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Real estate scam highlights necessity of ID checks

30 July 2014

A recent case involving an Australian Capital Territory real estate agent selling a property without the owner’s consent has again highlighted the need for agents to verify the vendor's identity.

The Canberra Times reported that the recent real estate scam was executed by overseas fraudsters. The Macgregor property owner recently discovered the house had been sold approximately four months earlier after contacting her property manager to query why she was not receiving rental payments.

Fraud is one of the fastest growing crimes in Australia and costs the economy in excess of $1 billion every year. NSW Fair Trading developed the Real Estate Fraud Prevention Guidelines in 2013 to assist agents with identifying their vendor. Included with the Guidelines is a Proof of Identity Checklist for Vendors.

The Guidelines help agents to verify the identification of vendors in order to prevent real estate fraud. They are a set of common sense practices and procedures for agents to confirm the identity of vendors or their representatives. They also include a list of possible warning signs and what you must do if you suspect fraudulent activity.

The Guidelines are not mandatory and completing the Proof of Identity Checklist is not required, however REINSW highly recommends you follow the procedures.

REINSW President Malcolm Gunning said this most recent real estate scam highlights the importance of having the correct identification procedures in place.

“The fundamentals are basic and all agents should be practising them. Research the property and pre-determine who the owner is. Always ask for proof of identification to show as an agent you have used your best endeavours to prove their identity,” Mr Gunning said.

“Secondly, good practice requires you to be as thorough as possible. Ask open-ended questions like: ‘Why are you selling?’. This ensures you are gaining a complete picture of the vendor.”

When the Guidelines were released, NSW Fair Trading Commissioner Rod Stowe said all agents should confirm the identity of vendors (or appointed representatives) in order to prevent real estate fraud.

“Agents must have external identity fraud prevention procedures in place to prevent fraudulent real estate transactions from happening without the knowledge and consent of lawful property owners,” he said.

Failure to have these procedures in place means that the Licensee-in-charge and/or agent could be held to be in breach of the requirements of the Property, Stock and Business Agents Act 2002 in relation to agents’ conduct and also, in the case of the Licensee-in-charge, in regard to the proper supervision of staff. In such cases, penalties and/or disciplinary action may apply.

REINSW strongly recommends that all members familiarise themselves with the Guidelines and put the necessary procedures in place to ensure compliance.

You can view the Fraud Prevention Guidelines on the NSW Fair Trading website by clicking here >>>

Warning signs!

It’s important that agents are able to identify the possible warning signs of fraud when they arise. Just some of these warning signs include:

  • A recent change in address or other contact details that have not been provided until instructions to sell a property are received.
  • The transaction involves people located overseas or documents issued overseas, especially from countries known for scams.
  • There is a request for funds to be sent to a different bank account to that normally used by the client, including but not limited to offshore accounts.
  • Advice is received that the sale is urgent – for example, because of an overseas investment opportunity.
  • Comments by the ‘seller’ that if this sale is successful or quick, future work or other incentives will be provided to the agent.

If you suspect identity fraud in a real estate transaction, you should contact the NSW Police or NSW Fair Trading and not act on the sale of the property.