Real estate fraud involves a range of illegal practices, like deceit and misrepresentation, occurring throughout real estate transactions. These dishonest activities occur at any point in the real estate process, from property listings and sales to financing and investments. Given their complexity, real estate transactions bring together many actors. These include buyers, sellers, real estate agents, lenders, appraisers, and title companies. Each juncture in this intricate process opens the door for potential fraud.

Remember that facing criminal accusations does not equate to an inevitable conviction. Accused individuals maintain the right to mount a defense in a court of law. They can establish their innocence or negotiate a plea agreement featuring reduced charges or penalties. Seeking the guidance of a seasoned criminal defense attorney is advisable to assess your available options. Call the Monterey Criminal Attorney if you have been accused of real estate fraud.

Real Estate Fraud and Mortgage Fraud

Real estate transactions can be a magnet for those seeking substantial financial gains. The prospect of sizable profits often attracts both genuine investors and individuals with less honorable intentions. Real estate fraud can occur at various stages of a transaction.

Some of the key areas where it occurs include:

Appraisal Fraud

An appraisal fraud scheme involves manipulating property appraisals to misrepresent a property's value, which can be done to secure larger mortgages or inflate a property's value for resale.

Closing Fraud

Fraudulent activities during the closing phase of a real estate deal can take different forms, including:

  • Secret payments (kickbacks) among parties involved.
  • Forgery of documents.
  • Impersonation of property owners or buyers, and
  • Last-minute misrepresentations of deal terms — In most cases, they involve changes to interest rates or fees.

Foreclosure Fraud

Fraud can even seep into foreclosure proceedings. Fraudulent activities like foreclosure rescue scams, dual-lay tracking, and robo-signing of foreclosure documents without proper review could lead to wrongful foreclosures.

Different laws apply depending on the fraudulent transactions you are accused of engaging in. The common fraudulent activities in real estate transactions include the following:

  • Theft by false pretenses.
  • Forged deeds or documents.
  • Foreclosure fraud.
  • Rent skimming and
  1. Theft by False Pretenses

Theft by false pretense is a deliberate act where someone acquires another person's property or assets through deceptive means. This type of theft involves several key elements:

  • False representation — The offender makes false statements, representations, or pretenses to the victim. These can take the form of spoken or written words or actions.
  • Intent to deceive — The perpetrator must intend to deceive the victim, knowing that the statements or representations are untrue and will lead the victim to part with their property.
  • Victim's reliance — The victim trusts the false statements or representations, ultimately leading them to transfer their property or assets to the perpetrator.
  • Property transfer — Due to the deception, the victim hands over their property, money, or assets to the perpetrator.

Theft by false pretense can occur in various situations, such as:

  • The sale of non-existent property or services.
  • Impersonation to falsely claim authority over the property or
  • Making deceptive promises to persuade someone to surrender their property.
  1. Forged Documents or Deeds

Forgery of deeds or documents is a significant component of real estate fraud. It is an avenue many use to manipulate and deceive the real estate transaction process. Here is a look at how it occurs:

  • Identity theft — In some instances, individuals could impersonate property owners, using forged documents to conduct transactions in the owner's name. This could involve selling, mortgaging, or transferring the property without the owner's consent.
  • Property ownership transfer — Perpetrators forge property deeds to transfer ownership from the legitimate owner to themselves or a fictitious entity. This fraudulent transfer can enable them to gain control of the property or sell it to an unwitting buyer.
  • Fraudulent sales — Forged documents, like fictitious sales contracts, can facilitate the sale of a property the fraudster does not own. Buyers could believe they are acquiring legitimate property, only to discover later they have been victims of fraud.
  • Title fraud — Forged documents can be used to falsely alter a property's title or ownership status, leading to disputes over the true owner.
  • Loan fraud — Fraudsters could utilize forged documents, like fabricated income statements or employment records, to secure mortgages or loans for properties they do not legitimately own. This can lead financial institutions to extend loans based on false information.
  • Alteration of legal documents — Documents like property deeds, titles, or contracts could be altered or counterfeited to manipulate the terms and conditions of a real estate transaction, misleading other parties involved.
  1. Foreclosure Fraud

Foreclosure rescue scams or mortgage relief fraud are common. In these cases, professionals purportedly assist homeowners facing foreclosure but engage in illicit practices to take advantage of the homeowners' predicament. The offense usually involves the following elements:

  • Charging upfront fees — The wrongdoer charges homeowners for foreclosure assistance services before rendering any help. This practice is often illegal in many jurisdictions.
  • Excessive fees — Perpetrators charge homeowners unreasonably high fees for their services, exploiting the homeowners' vulnerabilities.
  • Deceptive contracts — Fraudsters use deceptive tactics to coerce homeowners into signing contracts that could be illegal, unfair, or disadvantageous to the homeowner.
  • Taking a stake in the property — Offenders could manipulate homeowners into transferring partial ownership, effectively attempting to gain control of the property.
  • Securing power of attorney — Offenders could persuade homeowners to grant them a power of attorney. This provides significant control over the homeowner's financial and legal matters, often for nefarious purposes.
  • Accepting funds from third parties — Perpetrators receive money from third parties, for example, the homeowner's relatives or friends, without the homeowner's knowledge or consent.
  1. Rent Skimming

Rent skimming typically involves one of two scenarios, and the legal consequences can vary depending on the circumstances:

Renting Residential Property Without Applying Proceeds to the Mortgage

In this scenario, a defendant rents out a residential property within the first year of acquiring it and fails to use the rental income to cover its mortgage. This is deemed rent skimming, which is illegal.

Pretending to Own Property and Illegally Renting It

In the second scenario, an accused falsely claims ownership of a property they do not own. They then fraudulently rent out the property, collecting rental income to which they have no legitimate right. This is another form of rent skimming.

Note: In many states, rent skimming is generally considered a criminal offense only if it occurs more than once. A one-time occurrence could subject the rent skimmer to a civil lawsuit, where the victim, the property owner, seeks damages or restitution. However, repeated instances of rent skimming are typically treated as a criminal offense.

Common Ways That People Can Be Defrauded In Real Estate Transactions

Let us closely examine how most people get defrauded in real estate dealings.

  1. Foreclosure Fraud

Foreclosure fraud involves several activities. The more notable ones include the following:

  • Bait and switch.
  • Title transfer schemes and
  • Phantom help scams.

Bait and Switch Scams

Bait and switch is an unethical and deceptive practice in the real estate industry. Its objective is to lure individuals with appealing offers but then guide them toward less favorable options. Offenders aim to maximize profit or personal benefit.

The process commences with an enticing advertisement, wherein the perpetrator promotes a property for sale or rent. They will emphasize its attractive features and competitive pricing. This initial advertisement serves as the "bait," attracting the interest of potential buyers or renters.

However, the core of the bait-and-switch strategy lies in the subsequent steps. After prospective buyers or renters express interest in the advertised property, the fraudster introduces changes or conditions that were not initially disclosed. These changes can include higher prices, less advantageous terms, or claiming that the originally advertised property is unavailable.

In their pursuit to secure the deal, the perpetrator frequently employs persuasion and pressure tactics. This helps them convince potential buyers or renters that the altered terms remain in their favor. Sometimes, they could propose an alternative property that does not align with the initially advertised qualities or terms. This is done to salvage the deal by substituting it with a less desirable option.

Title Transfer

Title transfer occurs under specific circumstances:

  • Homeowner in foreclosure — The process begins when a homeowner is at risk of foreclosure due to financial difficulties. They potentially face the loss of their home.
  • Influence by a "consultant" — A "consultant," often acting with ill intentions, convinces the homeowner to sign over the title to their home. This consultant exploits the homeowner's vulnerable situation.

The consultant typically makes the following deceitful assurances to the homeowner:

  • Option to continue as a renter — The consultant guarantees that the homeowner can remain on the property as a tenant even after transferring the title. This is presented as a means to prevent immediate eviction.
  • Potential repurchase opportunity — The homeowner is led to believe they can repurchase the property later, thereby regaining ownership.

However, the actual outcome often deviates significantly from these promises. The consultant eventually evicts the homeowner, now a tenant, and seizes any existing equity in the property. This practice is both unethical and illegal. It exploits homeowners in financial distress, putting their homes and equity at risk.

Phantom Help Scams

Phantom help scams are fraudulent schemes that exploit individuals seeking assistance, particularly in financial or housing matters. These scams involve making false promises of help, which are never fulfilled. This ultimately leaves victims in a worse financial position. Critical features of phantom help scams include:

  • False assistance offers — Scammers target individuals grappling with financial challenges, foreclosure threats, debt problems, or similar issues. They claim to possess the expertise to help resolve these problems.
  • Upfront fees — Victims often must pay significant upfront fees for the promised services. These fees must be settled before any assistance is provided.
  • Lack of genuine help — Despite collecting fees, scammers provide little or no meaningful assistance. They could offer empty promises, vague advice, or take no action to address the individuals' problems.
  • Financial loss — Individuals falling victim to phantom help scams lose the fees they paid and miss out on the chance to seek legitimate assistance. The ultimate effect is a more dire financial situation.
  • Deceptive marketing — Scammers frequently employ deceptive marketing strategies, like unsolicited phone calls, spam emails, or online ads. These tactics guarantee quick and effective solutions to financial woes.

Phantom help scams can manifest in various forms, including debt relief, foreclosure rescue, and credit repair scams.

  1. Illegal Flipping

The following factors define illegal property flipping:

  • Inflated property value — This involves artificially and wrongfully inflating the value of a property through fraudulent appraisals. The objective is to create a false impression of the property's higher worth than its actual value.
  • Unaware buyer — An unsuspecting buyer acquires the property at an inflated price. Typically, the buyer is unaware of the fraudulent appraisal and pays more for the property than its actual market value.
  • Excessive bank loan — Sometimes, a bank extends a loan for the property based on the fraudulently inflated value, surpassing its actual worth. Consequently, the bank offers a loan amount that does not align with the genuine value of the property.

Note: The above scenario does not involve individuals who engage in legal property flipping. Legitimate property flipping typically involves:

  • The purchase of a property.
  • Its improvement or renovation and
  • Subsequent resale at a higher price.

Legal property flipping is a valid investment strategy and should not be confused with the fraudulent practices associated with illegal property flipping.

  1. Straw Buyer Schemes

Straw buyer schemes involve a "straw buyer" who serves as a front for someone unable to purchase a property, often due to financial issues or fraudulent intentions. The straw buyer agrees to buy a property on behalf of another party who is ineligible because of credit problems or financial ineligibility. In other cases, the true buyer could harbor deceitful intentions.

The straw buyer provides false information about their intentions and financial capacity to the property seller, real estate agents, or lenders involved in the transaction. They pose as the legitimate purchaser. In many instances, the straw buyer secures property financing through fraud, for example, using the true buyer's credit and financial details without their knowledge.

Straw buyer schemes serve the hidden or ineligible purchaser seeking to engage in property flipping, mortgage fraud, or money laundering.

A straw purchaser is considered unlawful under two primary circumstances:

  • Fraudulent transaction — Employing a straw purchaser is illegal when part of a transaction intended to deceive or defraud someone. This covers situations where the true purpose of the purchase is concealed from one of the transaction's parties.
  • Ineligibility of the actual buyer — The use of a straw purchaser is also regarded as illegal when the genuine buyer is prohibited from making the purchase for legal or regulatory reasons. In these cases, employing a proxy buyer is often an attempt to circumvent legal restrictions or obligations.
  1. Predatory Lending

Predatory lending, particularly in the mortgage brokerage sphere, involves the following behaviors:

  • Generation of excessive fees — Mortgage brokers initiate loans for potential buyers but incorporate numerous fees that do not benefit the borrower. These fees serve to inflate the total cost of the loan.
  • Self-serving motives — These actions are primarily motivated by the broker's desire to maximize their commissions or personal financial gain. Essentially, they seek to boost their earnings at the expense of the borrower's financial well-being.

California Laws that Address Real Estate Fraud

You will likely face charges under the following laws if you are engaged in real estate fraud. The actual law depends on the violation Monterey prosecutors seek a conviction for.

  1. Penal Code 115

Filing forged documents is a clear violation of California Penal Code Section 115. This legal provision addresses submitting documents known to be fraudulent or contain false information. It addresses and discourages deceptive practices.

A violation of PC 115 is a felony. The offense is punishable by:

  • Up to 3 years in prison.
  • A fine of $10,000, or both.
  • Probation instead of incarceration.

However, you are ineligible for probation if you:

  • Have a prior conviction for filing forged documents.
  • You have been convicted of more than one count of filing forged documents, with a cumulative loss exceeding $100,000.

Your penalties can escalate if specific aggravating factors are present. These factors include:

  • Multiple felony convictions — If an individual is convicted of two or more felonies involving fraud or embezzlement, with one of them being a violation of PC 115, all within the same criminal proceeding.
  • Pattern of Criminal Behavior — The felonies are part of a broader pattern of criminal conduct.
  • Multiple victims or occurrences — The felonies occur against two or more separate victims or involve the same victim on two or more separate occasions.
  • Substantial financial impact — The individual's actions allegedly resulted in a financial loss exceeding $100,000 for the victim(s).

Penalty enhancements can lead to:

  • An additional one to five years in prison and/or
  • An additional fine — It can be as high as $500,000 or double the amount of the fraud, depending on whichever amount is greater.
  1. Penal Code 487

Penal Code Section 487 is employed explicitly for charging individuals involved in theft by false pretense. This legal provision encompasses property-related offenses, particularly where the violations defraud someone out of property valued at more than $950.

Grand theft under PC 487 is a wobbler offense. You can face misdemeanor or felony charges depending on what the prosecution decides to pursue.

A conviction on misdemeanor charges results in the following penalties:

  • Summary or misdemeanor probation instead of jail time.
  • Up to one year in jail.

On the other hand, convictions on felony charges result in the following penalties:

  • Formal probation with a maximum of one year in jail.
  • 16 months, 2, or 3 years in jail.
  1. Civil Code 890

Rent skimming, the practice of profiting from rental properties without meeting financial obligations falls under the purview of California Civil Code Section 890. This legal provision is specifically crafted to address and deter rent skimming. It seeks to protect landlords and tenants from unscrupulous activities associated with rental properties.

Prosecutors consider the facts of the crime and your criminal history to determine if they should pursue misdemeanor or felony charges.

Convictions for misdemeanor charges result in the following penalties:

  • Up to one year in jail.

Convictions for felony charges result in the following penalties:

  • 16 months, 2, or 3 years in jail.
  • A fine of $10,000 or both.

You can also face a civil suit. However, the civil lawsuit does not impose a jail sentence. Should the jury rule in favor of the plaintiff, you will likely be required to fulfill the following:

  • Reimburse the victim(s) for the financial losses they suffered.
  • Reimburse the attorney fees incurred.
  • Potential punitive damages if the jury determines it is warranted.
  1. Civil code 2945.4

California Civil Code Section 2945.4 prohibits foreclosure consultants from participating in predatory or unethical practices. It establishes specific requirements and regulations, ensuring those providing foreclosure-related services adhere to ethical and legal standards.

A violation of this code will result in misdemeanor or felony charges.

Misdemeanor offenses are punishable by:

  • 364 days in jail.
  • A fine of $10,000 or both.
  • Paying restitution.
  • Losing your real estate license.

Felony offenses are punishable by:

  • 16 months, 2, or 3 years in jail.
  • A fine of $10,000 or both.
  • Paying restitution.
  • Losing your real estate license.

Find a Criminal Defense Attorney Near Me

When facing real estate fraud charges, seeking counsel from a qualified attorney who can assist in navigating your situation and crafting a suitable defense strategy is imperative. Monterey Criminal Attorney will help you comprehend your rights, evaluate the strengths and weaknesses of your case, and offer expert guidance on the best course of action.

Moreover, we will represent you in court. We handle all aspects of court proceedings, making persuasive arguments on your behalf and working tirelessly to secure your case's most favorable legal outcome.

To access the legal assistance you require, do not hesitate to contact us at 831- 574-1791. Our seasoned attorneys are ready to support you through these challenging circumstances and ensure your rights are upheld.