There has been a substantial rise in the number of cases related to real estate fraud over the past couple of years, particularly as the real estate market has started to flourish once again. The reason for this increase in real estate fraud is mainly because the pay off is substantial for the scam, but the penalties for this crime are also extremely harsh.
To ensure that you’re always on the right side of the law, and learn to protect yourself from real estate fraud, we are going to break down exactly what is real estate fraud, and what kind of penalties are attached with it. You can also check out this great article for more information.
Understanding Real Estate Fraud
There are different kinds of real estate fraud, with the common theme being that they are all designed to take advantage of their victim and leave them helpless. If you’re working in the real estate industry, and notice any of the red flags, you shouldn’t hesitate to take legal action against the perpetrators. If you’re in a position where you can commit fraud, you should stop. Committing real estate fraud in Florida comes with harsh penalties, and you will be registered as a convict for the remainder of your life.
Types of Fraud
Real estate fraud comes in many different types, all of which are connected to the different stages of processes involved in real estate. These may include the following:
- Rental fraud
- Land fraud
- Fraudulent loan origination
- Illegal flipping
- Equity skimming
- Home improvement fraud
If it seems like a scam, it’s probably because it really is a scam.
For instance, one of the main types of fraud involved in real estate is the foreclosure rescue. This fraud involves businesses preying on families facing foreclosure, desperately trying to keep their homes. Businesses in this type of fraud will try to convince families that their homes can be saved if they sign a temporary title transfer to the business.
The business will pay only a fraction of the real worth of the house on the market for this. This is essentially a leaseback, where the family can remain in the home and pay rent to the business for the length of the transfer title.
However, the business will sell the home, as soon as they get the title from the owners, which leaves the owners stuck in payments that they were paying on their mortgage.
One of the most common types of real estate fraud found today is mortgage fraud, which focuses mainly on mortgages, where people are already vulnerable and in debt. Mortgage fraud essentially has two main types, which include:
- Fraud for housing
- Fraud for profit
The main difference between the two types is based on who is getting conned: the lending institution or the homeowners.
Fraud for housing is committed by potential homeowners with the intention of maintaining or acquiring home ownership.
Fraud for profit is committed by people in the industry, who have in-depth knowledge of the mortgage system and know how to steal money. Their goal isn’t to acquire home ownership.
There is an extensive range of potential frauds that are found in these two types of mortgage fraud, which include:
- Inflated purchase price
- Silent second mortgages
- Employment income falsification
- Mortgage elimination programs
- Occupancy claims by non-occupants
For instance, mortgage elimination programs are one of the most common fraud-for-profit scams. Homeowners are convinced in these programs that their mortgage can be wrapped up quickly if they pay a premium for the services. This doesn’t happen obviously, and the homeowners end up with even more debt than they started with.
A common house-for-profit scam is the inflated purchase price. For example, you’ve got two different purchase contracts, and one of them is a fake with a sales price that is significantly higher. You’ll be committing mortgage fraud if you send the fake contract to the lender so that you can get a higher appraisal value.
Penalties for Mortgage and Real Estate Fraud
You’ll be facing some serious penalties and convictions if you’re charged with either mortgage or real estate fraud. To give you a clearer idea, we are going to discuss how fraud is defined in Florida law and then discuss the penalties you may face in such cases.
Florida Laws on Fraud
Statute 817.545 governs mortgage and real estate fraud in Florida state law. Under the rules of this law, a person is guilty of mortgage fraud if they have acted knowingly, and plan on defrauding, while:
- Misrepresenting facts to try and get a loan
- Help in misrepresenting facts
- Gain material proceeds by misrepresenting facts
- Filing documents during the mortgage process that misrepresents facts
If you misrepresent information in the real estate and mortgage process, willingly and knowingly, or attempt to gain any material benefit due to misrepresentation, you’ll be charged with committing fraud.
Documents to Consider
Before we go ahead, it’s important that we discuss what documents can be used for misrepresentation of facts in the mortgage process. These may include the following:
- HUD-1 settlement statements
- Residential loan applications
- Inspection reports
- Mortgage documents
Personal documents that are required in the loan application can also be used for misrepresentation of facts, and they include:
- Relevant disclosures
- Employment verification
- Income verification
- Bank statements
- W2 forms
- Payroll stubs
- Tax returns
You’ll be charged with committing fraud if you have misrepresented information on any of the documents mentioned for mortgage loans, acquiring real estate, or for material gain.
Penalties for Fraud
You can face all kinds of penalties if you’ve committed real estate fraud in Florida, and you’ll face harsher penalties if you’re charged at the federal level. It’s a good chance that you’ll face penalties for several laws since the crime includes federal and state laws.
Real estate fraud is charged as a felony in most cases, even if the sum is under $1,000. You’ll be charged with a third-degree felony if the sum is below $100,000, and anything above that figure will be a second-degree felony.
Penalties will be given out based on the type of offense, and they include fines, prison time, restitution, and probation. You could also end up paying fines for up to $1 million for real estate fraud if you’re prosecuted at the federal level.
You may also face prison penalties, and the length of the sentence will be longer if you’re charged at the federal level. It can go up to 30 years in jail, and you’ll also be paying restitution to any third-parties that suffered financially because of the fraud.
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