Recent cases of properties being sold without the owner’s knowledge or consent highlight the risks posed by real estate fraud and the need for agents to be vigilant.
Fraud is one of the fastest growing crimes in Australia and costs the economy in excess of one billion dollars every year.
In Western Australia in 2010 and 2011, two cases involved the sale of properties without the knowledge and consent of the legal and beneficial property owners. The agent involved thought he was dealing with the owners. Instead he was dealing with three imposters on the other side of the world.
Recently, an agent sold a property in Canberra without the owner’s knowledge. According to The Canberra Times, overseas con artists were responsible.
In most instances, fraudsters contact agents pretending to be vendors. Generally, a request is made to change contact details. The hoaxers then communicate with the agent to build a relationship before instructing the agent to sell the property. Owners only become aware once they are no longer receiving rental payments.
In 2013, NSW Fair Trading developed the Real Estate Fraud Prevention Guidelines, which can be found on their website at www.fairtrading.nsw.gov.au.
The Guidelines provide a comprehensive checklist for agents to correctly identify vendors as well as signs of fraud.
While the Guidelines are not mandatory and completing the Proof of Identity Checklist is not a legal requirement, REINSW strongly recommends agents follow the Guidelines and complete the checklist.
According to REINSW President Malcolm Gunning the fundamentals are basic. “Always ask for proof of identification to show, as an agent, you have used your best endeavours to prove a vendor’s identity and ensure you are gaining a complete picture of them.”
As a matter of best practice, agents should request proof of identity when it comes to dealing with vendors, including a driver’s licence or current passport, a current Medicare card or current credit card and an account statement, electoral enrolment card, gas or electricity bill or water rates. The Guidelines suggest agents should keep these identity check documents on file for inspection if required.
According to NSW Fair Trading Commissioner Rod Stowe agents must be vigilant when it comes to preventing 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.
NSW Minister for Fair Trading Matthew Mason-Cox believes it is best practice to follow up with owners via all modes of communication. “When a property owner wants to change their contact details, real estate agents should verify the request by contacting the owner via all the addresses the agency has on file,” he said. The Minister also advises to examine all paperwork and question unusual communication.
It is also worth setting up security questions with owners. When approached by the owner, agents should go through these questions to verify their identity.
Another tip from the Guidelines is to type an email address when replying to emails rather than just hitting reply. This will ensure the email is sent to the correct email address without the possibility of being intercepted by a code embedded in the original email, if sent by scammers.
According to the Guidelines, agents should be cautious in situations where no financial institution, as mortgagee, is listed in the second schedule on the certificate of title for the property. This is because mortgagees (such as banks) have stringent security measures in place. Criminals are more likely to target properties that are wholly owned by the owner so as not to disrupt those security measures.
Other warning signs of such fraud include:
- a recent change in contact details that are only provided with instructions to sell a property;
- transactions that involve people or documents located overseas, especially countries known for scams;
- a request for funds to be deposited into a bank account different to the account normally used;
- urgent sales;
- new email addresses; and
- comments by the seller that incentives will be provided to the agent if the sale is quick.
Dealing with fraud
As soon as you suspect fraud, you should contact the NSW Police Force and agents should immediately cease work on the sale of the property.
This article was first published in the October 2014 edition of the REINSW Real Estate Journal.
It is important to use common sense when it comes to real estate fraud. If in doubt, contact NSW Fair Trading.
It won’t be a case of being too vigilant.