Real estate fraud awareness – how to avoid falling prey to scamsters

The last thing you should be worrying about when buying or renting a home is being scammed, but unfortunately fraud is becoming increasingly prevalent in the real estate industry and it’s essential to be vigilant throughout the process.

So says Grahame Diedericks, who adds that fraudsters’ increasingly sophisticated scams are not only fleecing buyers, sellers and prospective tenants, but also property practitioners.

“Con artists are by no means a new phenomenon in the industry but the strident technological advances that have made our lives so much easier in recent years, has also opened up a whole new world of opportunities for fraudsters.

“And, as a result, it’s become far more prevalent, with the spike in digital fraud prompting financial institutions to urge clients and property professionals to keep their eyes open for any irregularities and ensure they verify all credentials.

In fact, the increase in scams perpetrated by the electronic interception of communication between attorneys, estate agents and their clients has been so significant that the Attorneys Indemnity Insurance Fund no longer coverers attorneys who fall victim to cybercrime, says Eduan Milner of Eduan Milner Attorneys, Notaries and Conveyancers.

Electronic communication scams

“Losses arising out of cybercrime include, payments made into an incorrect and/or fraudulent bank account where either the insured or any other party has been induced to make the payment into the incorrect bank account and has failed to verify the authenticity of such bank account which includes a face-to-face meeting.

“This type of fraud is actually quite sophisticated and entails a phishing-type email aimed at intercepting email correspondence to one of the parties and the progress of the transaction is then monitored, with the fraudster sometimes even brazenly phoning for updates.

“Shortly before payment is due to happen, they send a mail from an almost identical email address notifying the purchaser or conveyancer of a change in bank details.  The email addresses are sometimes so similar that it’s easy to miss the small discrepancy.

Milner says that, if successful, this scam has serious ramifications for all concerned: “If the buyer is deceived into paying into a fraudulent account, he/she can no longer financially perform in terms of the agreement of sale which places them in breach of contract and liable for damages to the seller.

“It’s a horrible two-fold blow because not only do they lose their money, they don’t get the house and have to pay an additional fee for damages.”

He adds that the fact that the breach is due to fraud is not a viable excuse as neither the seller nor conveyancer were at fault and cannot be expected to carry any of the loss.  Similarly, if conveyancers get duped into paying the fraudster, they are also liable.

Milner also cautions that fraud can happen at any point of the transaction – even after a sale has been cancelled.

“In one case, after a property sale had been cancelled, the conveyancer sent an e-mail to the purchaser’s Gmail address, advising her that the refund would be paid into the FNB account from which the payment had been generated.

“He received an e-mail response stating that the FNB account had been temporarily discontinued. He thereafter received an e-mail with details of an account held with Nedbank, into which the refund should be paid and he duly made the payment using electronic banking.

“In the meantime, the purchaser received e-mails (ostensibly from the conveyancer) apologising for the delay in the transfer of the funds and by the time the conveyancer became aware that the Nedbank account did not belong to the purchaser, all the money had been withdrawn from the account.”

Savvy syndicates

Diedericks cautions that there are a number of other hoaxes to be wary of, including those run by syndicates that have people who very convincingly pose as estate agents, sellers and even registered attorneys.

“One method is to sell homes that are not actually even up for sale and this is usually done in one of two ways.

“The first is when a syndicate member poses as the owner and the property is transferred and proceeds paid without the seller being aware that his/her property has been sold.

“However, this will only be successful if the agent and conveyancer are negligent in authenticating the identification of the seller as, in order to transfer the title of a property you need an original title deed and a special power of attorney from the owner authorising the conveyancer to make the transfer.

“The fraudsters may also identify homes that are legitimately on the market and post an advert on sites such as Gumtree. One of the syndicate members poses as an estate agent and takes an unsuspecting buyer for viewing and, if keen to buy, they are taken to the ‘agent’s’ lawyer to sign a sale agreement.

“The buyer is then instructed to deposit the sale amount to the seller’s bank account but the money is immediately transferred to various other accounts and withdrawn.”

Milner cautions that buyers can also be liable for committing fraud when they intentionally misrepresent or omit information which financially impacts the seller.

“For example, if a buyer misrepresents his/her financial status in order to enter into a contract, but later pulls out due to lack of funds, thereby causing the seller to miss other sales opportunities as a result, the seller may have grounds to pursue a fraud case against the imputed buyer.

“Similarly, omissions about a property’s history can also lead to fraud charges, especially if a seller fails to provide necessary information relating to zoning restrictions on the property, significant structural damage, the presence of undiscovered nuisances, mould or other toxic damage.”

Rental racket

Diedericks cautions that it’s not only in the sale sector that people need to be wary, but also in the rental arena.

“The best line of defence is to use a reputable agency as both landlords and tenants are thoroughly vetted, but if you are considering renting a property directly, my advice would be that if you have any doubt at all, don’t do it.

“Never take a property sight-unseen, never transfer deposits to secure a property unless you are 100% sure the agent or landlord is authentic and if there are current tenants when you view, be sure to ask a lot of questions.

“And don’t ever come across as desperate as dishonest people very skilfully prey on that.”

He adds that you can also insist that an attorney holds the funds in their account to be released to the landlord once an ingoing inspection is done.

Milner offers the following advice to protect all parties against fraudulent real estate scams:

  • It’s important for agents and attorneys to verify and know their clients and always personally verify any change in payment instruction;
  • Be especially vigilant if bank details are changed and independently verify the bank account details directly with the bank.  Most banks have systems to enable conveyancers to do this;
  • Never, ever pay money into an account that does not belong to a bona fide party to the transaction;
  • Confirm that your estate agent is legitimate. You can also do so via the Estate Agency Affairs Board website where all agents who are marketing properties must be registered;
  • Never, ever just click reply to an email when you are sending important information. Rather create a new email and input the email address directly from your address book.  This will ensure that you never send information to a fake email address that looks similar.
  • Buyers and sellers should always ask for verification of the bank account into which any funds are being paid;
  • All correspondence requesting a change of banking details should be viewed with suspicion;
  • Only use banking details provided in an email if you have confirmed authenticity;
  • Nowadays, face-to-face meetings are not always possible however, important documents should always be signed in person and verification of bank details always completed;
  • Be on the lookout for the following red flags: spelling errors in emails or other messaging systems, the presentation of sudden changes or decisions as having strict deadlines, hasty changes to terms and conditions of the contract, refusal to speak on a phone call;
  • Property professionals should be adequately insured.

“Now, more than ever it’s critical to appoint well-established and accredited property professionals,” says Diedericks.

“Experienced conveyancing attorneys and estate agents affiliated to a registered and recognised brand will not only safeguard you, they are also always current on all aspects of the industry, including potential pitfalls and dangers like fraud.

“They will also have systems in place to detect fraud and should carry insurance to cover incidences like negligence or being misled by a fraudster.

“Whether you are buying or renting, property usually accounts for the bulk of our monthly spend and is often the largest investment any of us make, so never let your guard down,” advises Milner, “and don’t be too embarrassed to ask for confirmation or verification and follow your gut instinct if you feel uneasy about any aspect of the transaction.

“And if you do have the misfortune of do falling victim and paying into a fraudulent account, contact the fraud department of the recipient bank and of your bank immediately as they may be able to stop the money leaving the account.”

Article Source:

Join The Discussion

Compare listings