When most of us think of being robbed, we imagine a burglar physically breaking into our house through a window or door. It can be one of our worst fears and we take all sorts of precautions to make sure our home is protected. We install security systems, smart doorbells, and cameras. When we go away, we make sure our house looks lived in by having someone pick up our mail, park in our driveway, and roll out our bins on garbage day. We even buy timers to turn our lights on and off in our attempts to foil would-be thiefs. However, there’s another form of home theft that is on the rise and it can be potentially more devastating than a break-in: real estate fraud.

For many Canadians, real estate fraud used to feel like something that only happened in other countries. But that’s changing, and real estate fraud in Canada is on the rise.

According to a recent Toronto Sun article, nearly 450,000 Canadians fell victim to fraud in 2019 and the numbers are going up. With so many transactions taking place online, identity theft is easier than ever, and living in a pandemic has given fraudsters more opportunities. As the article states, “The safeguards haven’t been as firm as they once were. Historically you would meet a client in person and verify their ID. You could look them in the eye and touch and feel their documents…it’s a lot easier for a fraudster to pass off forged documents on a video call; things can slip through.”

Title insurance companies have also noted increases in claims over the last two-and-a-half years, with losses in the hundreds of millions of dollars.

So what exactly is real estate fraud and what can you do to prevent becoming a victim? Keep reading to learn more about the risks and how you can keep your home safe!

What is Real Estate Fraud?

Real estate fraud is a type of theft where someone uses your personal information to gain title to your home. effectively giving them the ability to sell it or rent it without your knowledge or consent. Or they could apply for some sort of financing using your house as collateral, like a home equity loan or line of credit, and then fail to make payments—exposing you to credit damage and potential foreclosure. Title and foreclosure fraud are the two main types of real estate fraud.

Title Fraud

Title fraud happens when someone adds their name to the title of your home, then either sells the home or applies for a new mortgage against it. It’s more common if your home is mortgage free and the title is clear of any debt obligations or liens.

If you are mortgage-free, the best defense is opening up a home equity line of credit on the property, even if you never plan to use it. A lien will be registered on your title, making it much harder to sell.

How does title fraud even happen?

To commit title fraud, a fraudster must first steal your identity, and they aren’t shy about it. They’ll steal your information from an organization or company that has you in its records or they can go straight to the source and get it directly from you, using phone or email scams or phony job offers. Using your information, they’ll make fake identification and forge the documents needed to add information to an existing land title.

You might be thinking - wait a minute! Doesn’t the land title office require documents to be notarized? And you’re right, it does, but unfortunately, not all notaries will ask to see originals, so the fraudster can get their fake documents notarized and the land title office is likely to accept them.

If a fraudster is an over-achiever, they may go the extra mile to actually sell your property, even though it’s more complicated than just obtaining a mortgage.

More people are typically involved in selling a house, which means more eyes are watching for red flags. They need to impersonate you, possibly work with a realtor to sell the property, and somehow make it past all the checks and balances that should be acting as fail-safes.

It’s also really hard to sell a house without showing it, so it needs to be empty. Being away for long periods of time makes you an easier target – we’re talking to you, snowbirds!

What happens if someone fraudulently sells my house?

Sadly, if the fraudster is successful, the title will transfer to the new owners. Like a scene in a bad movie, you could come home from your trip away to find a new family living in their house. If you have title insurance, your financial losses may be covered, but you may need to go to court to settle whether you have a claim to your house.

Buyers also beware - possession isn’t always 9/10ths of the law! Always work with a licensed realtor that you’ve chosen and invest in title insurance to protect yourself from potential financial losses.

How Can I Prevent Title Fraud?

The most important thing you can do to prevent title fraud is to protect your personal information!!!

Identity thieves are experts in the art of dumpster diving – they will go through your garbage and recycling bins! Shred your personal information, including things like banking and mortgage documents, receipts, credit applications, and insurance forms. Protect your mail by removing any mailbox items soon after delivery and if you move or change your mailing address, ensure you have your mail forwarded.  

Don't get tricked by a friendly voice or sad story. Never share your personal information on the phone, through email, or online, unless you initiated the contact or know the people you’re dealing with. Always ask how they’ll use your personal information and if it will be shared.

Additional things you can do include:

• Follow up with creditors if you stop receiving payment notices.
• Do a land title search with the provincial land title office to make sure no other names or liens have been added.
• Check to see if there are unauthorized financial accounts in your name by reviewing your credit report. You can request free copies from Canada’s two reporting agencies: Equifax Canada and TransUnion Canada.
• Invest in title insurance to protect yourself from losses related to title fraud, including legal fees and other expenses associated with fraud claims. And if you already have title insurance in place, check your coverage, especially if your home’s value has appreciated significantly.

Foreclosure Fraud 

Foreclosure fraud is predatory in nature - it's usually committed by someone who is knows you are in a financial predicament, likely desperate, and offers to "help" you out. It usually happens when you are having problems making your mortgage payments.

Fraudsters will trick you into signing a mortgage or a lien that allows their name to appear on the title of your home. They may accept payments from you for a while but because they’re on the title, they may also remortgage or sell your home. Or they’ll foreclose on the mortgage to trigger a loan default on the pretense that you didn’t comply with all their conditions. You’ll have no choice but to sell the property in order to repay the debt.

How Can I Prevent Foreclosure Fraud?

Foreclosure fraud is arguably easier to prevent than title fraud because it requires your participation, even if you’re not aware of what’s happening. Awareness and common sense are your two most important weapons, but there are a few other things you can do to protect yourself:

1)    If you aren’t able to make your mortgage payments, don’t be afraid to talk to your mortgage lender! They’ll often allow you to defer your mortgage payments for up to six months.

2)    Beware of people throwing money at you – if it sounds too good to be true, it is. Do your research before you take a loan from a company or individual – this isn’t the time to go with someone you found on social media. And read the fine print carefully!

3)    Be cautious of anyone offering to “buy houses for cash.”  It may be legitimate, but many are not. Work with an independent realtor that you have chosen independently!

4)    Talk to your lawyer before you sign over the rights to deal with your home or any other part of your estate.

Mortgage Fraud

Mortgage fraud is somewhat different from title or foreclosure fraud as the fraudsters are doing their dirty work in plain sight. It can happen even when you’re working with legitimate institutions, like banks and accredited mortgage brokers.

Brokers or bank employees forge documents or alter details to get a mortgage approved, usually if you’re buying a home outside your means. You probably won’t be aware of what they’ve done until you struggle to make your mortgage payments.

What If You Suspect Fraud?

If you suspect fraud, the first thing you should do is report it to your local police department! The next call you make should be to the Canadian Anti-Fraud Centre. Be sure to:

• write down dates and names and save any records, like emails, texts, or voice mails  
• contact your financial institutions and any other companies where you think accounts may be affected
• contact the provincial land title office
• contact Canada’s two credit rating agencies, TransUnion and Equifax, and ask them to put a fraud alert on your file

The Bottom Line

Real estate fraud isn't going away any time soon. It's one more thing on what feels like an ever-growing list of ways you're vulnerable to being taken advantage of. But don't despair - the good news is that there are simple steps you can take to protect yourself! Ask questions, do your research, and remember that if something seems to good be true, it probably is.

And, as always, if you're buying or selling a home, have an expert in your corner by working with a realtor. Whether you're ready to buy or sell a home or just have questions, reach out to us at AlexCowie.com and let us use our years of experience to help you navigate the constantly-changing world of real estate!