If you have been looking for a home in most major markets, then you know the search has often become a miserable experience. As a real estate ethics keynote speaker, real estate ethics consultant and author, I have learned that not only has the buying experience turned sour but real estate fraud has skyrocketed as well.
Worse before it gets better
When a market tightens (no matter the product or service) and the demand increases, there are inevitably those who will seek to take advantage both on the buy and sell sides. Obviously, unlike canned beans or gardening tools, homes can only be produced so fast and desirable property lots are limited. This year will see a record number of scams as unscrupulous sellers will take the opportunity to deceive buyers.
In September 2022, CoreLogic, a mortgage fraud organization released its fraud report with starling information: income fraud risk rose 27-percent (misrepresentation of net worth), property fraud risk increased 23-percent (misrepresentation of information on the value of the property), identity fraud increased to nearly 5-percent (buyers or sellers misrepresenting themselves) and transaction fraud increased by nearly 2-percent (failure to disclose other conditions or agreements that were in place).
At the present time, about 1 “sale” in every 134 is fraudulent. If that doesn’t sound like much, remember that in 2022, more than 6.1 million transactions took place. As many as 45,000 residential transactions were completely fraudulent. As a real estate ethics keynote speaker, real estate ethics consultant and author, I have seen the pain of those duped by such frauds. Remember that 2022 was up nearly one-million units from 2021.
Who is keeping up?
As economic pressures such as inflation and mortgage rates, and supply chain problems with building materials all increased, along with reductions in housing starts and real estate listings, a sense of desperation took hold. Fraud loves desperation, especially as money has grown tight. The tighter the money supply, the more likely the opportunity for a certain frenetic desire to close deals and rush processes through the mill.
According to CoreLogic:
“Chaos creates a perfect time for cyber criminals to take advantage of these, especially in the housing industry…each transaction between parties is an opportunity for a fraudster to strike. They end up being exposed to phishing, hacking, spoofing, to name the different schemes out there.”
CoreLogic’s National Mortgage Application Fraud Index “has increased 30% from its low during the pandemic. The index is a predictive tool, currently suggesting 30% higher risk of fraud in mortgage applications.”
The disconnect
There is conjecture within the real estate industry that fraud could increase as much as 25-percent by 2025.
It is entirely possible that you, or someone you know, could be caught unaware. As a real estate ethics keynote speaker, real estate ethics consultant and author, what is further troubling to me, is how little attention this issue has received.
If fraud increases, as it is projected, and if the pressure of limited property supplies persists, there is every likelihood that fraudulent real estate transactions may rise to 1 in 100 or more. This fact, in a time of expanded AI, decreased customer service and greater digital control over what used to be a people-oriented industry.
The first line of defense should be the realtor, and the industry should be increasingly vigilant as to the many aspects of fraud. Unfortunately, I don’t know if this is transpiring. If you or your organization is engaged in the buying or selling of a property, it is essential that any realtor you choose is well-versed in fraud.
Unfortunately, the amount of attention fraud is receiving in the training of realtors is spotty. Ultimately it is crucial that in interviewing any potential or existing realtor, they must be ethically aware of the issues. Real estate fraud is soaring. What does your realtor know?
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