Common Types of Real Estate Fraud to Watch Out For

Whether you are investing in residential or commercial real estate for your own use or as a landlord, you know that getting accurate information about the property, its history, its tenants, and any other relevant issues can mean the difference between a great investment or a disaster waiting to happen. Obviously, some facts about a property may be unknowable to buyer or seller, and the seller may have neglected to do his or her homework in some cases, but there are also situations where a seller commits real estate fraud by intentionally withholding or misrepresenting important information about the property. Below are a few common types of real estate fraud to watch out for when evaluating a property.

Inflated/Fake Rent Rolls

A common fraudulent scheme is one which a buyer misrepresents to a potential buyer information about the tenants of a building, their leases, or restrictions on the property. For example, a seller may tell a buyer that the units in a building are fully leased at certain prices, and may even present copies of the leases to the buyer for inspection, but it may turn out that the leases are either non-existent or misrepresented and the copies provided may have even been forged. Furthermore, representations made about restrictions on leases, such as those relating to zoning laws and rent-control laws, may have been made which are untrue, or the seller may have omitted such information even when asked about it.

Omissions About the Property’s History

Clearly, information about the history of a property can be critical to the present and future valuation of a property. If a seller fails to provide necessary information relating to these important issues or lies about such information, this can be the basis of a real estate fraud lawsuit. Such information might relate to:

  • Zoning restrictions on the property
  • Structural damage occurring from earthquakes, fires, or floods
  • The presence of undiscovered nuisances (e.g. noxious fumes or insects)
  • Mold or other toxic damage
  • Other historical facts affecting the value, e.g. grisly crimes

Syndicator Fraud

Syndicators are individuals or entities that ostensibly organize groups of investors to pool their money into large funds which then purchase real estate for investment purposes. While such a practice is of course not fraud per se, this type of scenario where the actual buyers (the people who pay into the syndicate) and sellers of real estate have limited visibility of one another can be one in which unscrupulous actors can take advantage of both sides of the deal. A syndicator may collect investment money and suspicious fees from customers where there is not actually a legitimate investment opportunity. Likewise, they may dupe buyers into deals where adequate capital for the purchase is not actually available.

Misrepresentations by the Buyer

Buyers can also be liable for committing real estate fraud when they intentionally misrepresent or omit information which financially injures the seller. For example, if a buyer misrepresents his or her financial status in order to enter into a contract for the sale of the property, but later pulls out due to lack of funds, while causing the seller to miss other sales opportunities as a result, the seller may have grounds to pursue a fraud case against the putative buyer.

Work With an Experienced Los Angeles Real Estate Fraud Litigator

Whether you are considering legal action against a seller, buyer, broker, or agent, it is important to work with an experienced real estate litigation attorney who can evaluate your circumstances and bring your best case for relief. The Los Angeles real estate fraud attorneys at Wagenseller Firm have the experience to evaluate your case and work to obtain the outcome you deserve. Contact Wagenseller Firm today to schedule a consultation.