Most homeowners have a sentimental attachment to their properties, especially if they have been passed on from generation to generation. However, that has not stopped organized crime groups from defrauding people in the Greater Toronto Area.
Recently, two Toronto homeowners had their property listed in January and sold without their consent. How could this happen?
The Toronto Police Service stated that two suspects used fake IDs to impersonate the homeowners to sell the property. They are asking for assistance from the public to identify the suspects.
Unfortunately, these cases appear to be only a small portion of a much larger real estate fraud operation in the GTA. According to a recent CBC investigation, private investigators employed by a title insurance company revealed that a handful of organized groups are behind all these. Currently, the firm is looking into four fraudulent title transfer cases across the GTA.
Meanwhile, at least 26 mortgage frauds are also under investigation. Fraudsters took out mortgages on these homes without the owner’s authorization. There are potentially more cases of these fraudulent home sales in the GTA.
The lowdown on the scheme
Isaac Zisckind, a senior Diamond and Diamond LLP partner, said, “Knowing how the scheme works is crucial for prevention.”
The fraudsters carry out what investigators call “total title fraud.” Typical title fraud is when the perpetrator produces fake documents to deceive buyers or mortgagors. Total title fraud is when criminals impersonate property owners using fake identification when selling or mortgaging property.
According to the CBC, the scheme begins by searching for homes with little or no mortgage and a lot of equity from public records. Once they have identified their targets, the next step is to acquire stolen IDs.
The fraudsters then supply “stand-ins” with fake IDs to pose as tenants or homeowners to gain access to the home to mortgage or sell. The mortgage or sale happens quickly. The perpetrators move the money out of the fraudulent bank accounts within seven days and shipped overseas.
It’s possible to recover the money in some cases. Unfortunately, homeowners often discover their property has been mortgaged or sold several months later. In most instances, owners only find out when they receive a document stating they no longer own the property.
The role of title insurance
Given the slickness of these organized groups in carrying out fraud, homeowners should take a proactive stand. They should take out a title insurance policy to protect them against fraudulent claims on their property. It also covers legal costs for restoring the homeowner’s rights to their property’s title.
Property buyers also benefit if they unintentionally purchase a fraudulently listed home. Title insurance also covers them so they can get their money back.
Title insurance protects homeowners and home buyers from the consequences of real estate fraud for a one-time fee of $250 to $500. The fee varies depending on the insurance company and property value. However, considering it is a one-time expense against the potential loss of property, it makes sense for homeowners to get one.
The problem is that Canadian homeowners may not have that option for much longer. The rising number of title transfer and mortgage fraud cases and subsequent claims put a heavy burden on insurance companies. If title fraud continues to grow, insurers may stop providing title insurance to consumers.
How to prevent real estate fraud
Purchasing title insurance remains the most critical defence against real estate fraud. However, there are ways for homeowners to keep real estate fraud from happening in the first place.
Consult a real estate lawyer
Have a real estate lawyer check your titles once in a while for any issues. It’s also wise to search your property online to check for any listings.
Property owners can also consult a lawyer about legal options to protect their titles, such as registering instruments or wills. Registering instruments such as deeds and mortgages can protect against real estate fraud by creating a public record of ownership. It provides authorities with a way to verify the legitimacy of property transactions.
Registering these instruments can track and verify any changes or transfers in ownership or mortgages. That can make it more difficult for fraudsters to falsely claim property ownership or use a forged document to sell or mortgage a property.
Additionally, registering a will can prevent fraudsters from falsely claiming to be the rightful heir to a property. The registration process is a deterrent to fraud, making it more difficult to use fake or forged documents to gain access to property or assets.
Protect your personal information
Homeowners should be vigilant about protecting their personal information. Identity theft is a key factor in this particular scheme for real estate fraud. Taking basic precautions to keep bad actors from accessing personal data is the most effective way to stop real estate fraud.
Property owners can protect their identity by securing their physical passports and social security card. Shred bills and other documents with sensitive information instead of throwing them in the trash hole.
Most people know to use unique passwords for online accounts. Still, they have no problem using public WiFi when accessing these accounts. Avoid doing that as much as possible.
Be alert for phishing scams, which are attempts to steal personal information by disguising it as a trustworthy source. Monitor financial statements and credit reports regularly to catch any suspicious activity. Homeowners may also consider freezing credit reports, making it more difficult for criminals to open accounts under their names.
Do a background check
Those who rent their homes out also need to be more cautious. Because they’re giving physical access to the property, they could be at a higher risk of fraud. Property owners should do background checks on potential tenants.
Another critical component of real estate fraud is real estate agents and mortgage brokers. Fraudsters typically reach out to legitimate operators to do the listing and receive offers. Agents and brokers should learn more about the client to ensure they are on the level.
“Whether it’s the client not having, and not being willing to get, proper identification, or not knowing enough about the property – that raises red flags too,” Zisckind said.
He recommended speaking with a lawyer before giving out personal information and making real estate transactions. Additionally, both parties should ensure they know who they deal with in a real estate transaction.