and the Greater Toronto Area should be extremely cautious as these locations are hotbeds for fraudsters.