The promise of a quick profit in real estate can be hard to resist. But consumers who misrepresent information when buying or refinancing a home could end up being responsible for any shortfall when the property is sold. If the misrepresentation is intentional, they could also be held criminally responsible as accomplices to mortgage fraud.
The most common form of mortgage fraud, called straw buying, occurs when someone with good credit is convinced to put their name on a mortgage application for a home that someone else will be buying, usually in return for the promise of a quick profit. To protect your name, your credit and your family, Canada Mortgage and Housing Corporation (CMHC) offers the following tips on how to avoid becoming part of a mortgage fraud scheme:
- Never accept money, guarantee a loan or add your name to a mortgage unless you fully intend to purchase the property. If you allow your personal information to be used for a mortgage, even for a brief period, you could be held responsible for the entire debt even after the property is sold.
- Always know who you are doing business with. If you are buying or selling a home, use only licensed Real Estate Agents and other industry professionals. And never sign anything until you know exactly what you are signing.
- Determine the sales history of any property you are thinking about buying, and consider having it inspected and appraised. Ask for a copy of the land title search, and find out if anyone else has a financial interest in the home. If a deposit is required, make sure the funds are held “in trust” by the Vendor’s Realty company or lawyer / notary.
- Get independent legal advice from your own lawyer / notary. Talk to your lawyer / notary about title insurance and other alternative methods of protection.
- To protect yourself from identity theft, never give out your personal information until you know who you are dealing with and how your information will be used. Review your mail, bank statements and other financial statements on a regular basis for inconsistencies. Shred or destroy all personal and financial documents before you throw them away. And inspect your credit report on a regular basis by contacting Equifax Canada at www.equifax.ca or TransUnion Canada at www.transunion.ca.
- Most importantly, be wary of anyone who approaches you with an offer to make a quick profit in real estate. Remember: if a deal sounds too good to be true, it probably is.
- This information is available in eight languages.
If you suspect that you or someone you know has been the victim of real estate fraud, contact your local police department immediately.