Real Estate Fraud Prevention

Background

Identity fraud and scams are increasingly prevalent throughout the community and the real estate industry is not immune to falling victim to such events.

Two highly publicised incidents in September 2010 and March 2011 resulted in properties being sold in Western Australia without the knowledge and consent of the lawful owners.

In both instances, real estate agents were contacted by the fraudsters who were acting as the true owners. The properties were tenanted and managed by a real estate agent on behalf of the registered owner. The fraudsters contacted the agent, pretended to be the owners and notified them of new contact details which formed the basis of future contracts.

These two events highlight the relative ease by which fraud can occur and emphasise that agents need to be on high alert for potential fraudulent real estate transactions.

The applicable Property Agents and Motor Dealers (Real Estate Agency Practice Code of Conduct) Regulation 2001 places a number of obligations on agents which are relevant to take steps to avoid situations as described above. Agents have a fiduciary obligation to their clients and must exercise reasonable skill and diligence in order to act in their clients´ best interests. Agents are also required to verify ownership of the property and all facts relating to a sale.

Warning signs for possible fraud scenarios

The following warning signs can be an indication of possible real estate fraud:

• recent change in address or contact details provided by someone other than your client (or someone acting on behalf of your client)
• documents originate from overseas or places of questionable repute
• request for funds to be sent to a different bank account to the one normally used by client
• advised the sale is urgent - for example, because of an overseas investment opportunity
• there are inconsistencies in the information provided by the client
• new email addresses are generic such as Hotmail, Yahoo or Gmail
• language used in email communications is uncharacteristically poor
• comments by ´seller´ that if the sale is successful or quick, future work or other incentives will be provided to the agent.

Risk management

There are a number of tools that agents may use to confirm a client´s identity:

• conduct a 100-point identity check using multiple points of identification
• maintain a signature register where original signatures of clients are obtained and kept on file for reference for future transactions
• file particular discussions or queries unique to the client for future reference
• complete property transactions in person, if possible.

Action to take if fraudulent activity is suspected

Agents who suspect real estate fraud must:

• contact the Queensland Police
• not act on the sale of the property.

Agents should retain copies of all documents obtained in the process of verifying identities and in verifying the authority of a person to act in the sale of the property.
The above information has been sourced directly from www.fairtrading.qld.gov.au as at 22nd May 2013

Real Estate Excellence members have access to a best practice identity form to use when working with sellers and landlords. Members should contact Stacey Holt for more information www.realestateexcellence.com.au