We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What Is Property Fraud?

Mary McMahon
By
Updated: May 17, 2024
Views: 9,497
Share

Property fraud is a form of real estate fraud where a borrower misrepresents information in order to access a loan he would not ordinarily qualify for. Borrowers can use a number of tactics and are sometimes guided into fraudulent activity by financial advisers who behave inappropriately. Measures for combating property fraud include maintaining investigators in high fraud areas, requiring lenders to scrutinize applications, and encouraging members of the public to report fraud to a government agency. Agencies concerned with housing and fraud can usually accept reports from members of the public.

In a simple example of property fraud, a borrower could misstate income or assets to quality for a large loan or a loan with better terms. The borrower might alter pay stubs, move money around to make it look like she has more assets, or get false letters of credit testifying to her creditworthiness. This can be facilitated through applying for a low documentation loan, where the borrower may be allowed to state income without providing proof. This makes it very easy to lie to get a better loan.

More complex forms of property fraud can include illegal property flipping and false appraisals. In this activity, the borrower buys property, sells it quickly, and buys a new piece of property. Flipping is not inherently illegal, but it becomes so when it is based on false information, like an artificially inflated appraisal made to make the transaction more profitable. Likewise, borrowers may use a false appraisal report to qualify for a loan that is worth more than the property.

Buyers committing property fraud may do so with the best of intentions; they want to buy real estate and they plan to repay their loans in full and abide by the terms. However, it poses a risk for lenders, as the borrower may be at a higher risk of default, and the lender will have to initiate collection proceedings if the borrower does not make good on the loan. Lenders may want to be able to charge higher interest in such settings in order to protect themselves. Property fraud can unjustly enrich the borrower at the expense of a lender, which can be grounds for a suit.

Lenders conduct careful investigations into buyers to reduce the risk of fraud. The investigation can include background checks, filing for credit information, and other measures to verify identity and authenticate any statements made by the borrower. Members of the public, including real estate agents, who are aware of property fraud should report it to a law enforcement or housing agency. The agency can check up on the situation to determine if fraud is occurring, and may take additional steps to address the matter.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a WiseGeek researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Editors' Picks

Discussion Comments
By anon1000843 — On Jan 09, 2019

My agent refused to show my property and told me to let her handle the renters, then undersold my property and threatened to have the buyer and herself sue me.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

Learn more
Share
https://www.wisegeek.net/what-is-property-fraud.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.