The Financial and Consumer Services Commission is warning real estate agents, mortgage brokers and other professionals working in the real estate industry to be aware of ‘fake buyers’. There have recently has been cases of reported fake buyers attempting to get money through a real estate transaction. Although it isn’t always clear exactly how the scam will unfold, in one reported local situation, an agent was targeted by a fake buyer and the fraud was only discovered on the closing date of the sale. This scam resulted in the home owner missing out on legitimate sales opportunities.
The Commission is also aware of an instance where a local mortgage broker was contacted by a real estate salesperson in another jurisdiction regarding a prospective client looking to proceed with a financial application on a residential property outside of New Brunswick. The client was a scam artist looking to wire transfer an amount of money for a deposit. While the situations are not exactly the same, they presented some common red flags.
The red flags that may help identify a fake buyer are:
- The buyer only makes contact via email and/or text message.
- The buyer is willing to trust an agent they found on the internet without having a conversation or meeting in person.
- The storyline follows a similar pattern, such as: the buyer is out of country or away from the area for a period of time. Their story also displays many twists and turns, including: time zone differences, details about travel and/or jet lag, and other complications that pose obstacles to having a conversation over the phone. In some cases, they may even refer you to speak with a third-party on their behalf.
- The buyer wants to purchase a property sight unseen, sometimes in a community that they know nothing about. The buyer may also omit to ask questions that a typical buyer would ask.
- He or she may be eager to overshare financial arrangements, or provide official looking documentation, such as forged bank letters.
In all cases, it is important to practice due diligence and ensure you verify the identity of a prospective client. Below are some suggested best practices:
- Confirm all documentation (ie: driver’s licence, government issued-ID) to ensure identity, especially if you don’t meet the client in person and are dealing exclusively via email or text message.
- Avoid sending or sharing sensitive information via email.
- Verify with the bank that the funds have cleared before completing a transaction.
- Trust your instinct. If something seems off with the client or transaction, practice further due diligence before proceeding.
In February, the Law Society of New Brunswick also posted a fraud alert related to this type of scam.
Be aware that these scams can be extremely convincing, and are becoming more frequent and are constantly evolving. Always report this type of fraudulent activity to the Financial and Consumer Services Commission and the police. Being vigilant, thinking critically and using best practices for knowing your client is the best defense against fraud.