Identity Fraud In A Real Estate Transaction

Estate Agents should not all look the same

We want to believe that there aren’t any risks in real estate transactions. Unfortunately, this is another utopia. First-time home buyers already feel the pressure to know everything about the purchasing process. It’s hard enough to find the perfect home due to the competitiveness of the market.

It’s also essential to learn more about the potential threats when it comes to real estate. By spotting the most common scamming and identity fraud techniques, you’ll be prepared to protect yourself. So let’s dive in!

Real estate – a favorable target for criminals

With digitalization, more processes are carried out remotely. That’s why without proper security measures, companies face data breaches. Real estate transactions aren’t an exception. Since the real estate processes require many personal details as well as paperwork, scammers find this sector a great channel to launder money or commit their crimes.

Alarming statistics

The number of scams is rising, making occurrences of identity theft a major issue. FBI reports that more than 13,600 people fell into the list of real estate victims in 2020 alone. The statistics from 2021 remain alarming. According to the Federal Bureau of Investigation’s report, more than 11,500 people reported cases of real estate or rental fraud.

While many victims are consumers, there are many other targets, such as banks, real estate professionals, lenders, or title companies. Some of the most common fraud types in real estate are rental fraud, wire transfer scams, title company fraud, and, of course, identity fraud.

How real estate identity fraud occurs

It’s a whole complex process, as identity theft doesn’t occur in one single transaction. For starters, hackers strive to gain access to your data. They get into your computer, your email, or other personal accounts. Typically, the easiest way to achieve this goal is to use spyware, malware, or phishing.

For instance, malware is very dangerous because the victims often unknowingly download malware; this way, opening a door for hackers. Once that’s done, cybercriminals steal usernames, passwords, and other personal data. In other words, hackers can see every move the person makes, stealing their whole digital identity.

Criminals choose their targets wisely

Some scams are so advanced that they put any property owner at risk. There’s a point where you can lose your house due to a fake deed or a title scam. The principle seems simple. A deed is a signed document that proves the ownership of the asset. But when it comes to fake deeds, they involve an involuntary transfer of an ownership without the owner’s knowledge.

Very often scammers target senior citizens or second-property owners whose houses show signs of neglect. The fraud can occur when the property owner moves into an elderly care facility or when the house remains unoccupied for a longer period. Scammers also seek property owners who pass away. They even live in the houses, rent them, or even flip the properties under fake names.

That’s why homes that are left behind mortgage payments or taxes, vacation homes, and unoccupied properties are the best targets for criminals. Unfortunately, even if the victim doesn’t lose their home, a fake deed scam is an expensive issue to fix. To protect yourself, watch out for missing bills or lower credit scores, as they are the main red flags of title fraud.

An open door for various frauds

Identity fraud in real estate causes financial issues due to the power of data. Identity thieves use the stolen information to apply for mortgages, purchase and refinance new properties, take out loans, or, as discussed, seize the house via a fake deed.

Not only individuals but also companies are at risk, making business identity theft a rising issue. Cybercriminals target companies and their companies with the goal to resell or refinance the properties. They act as the manager or the owner of the title company, then use the business’ credentials to pocket the cash.

Another way for scammers to gain money is through loan flipping. In this scenario, a predatory lender pushes the property owner to refinance their mortgage. The hacker charges for each transaction, often borrowing high sums each time. This results in property owners getting stuck with high loan payments that they can’t afford. Usually, scammers target seniors for this type of scam, again due to them being more gullible.

Ways to spot real estate fraud

If you’re not experienced with real estate transactions, you should learn more about the signs of fraud. For instance, the first giveaway of potential fraud is when the property seller doesn’t have the right documents. Some fraudsters even promise to send paperwork only after the buyers transfer the money.

Other scammers pressure them to send the money as soon as possible. They push buyers to forward their personal information as well. Otherwise, scammers try to scare the buyers, stating that they might lose the property if they don’t comply.

Usually, they make an offer, and once the seller accepts it, a deposit can be transferred. In other words, if the transaction seems to be too good to be true, this is another warning sign. Don’t respond to criminals’ demands to wire the money directly.

Also, be careful when sellers promise to make changes to a loan in exchange for an upfront payment. This is also a common scam tactic. That’s why if you’re suspicious, don’t hesitate to contact your real estate agent.

How to avoid fraud in a real estate transaction?

The most effective way to combat identity theft is digital idenfity verification. All it takes is to verify the identity of the person who’s involved in the real estate transaction. This remote process protects businesses from fake identities and criminals who have bad intentions.

Thanks to artificial intelligence, the automated software scans more than 2100 passport and ID types from all over the world, ensuring security in real-time. Don’t worry, real estate transactions aren’t hard to understand. Once you know the risks, you won’t fall into the fraudsters’ hands.

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