Beware These 5 Common Real Estate Scams

13 May 2019
Robert Greenberg Team

Buying a home is a stressful time. This might be the largest purchase you ever make, and a large chunk of your savings is on the line. This combination of cash, stress, and vulnerability sometimes entices sketchy people to try to take advantage of you. With some knowledge about real estate scams in Toronto, you can reduce the chances of falling for one of these schemes.

1. Title Fraud

Title fraud is relatively rare, but always devastating. It’s when a scammer steals your identity and forges documents to either remortgage your home and keep the profits, or actually sell your home without you knowing. You’ll likely only know that it’s happened when the bank comes looking for the mortgage money or the new “buyer” shows up at your door. The best protection against title fraud is title insurance and protecting your personal data from identity theft.

2. Foreclosure Scams

Foreclosure fraud is when a criminal takes advantage of a property owner struggling to make mortgage payments by offering a loan to cover expenses and consolidate loans, in exchange for upfront fees and an agreement to transfer the property title. As opposed to real debt consolidation programs, the scammer will keep all of your payments, ignore bills and taxes, remortgage your home and escape with the money, leaving you homeless and in debt. Be wary of any lender who approaches you directly and speak to your lawyer before signing any agreements.

3. Straw Buyer Fraud

Straw buyer fraud is when the fraudster convinces you to use your name on their mortgage in exchange for cash or a cut of the proceeds when the property is sold. You’ll be promised that you will have no liability for mortgage payments, taxes, insurances, etc., and that you’ll make a lot of money in the near future. What happens instead is that the fraudster pays you nothing and you’re receiving foreclosure notices and learning that you’re responsible for paying back the mortgage, even though you never benefitted from the profits. You’re out of money and your good credit is ruined. Look for red flags like quick closings, private agreements of purchase and sale, and a third person doing all the talking.

4. Rental Scams

Let’s say you’re leaving town for a few months and decide to rent out your home to a tenant. The scam occurs when instead of living in your house or condo, the tenant uses it for short-term rentals or Airbnb, breaking municipal bylaws and possibly damaging the property in the process. Do your research, read all contracts, and have a licensed professional look over everything before committing to a rental agreement.

5. Property Investment Seminars or Courses

These are courses or seminars offered by unlicensed professionals that often promise the secret to buying and flipping properties - if you pay thousands of dollars first. Sometimes the seminar is free, but you have to buy overly expensive reports or books, or borrow large sums of money to buy into their “incredible” investment. The best way to avoid being scammed is by performing extensive research on the company and/or person offering the seminar.

There are a lot of opportunities for fraud in the luxury real estate industry, and the best way to avoid being scammed is with the help of an expert Toronto real estate agent, like Robert Greenberg and his team of Toronto luxury realtors. Get in touch today!