According to a study conducted by EasyFile, a public file management service, almost one in two French people say they are ready to falsify their rental file to obtain accommodation. A frightening statistic, it demonstrates that document fraud also affects the real estate sector. What do we mean by real estate fraud? What are the impacts of documentary fraud in real estate? We tell you more!
What is real estate fraud?
Real estate fraud consists of using deceptive means to derive financial benefit from a real estate transaction.
Real estate fraud can take different forms. We are thinking, for example, of document falsification, identity theft but also price manipulation.
The big problem with real estate fraud? It can affect all parties involved in a transaction.
- THE buyers and the tenants risk paying an excessive price or discovering that the property does not really exist.
- THE sellers may be confronted with buyers whose profiles have been falsified.
- THE real estate agents often find themselves with fraudulent rental files.
So, with the rise in real estate prices and the decrease in supply on the market, cases of fraud are increasing. They lead to financial losses considerable and have a significant impact on the reputation of real estate agencies.
What are the different types of fraud? Let’s see that in the rest of this article!
The different types of real estate fraud
Rental fraud
Rental fraud is most prevalent in the real estate industry. Indeed, according to Lagenceblue, 67 % tenants falsify their rental file for housing.
This type of fraud can take different forms but it is above all possible thanks to the document fraud. Modified pay slips, fake bail addresses, falsified identity documents, doctored tax notices, the alterations are numerous and allow fraudsters to have the best possible file. They can then obtain housing that they would not normally qualify for due to their credit history, employment status, or past renting history.
Sales fraud
Sales fraud particularly affects buyers of real estate.
How ? Dishonest sellers conceal major defects in property such as structural problems or hidden defects. Very simply, they modify a property title, a sales contract or an Energy Performance Diagnosis (EPD) to mislead the buyer about the real characteristics of the property. By failing to mention certain defects, sellers hope to complete their sale at a higher price.
Mortgage fraud or credit fraud
Credit fraud is a common practice in the world of document fraud.
When applying for credit, the borrower falsifies a document, such as his tax return, in order to obtain a larger sum.
If his overvalued loan application works, the fraudster then takes advantage of it to:
- Born never repay the loan granted,
- Or buy a property, resell it at an inflated price and make a quick and substantial profit. This is what we call “flipping fraud” or quick buy-sell fraud.
Tax fraud
Tax fraud refers to any action aimed at illegally evading or minimizing tax obligations linked to real estate transactions.
Tax fraud takes various forms, including:
- There under-declaration of rental income. Owners voluntarily fail to declare their rental income in order to avoid paying too high a share of taxes on this income.
- There undervaluation of real estate. Landlords undervalue real estate values in order to reduce these property taxes.
- There non-declaration of capital gains. During a sale, taxpayers do not declare the gains made on the sale to avoid paying taxes.
Property title fraud
Fraudsters, who practice this technique, seek to obtain title deeds for high-value real estate. Subsequently, their goal is to resell them illegally or obtain fraudulent mortgage loans using these goods as collateral.
To learn more about the types of false documents in general, read our article on the subject: What are the different types of fake documents?
The risks of real estate fraud
Financial losses
Like all types of fraud, real estate falsification leads to significant financial losses. The problem in this sector is that the targets affected are multiple. These include buyers, sellers, landlords, tenants, real estate agencies, lenders and any other party involved in the transaction.
Reputational damage
Cases of real estate fraud can cause significant damage to reputation of real estate agencies and financial institutions involved. This damages their credibility and trust with the public.
Disputes & legal uncertainty
Fraudulent real estate transactions easily lead to costly legal disputes between the parties involved. Often long and difficult to adjust, these disputes quickly become binding on real estate agencies.
To avoid getting into legal disputes, use Finovox and unmask potential alterations in the documents sent to you. Interested ?
Impact on the real estate market
Real estate fraud can have a negative impact on the real estate market. She creates uncertainty, reduces investor confidence and influences real estate prices.
It therefore represents a major risk for the stability and integrity of the real estate market.
How to fight real estate fraud with Finovox?
To combat real estate fraud, there are numerous tools for detecting false documents. Based on artificial intelligence, these technologies make it possible to check the consistency of information in a document.
To help you fight against these falsifications in the long term, Finovox has implemented false document detection software. Combining artificial intelligence and mathematical algorithms, the solution prevents fraud attempts and minimizes your company's financial losses.
How to use Finovox to fight rental fraud?
When you receive a rental file from a potential tenant, Finovox ensures that the documents are compliant and have not been falsified.
Using Finovox means reducing your company's document fraud by 6!
Do you want to avoid fraud with Finovox? Do not hesitate to contact our experts.
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