How This Toronto Real Estate Scam Works
The victim of this real estate scam will be approached by a crook and offered a few thousand dollars to co-sign a mortgage application. Usually, the victim has great credit, and the crook maintains that they themselves or “a friend” can afford the mortgage no problem. It’s just that their credit isn’t the greatest, and in order to be approved they need someone to co-sign. So, probably in need of a few thousand dollars, the victim puts their credit on the line and co-signs. The bank is now happy to approve the mortgage, and the crook takes off with the money. The victim is now on the hook for an entire mortgage.
Real estate transactions involving straw buyers tend to make the news, and show just how much trouble those who fall for this scam can get into: there is little recourse for the victim, and the bank usually wins in the end. Last summer for example, a Toronto woman was court-ordered to pay the Royal Bank of Canada $95,000 after falling victim to a straw buyer scam. She had been talking about her financial troubles in a coffee shop when a man offered her $6,000 to co-sign on a mortgage for him. Then, he took the mortgage money and ran. Soon after, RBC started sending her late payment notices.
The above is one way this scam can play out. In another, a Toronto real estate “investor” will approach you in a similar manner, paying an upfront fee for the use of your name and credit history when buying property. He would pay the mortgage, and in about a year sell the property and split the proceeds with you. Only this never happens and you are stuck with a hefty mortgage. In this scam, the victim is called a “straw buyer”.
How To Avoid This Toronto Real Estate Scam
Common sense is generally your best defense against this Toronto real estate scam. Don’t co-sign anything ever, unless it’s for your own kid’s first apartment and you’ll be able to literally get your hands on them later if something goes wrong. If someone offers you a real estate deal that seems too good to be true, think twice and do all you can to verify the situation: ask for the person’s history, references (and actually speak to them), credit scores, tax returns and do some investigating on your own. Before signing any real estate document, run it by your Toronto real estate agent and real estate lawyer.