Real Estate Fraud

Real estate fraud is a type of theft whereby individuals target weak spots in real estate transactions. Property fraud in California is increasing. In 2021, the national average for real estate crimes was 37%, in California, it was 39%. Law enforcement takes property crimes seriously, so if you’re accused, you need an expert real estate defense attorney in California on your side.

In California, some laws against real estate fraud overlap with laws against mortgage loan applications. Laws cover fraud related to housing, rental agreements, mortgages, and foreclosures. Penalties include prison sentences, large fines, and restitution to the victim. 

The Legal Definition of Real Estate Fraud in California

Real estate fraud occurs when an individual commits fraudulent activities related to the purchase, sale, rental, and financing of real estate property. It’s a crime under state and federal laws and carries stiff penalties.

In California, laws against residential and rental fraud fall under these factors below:

  • Theft by false pretenses
  • Foreclosure fraud
  • Rent skimming
  • Filing forged deeds or documents

Here’s an example of theft by false pretenses and foreclosure fraud. John missed some mortgage payments and could lose his house. He responds to an ad for a company that specializes in helping people on the brink of foreclosure. The company assures John they can stall the foreclosure process and arrange a new payment schedule. All John needs to do is sign documents that authorize the company to act on his behalf. 

Unfortunately, John signs the deed that transfers ownership to the company, which owns John’s home and any equity attached to it.

Real Estate Fraud in California is Charged Under:

  • Penal code 487 PC: Grand theft
  • Civil code 2945.4: Foreclosure fraud
  • Civil code 890: Rent skimming
  • Penal code 115 PC: Filing forged documents

Real Estate Fraud – When a Deal Turns Into a Crime

In most cases of fraud, transactions are legal and above board until the point after which activities become criminal. If you think you’re in trouble, call a real estate fraud defense attorney in California.

Property fraud can be committed by buyers, sellers, real estate brokers, and mortgage providers.

Buyers

Buyer fraud relates to mortgage applications. Buyers provide accurate information, including name, social security number, address, etc. The fraud begins when they make false representations to secure the loan. 

For example:

  • Improving credit score
  • Exaggerating income
  • Minimizing debt
  • Providing false bank and/or tax statements

Sellers

Seller fraud relates to the condition of the home for sale. Real estate agents may honestly inform buyers about certain conditions; for example, the house needs painting. The fraud begins when real estate brokers intentionally omit conditions that are far more serious.

For example:

  • Not showing the full extent of the mold problem.
  • Falsifying inspection reports.

Lenders

Mortgage lenders increase a home’s value to earn a higher commission. This is appraisal fraud and is often a joint effort by lenders, estate agents, and appraisers. Every aspect of the sales process is above board, except the advertised price.

What are the Types of Real Estate Fraud?

There are several real estate scams, the most common types include:

Foreclosure Fraud

We looked at foreclosure fraud above. Here are the three categories of crime.

  1. Title transfer – Property owners sign the title of the house to foreclosure consultants, who allow them to rent the home with a view to purchasing it. The consultant acquires the equity and could also sell the property from under the owner’s feet. 
  2. Bait and switch – Homeowners are unaware that they’ve signed the title to a consultant who overwhelmed them with confusing paperwork.
  3. Phantom help – Consultants promise to help owners prevent closure, provided they settle the upfront payment. Consultants could disappear with the money.

Forged Documents or Deeds

Someone intentionally alters a property deed or provides a fake title deed to secure a loan or sell a property.

Rent Skimming

This rental scam occurs when landlords keep the proceeds from a rental property without paying the mortgage. It’s also when someone falsely claims to own property that they rent out and keep all the proceeds. 

A single incidence of rent skimming is a civil matter, but several incidences are deemed criminal acts and are penalized accordingly. 

Straw Buyer

This occurs when someone asks someone with a good credit rating to buy property on their behalf. They are promised a fee which they’ll receive upon transfer. The individual doesn’t remit the loan payments, leaving the person in debt.

Predatory Lender

Loan brokers agree to refinance the loan plan but at inflated fees. Brokers play on borrowers’ ignorance of property laws and transactions.

Common Forms of Real Estate Fraud in California

Real estate fraud prosecutors must prove five elements to gain a conviction.

  1. Misrepresentation through deceit, concealment, or non-disclosure.
  2. Knowledge of falsity
  3. Intent to defraud
  4. Justifiable reliance
  5. Resulting damage

The intention is the crux of the crime. Some cases result from a genuine mistake. It’s the intention that prosecutors must prove.

Intention’s difficult to prove beyond a reasonable doubt. A good real estate fraud defense lawyer in Los Angeles will pick the prosecutor’s argument apart.

Penalties for Real Estate Fraud

Penalties differ according to the type of real estate fraud as well as whether you’re charged with a misdemeanor or felony crime.

  • Charges under Penal Code 487 PC grand theft can be a misdemeanor or felony. A misdemeanor sentence is up to one year in jail. A felony conviction comes with a three-year jail sentence.
  • Charges under Penal Code 115 PC filing forged documents are automatically a federal crime. You face up to three years in jail and a fine of up to $10,000.
  • Charges under Civil Code 890 rent skimming can be a misdemeanor or felony. It has the same penalties as grand theft.

Civil Code 2945.4 foreclosure fraud is a wobbler offense with the same penalties as grand theft. 

Fight Legal Charges with Our Real Estate Fraud Dense Attorney in California

Conviction of any white-collar crime casts a shadow over the rest of your life. Getting a job after serving time in jail is very difficult, especially if you want to continue in your line of work. This is why you need a LibertyBell Law Group real estate fraud defense lawyer by your side.

Our attorneys are skilled at keeping our clients out of federal prison and securing favorable settlements on their behalf. Your attorney is skilled at state and federal trials.

To book a free consultation, fill out our online form at LibertyBell Law Group today!

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