According to general property law principles, the term “real estate broker fraud” occurs when a real estate broker or brokerage misrepresents one or more key factors associated with a particular real estate transaction. Real estate broker fraud may also refer to when a broker provides false information about themselves. This includes possessing a fake real estate license, claiming to have a good reputation, or fabricating their work history.
Broker fraud, also known as brokerage fraud, is one of the most commonly cited legal issues in lawsuits involving real estate brokers. In some cases, broker fraud can result in serious charges. This is especially true when the type of broker fraud committed violates both federal and state laws.
If you are facing charges for real estate broker fraud, then it is strongly encouraged that you hire legal representation immediately. A lawyer who has experience in handling real estate broker fraud matters can help you navigate the U.S. legal system and ensure that your rights are protected.
What Are Some Examples of Real Estate Broker Fraud?
There are a number of ways that a broker can commit real estate broker fraud. For example, in certain regions where flood conditions are an issue, a broker can misrepresent facts about a particular property or home by downplaying how susceptible they are to flood damages.
Another example of real estate broker fraud is when a broker intentionally provides a false description of a specific property. For instance, the broker may claim that the property is larger than it really is or may say that a home was recently built, but in reality, the home is very old. A broker could even falsely claim that a house or property was previously owned by a celebrity just to get a person to buy it.
One additional scenario that exemplifies real estate broker fraud is when a broker engages in a real estate scam like short sales, title insurance fraud, or skewing the details of foreclosure listings. For instance, one type of scam that involves a foreclosure listing is called, “phishing.”
A phishing scam may occur when a broker requires a buyer to provide personal information to access a foreclosure listing. The broker can then use the buyer’s personal information to commit identity theft or credit card fraud.
Some other common factors that may indicate that a broker is committing real estate broker fraud include:
- The broker or their brokerage firm has false credentials, like not having the reputation they claim to have or using a fake real estate license or certificate;
- The broker deliberately includes factual misrepresentations in a broker agreement or breaches a client’s broker contract.
- The broker fails to comply with some or all of the full disclosure requirements when selling a home or property; and/or
- The broker delegates the work to a third party without their client’s consent or to a third party who the broker knows is not reliable and who may impact the client and their property investments in a negative way.
What Are the Consequences of Real Estate Broker or Brokerage Fraud?
There are a number of serious legal consequences that can stem from committing real estate broker or brokerage fraud. The reason as to why both of these actions have so many ramifications is because real estate transactions typically involve the transferring of large sums of money. Accordingly, the fraudulent actions of an individual broker or brokerage firm can cause a person or business to lose significant portions of their investments.
The following is a list of some consequences that a broker or brokerage firm can face in the event they are convicted of committing this type of fraud:
- Monetary fines (both criminal and civil);
- Suspension or revocation of their real estate license;
- Various damages awards (e.g., compensatory, punitive, nominal, etc.); and/or
- Criminal punishments, such as a jail or prison sentence.
In addition to the above consequences, being convicted of real estate broker or brokerage fraud may result in a violation of other areas of the law like federal criminal laws. In other words, if an act involving this fraud is severe enough, it can result in the actor breaking more than the rules or codes surrounding a real estate license.
For instance, escrow fraud is one example that may qualify as an act of broker or brokerage fraud. A real estate agent may be charged with escrow fraud when they intentionally misuse the funds being held in a client’s escrow account. In such a case, not only can the broker be charged with escrow fraud (and therefore broker fraud), but also of grand larceny, bank fraud, and wire fraud. A conviction on any of these charges can lead to a prison sentence.
How Can I Avoid Real Estate Broker Fraud?
There are several steps you can take to protect yourself from real estate broker fraud. The single most important one of those steps is to confirm that a broker or brokerage firm has a good reputation. Some ways that an individual can find out is by:
- Reading online reviews from users who have previously hired the broker or brokerage firm;
- Researching the individual or firm on the internet;
- Hiring a lawyer or investigator to perform a thorough background check on them; and/or
- Asking family or friends for personal recommendations of brokers or brokerage firms that they have used in the past.
The second step that the individual can take to avoid becoming a victim of broker or brokerage fraud is to hire an attorney to review any documents that are connected to the real estate transaction in question. If the individual prefers to review the documents themselves, they should be sure to read all of the fine print and to ask their broker about any terms or concepts in the documents that they do not understand.
The individual should also check that the documents do not contain the names of any persons or other third parties who were not a part of the original real estate transaction. Again, this is one of the tasks that an attorney can complete to assure that the individual will not fall victim to real estate broker fraud.
One last step that an individual can take as a precautionary measure is to educate themselves about the type of real estate transaction they are considering, such as learning the basics of purchasing a house or gaining a general understanding of what it means to have a mortgage. This is true regardless of whether the individual hires an attorney to help them or not.
Additionally, if an individual does decide to retain attorney services, then they should ask them to explain how the real estate transaction they are entering into works. The more familiar that an individual is with the process, the better equipped they will be to spot errors or suspicious elements in the transaction.
What Should I Do If I’m a Victim of Real Estate Broker Fraud?
Most states have their own procedures for how a victim of real estate broker fraud in their state can report the issue. Some general steps that a person who has been a victim of real estate broker fraud may have to take include:
- Reporting the event to a local police station or sheriff’s office in their county;
- Preparing a written statement describing the incident in question;
- Gathering the contact information for all of the parties involved in the fraud matter;
- Obtaining copies of documents and other materials associated with the fraud event;
- Cancelling or stopping any payments provided to a broker or brokerage firm; and
- Speaking with the individual who has been assigned to oversee the case from a local District Attorney’s office.
Should I Hire a Lawyer for Help with Real Estate Broker Fraud?
Falling victim to real estate broker fraud can result in severe financial losses and could potentially expose sensitive information about the victim like their social security number. Therefore, if you have any concerns about a real estate transaction or believe that your broker might be committing fraud, then you should speak to a local real estate lawyer about the issue immediately.
Some of the benefits to hiring an attorney for real estate broker fraud include:
- Having a certified representative to perform background checks on the broker or brokerage firm that you are employing;
- Being able to ask an experienced attorney questions about a specific transaction, your case, or the laws in your jurisdiction; and
- Having a qualified attorney to represent your interests in court or to negotiate better deals on your behalf during a settlement.
Lastly, your attorney can also conduct a title search on any property involved in your real estate transaction if necessary. Doing a title search on a property can sometimes be one of the quickest ways to tell if a broker is attempting to carry out a fraudulent real estate scheme.