Is real estate fraud a thing of the past? As a business ethics speaker, business ethics consultant and writer, I must be attuned to real estate fraud trends. While fraudulent real estate behaviors have trended down over the past five years, overall, scam artists have still found ways to take advantage of vulnerable home buyers and renters.
What is the role that ethics should have in real estate?
I might first add as a real estate ethics speaker, business ethics consultant and writer that while real estate investors might be pointing with pride that fraud is down in their segment of the industry, even during the time of “pandemic lockdowns” reports of real estate investing fraud were averaging about 8,100 cases per month. It is one thing to boast of pride in a declining period, but to those 30,000 plus Americans who were victims of fraud, it is hardly good news.
When I move into the area of scams stemming from phony “credit bureaus,” the news turns bleak. According to the National Credit Bureau Administration, fraudsters are operating in a two-pronged approach:
“A fraudster hacks into a title company or lender’s email server or computer system to search for upcoming real estate closings; and the fraudster then emails the buyer or financial institution with bogus wire-transfer instructions related to a particular real estate loan closing.”
This type of fraud is reported to have increased more than five times since 2015 amounting to billions in fraud. The question I would need to ethically raise at this juncture is again one of communication. Are title companies and lenders only responsible for impersonal paper processing and fee collection, or is there a higher duty to stay in constant contact with clients?
Times are in the process of change in real estate as never before. As a business ethics speaker with a particular interest in corporate social responsibility, it is possible to project ahead and see sweeping changes occurring to where Millennial and even Gen-Z ownership could reject the traditional way that business is being conducted. Never believe that any area of real estate will be stagnant.
If lenders and title companies don’t become more responsive and customer service oriented, it is a guarantee buyers will find ways to circumvent the process – and with the help of the government. The ethics of the situation will lead the way.
Briefly, I would add that this year, more than 6.4 percent of all apartment rentals have been affected by fraud and ethical misconduct. That amounts to millions of properties and billions of dollars.
While tangential to this conversation, but affecting buyers and renters alike, I must note that home repair fraud, from roofing to appliances continue unabated.
If we are honest in asking what is the role of ethics in the real estate industry? The obvious answer is that teaching and reinforcing ethical behavior is more important than ever.
Blame the pandemic?
The pandemic was responsible for problems in buying, selling, leasing and renting in unexpected ways. The digital assets available to all of us sometimes made clients vulnerable to fraud caused by a lack of oversite. Strangely, research has shown that Millennials, more than older demographics were frequently taken in by scams. As many were first time home buyers and renters, they could be more subject than other, somewhat more sophisticated groups.
I find this troubling and certainly not amusing and it lands directly on the industry. Ethics must be front and center in all aspects of the real estate market. If the industry maintains the mindset of buyer beware rather than “seller” or “agent” beware, it is almost a guarantee that new systems and products will be created with the result being broad shifts to the industry.
It is time for the real estate industry to step up and be ethical leaders.
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