Fraud Scams Mean Property Investments Aren't “As Safe As Houses”

Property investment has generally been viewed as a secure strategy for generating financial returns, certainly in the long term. Even in recessionary markets where property values may temporarily tank, speculators still persist in buying "bricks and mortar" to renovate, rent or add to a pension portfolio.

That probably explains why nearly every day I get spam e-mails offering all sorts of lucrative property investment opportunities, many of these overseas in supposedly growth markets, and imploring me to invest in the latest "dead cert". Many of these are, of course, from genuine or well-meaning organizations and individuals, but a worryingly significant minority hide a more furtive motive: fraud.

Consider the case of Phet Loi Naovarath, a criminal still at large and on the FBI's "most wanted" list, who duped unsuspecting investors into ploughing money supposedly into property in Las Vegas. In reality, he used both their money and their identities to acquire additional mortgages on other property, ultimately running up debts exceeding $10 million.

Identity theft and mortgage fraud have become big business worldwide. Financial institutions are coming to realize that a reliance upon the security of physical collateral is no substitute for other due diligence checks upon the bona fide nature of the individual, the property and the "professionals" involved in the purchase.

Shockingly, many banks have often found out the hard way — too late and at their cost — when identities have been compromised, property details and values have been fabricated, and non-existent or corrupt "professionals", such as false valuers or fictitious legal representation, have been used to support a purchase.

Now, new analytic methods are being brought to bear in this high-value environment, making it increasingly difficult for crooks to exploit misplaced trust in property transactions.

The more obstacles we can put in the criminals’ path, the greater the chance that we can make property truly (as we Brits say) "safe as houses."