Working in real estate can be a challenging and demanding career path. Whether someone works as an agent representing buyers or sellers for residential or commercial transactions, or works as an appraiser or loan officer, there are many legal regulations in place that professionals must remain aware of at all times.
From creating binding contracts for their clients to placing a realistic fair market value on a property, the role that real estate professionals play in transactions is critical to the overall fairness of the modern real estate system. Unfortunately, some people who work in real estate or adjacent professions will commit acts of fraud in an attempt to bolster their own income.
Whether you work in real estate or are about to purchase or sell a home, familiarizing yourself with common forms of real estate fraud can protect you from either becoming a victim or facing criminal charges related to your job.
Increasing a property's value or price could put you at risk
When the real estate market is hot, sellers' agents can make unrealistic promises to potential clients to sign them. They may try to give an unrealistic estimate of what the home could sell for in order to secure a contract. Then have to worry about dissatisfaction when their clients' appraisals doesn't come back at a similar value.
Some real estate agents will go so far as to work with specific appraisers because they know that the appraiser will return a value closer to what they estimated than what the fair market value of the property currently is.
There are many potential issues with this kind of practice, including an artificial inflation of a neighborhood's property values and lenders becoming overextended because of the actions of appraisers and agents.
Helping to hide or cover up defects in the property is also fraud
Many mortgage programs regulated by the federal government, such as the FHA mortgage system, will not approve loans on properties that don't meet specific requirements. Some agents will help their clients intentionally game the system by covering up or not disclosing known defects in a property.
The obvious issue here is that buyers and lenders will make a decision based on the perceived condition of the property, offering more money then the property is probably worth. When a buyer or a lender alleges fraud in a real estate transaction, many of the people involved in the transaction could wind up facing charges.
If you work in real estate, talking to a white collar criminal defense attorney about allegations of fraud can help you determine if you are legally vulnerable. If you recently sold a home and a buyer is now claiming fraud, you may also need legal guidance to navigate the upcoming issues related to the sale.