Real estate fraud is a broad category consisting of different criminal offenses involving foreclosures, rental agreements, mortgages, and housing. Because real estate has high value and this type of fraud results in huge financial losses, the offense is taken seriously and its penalties are harsh.
A real estate fraud charge carries steep penalties and long prison terms. If you are under investigation or are charged with real estate fraud, get in touch with the California Criminal Lawyer Group in Santa Ana to help defend you.
What is Real Estate Fraud?
Real estate fraud is a crime committed when a person knowingly and intentionally makes false or misleading representations regarding real property or the sale of real property. These misrepresentations can be made orally, in writing, or by electronic means. Real estate fraud can also occur when a person knowingly omits material information about real property or the sale of real property. For example:
- It is illegal to knowingly make a false statement about the listed price or rent of a property to convince someone to buy or rent it
- It is illegal to knowingly make a false statement about the terms of a real estate transaction, such as the type of loan that will be used, to convince someone to enter into the transaction
- It is illegal to use false pretenses to convince someone to sign over their deed or title to a property
- It is illegal to knowingly make a false statement about the condition of a property to convince someone to buy it
Note that California law prohibits real estate fraud in PC 487, which is the primary state law prohibiting grand theft. The main reason why prosecutors use this statute in this type of fraud is that it involves theft by pretense. However, for real estate fraud to be categorized as grand theft, the amount involved in the defrauding must be more than $950.
The Different Types of Real Estate Fraud
This type of fraud is very broad and complex. Most times, defendants commit the offense while trying to be creative and not knowing that their actions are illegal. Law enforcement uses help from the California Bureau of Real Estate to check any fraud signals in real estate transactions.
Some of the common types of real estate fraud are:
Rent Skimming
Rent skimming occurs when a property owner illegally keeps rent money that is supposed to go towards the mortgage or other expenses related to the property. A property owner can be convicted of rent skimming if they are caught keeping rent money that is supposed to go towards the mortgage or other expenses related to the property.
Note that you cannot be convicted for rent skimming if you collect the rent money and within 30 days, you:
- Spend the money on the property or
- pay the money into a bank, savings and loan association, or credit union account that has been established for the exclusive purpose of holding the funds for expenditure on the property
Foreclosure Fraud
In this type of fraud, fraudsters target homeowners who are unable to pay their mortgage and are facing foreclosure. You will likely be charged with foreclosure fraud if you:
- Use fraudulent documents
- Create a false identity
- Eliminate a homeowner’s equity in their home
- Use fraud to buy a property
- Use fraud to sell a property
- Use fraud to transfer a property
- Use fraud to refinance a property
- Use fraud to modify a mortgage loan
Note that you can be charged with a crime if you help another person commit foreclosure fraud, such as providing them with information or documents to help them commit a method of foreclosure fraud.
Examples of Foreclosure Fraud Cases
There are many types of fraud that fall under foreclosure fraud. Here are a few examples that will likely result in foreclosure fraud criminal charges.
- Document fraud ⏤ Document fraud is one of the most common methods of foreclosure fraud. Document fraud can occur in several ways. When you attempt to fraudulently transfer or sell a property, you may be required to complete documents, such as a deed. If you provide a false name or sign someone else’s name on these documents, that could be considered document fraud.
- Fraudulent transfer or sale ⏤ You may commit a crime if you sell or transfer property using false documents or if you do not have the legal right to do so. Fraudulent transfer can also occur if you fail to make payments on your property and try to sell it to avoid foreclosure.
- Mortgage modification or rescue fraud ⏤ If you are considering a mortgage modification or foreclosure rescue, it is important to be aware that some of these services are only available through approved housing counselors. Foreclosure rescue fraud is often committed by individuals who claim to be able to help homeowners avoid foreclosure. They may offer to purchase the home, pay the mortgage and then lease the home back to the homeowner. But, since they may not have the funds to do so, the homeowner is left with a deed to a home that has been foreclosed. Mortgage modification fraud can also be committed when someone offers to help you modify your mortgage. They may offer to help you lower your interest rate, reduce your monthly payments, or even help you get rid of your second mortgage. Instead, they trick you into signing over your deed to your home.
Forged Deeds or Documents
Forgery of deeds is described as changing a property title along with another type of document to sell a piece of property to an unsuspecting buyer. The new owner of the property may not be able to enforce their ownership rights because the document was altered. Forgery can also be used to commit loan fraud or another type of fraud against a lending institution.
In other terms, you commit the crime of forgery of property documents when you:
- Forge a document, or
- Alter a document in any material particular, or
- use a forged or altered document;
to induce another person to accept it as genuine, and to use it to enforce their rights to a property.
Straw Buyer Schemes
Straw buyer scheme fraud occurs when you fail to qualify for a mortgage but buy a house by lying about your income, debts, or employment history. You may also be charged with this offense if you use someone else to acquire a mortgage. For instance, you ask a person who has good credit ratings to request a mortgage for you and offer them money in return. After they have applied for the mortgage, signed the paperwork, and transferred the property to you, you refuse to make the payments as agreed. In this case, you will be considered to engage in straw buyer schemes which put you at the risk of being convicted.
Predatory Lending
You can face predatory lending charges when you:
- Use false pretenses to obtain a mortgage ⏤ obtaining a loan through false pretenses, which is also known as mortgage fraud. Mortgage fraud occurs when an individual lies on a mortgage application to obtain a loan that they would not otherwise qualify for. This can be done by inflating income, assets, or employment information, or by providing false information about the property being purchased.
- Set the loan terms excessively unfavorable to the borrower ⏤ predatory lending, excessively unfavorable loan terms, can occur in several ways. For example, a lender may charge exorbitant fees, offer a loan with an interest rate that is much more than the market rate or require the borrower to purchase unnecessary insurance products.
- Structuring the loan in a way that makes it challenging to repay ⏤ structuring loans in a way that makes them difficult to repay, is also known as loan sharking. This can be done by requiring a large balloon payment at the end of the loan term, or by offering a loan with a very short term (such as a two-week loan). This type of loan is often advertised as a "payday loan" or a "cash advance loan."
Illegal Flipping
Illegal property flipping is when a person buys a property and then sells it for a higher price before the deed is transferred. This is often done by signing a contract with the seller and then finding a buyer who is willing to pay more for the property. The seller may not be aware that the property is being flipped and may not receive any of the additional money. This type of flipping is illegal in many states and can lead to criminal charges.
Real Estate Fraud Elements
For you to be convicted of real estate fraud, there are various elements that the prosecutor must prove. These elements include:
- You made a false representation of a material fact concerning a real property transaction
- You knew that the representation was false when you made it
- You made the false representation with the intent to deceive or defraud another person
- The other person relied on your false representation in deciding on the real estate transaction
- The reliance resulted in a financial loss to the other person
Real Estate Fraud Penalties
The penalties for this type of fraud depend on the specific charge. However, here are some of the most common penalties.
Grand Theft Penalties
Grand Theft is considered a wobbler in California. If you are accused of grand theft or real estate fraud, the prosecution could charge you with a misdemeanor or felony offense. Grand theft real estate fraud of $950 or less is a misdemeanor offense. A misdemeanor offense is punishable by:
- up to 1 year in county jail
- maximum fine of $1,000, and
- Informal probation
Grand theft real estate fraud of $950 or more is a felony offense. A felony offense is punishable by:
- 16 months, 2 or 3 years in county jail
- Fines of up to $10,000, and
- Formal probation
Grand theft real estate fraud of $65,000 or more is a felony offense that is punishable by:
- 2, 3, or 4 years in jail and
- A maximum fine of $10,000
Grand theft real estate fraud of $200,000 or more is a felony offense that is punishable by:
- 3, 5, or 7 years in county jail, and
- Maximum fines of $10,000
Rent Skimming Penalties
Rent skimming is considered a wobbler in California meaning a defendant can face felony or misdemeanor charges.
The misdemeanor penalties for rent skimming are:
- Informal probation;
- Maximum fines of up to $1,000; and/or
- Up to one year in county jail
The felony penalties for rent skimming are:
- Formal probation;
- Maximum fines of up to $10,000; and/or
- 16 months, 2 years, or 3 years in county jail.
Foreclosure Fraud Penalties
This offense is also considered a wobbler under California law.
The misdemeanor penalties for foreclosure fraud are:
- Up to one year in county jail
- Maximum fines of up to $1,000; and/or
- Informal probation;
The felony penalties for foreclosure fraud include:
- 16 months, two years, or three years in county jail
- A fine of up to $1,000; and/or
- Formal probation
Forged Deeds Penalties
Penalties for forging someone else's name on a deed or any other legal document can be harsh. You could be charged with a felony which is punishable by:
- Up to 5 years in state prison and/or
- A fine of up to $10,000
Legal Defenses for Real Estate Fraud
There are various legal defenses that you can use to fight your real estate fraud charges in California. These defenses include:
- Lack of fraudulent intent ⏤ For you to be convicted for real estate fraud, the prosecutor must beyond reasonable doubt prove that you acted intending to defraud. Even though the prosecutor believed that you wanted to defraud another party, you cannot be convicted by the court if the prosecutor fails to prove your intent. Your actions may have been in good faith or you misunderstood the effect and meaning of your act which is normal at times. If this is the case, you cannot be convicted for real estate fraud although your actions may affect your business negatively.
- The transaction was consented to by the owner of the property ⏤ In most cases, you will only face real estate fraud charges when someone else’s property is involved. In almost 60% of these cases, the alleged victim is always an elderly person. What happens is that the elderly may give you their permission to designate for them, but since they may not be familiar with the whole process, they end up getting confused and filing charges against you. You can argue that you were offering to help and they consented to the transaction. Again without the intent, you cannot be convicted.
- False accusations ⏤ With so many people in the property business, it is easy for people to fall, victim, to fraudsters hiding in the business. At times the fraudsters may steal your identity and use it for fraud, other times they may accuse you as a way of covering up their criminal acts. This could also be a case of mistaken identity plus much more. There are many ways in which you may face false accusations but you can use the help of an experienced fraud attorney to show your innocence.
Plea Bargaining in Real Estate Fraud Cases
The process of negotiating plea agreements in California real estate fraud cases has some similarities to the process in federal cases, but there are important differences. Most real estate fraud cases in California are prosecuted in Superior Court, which is one of the 58 trial courts of general jurisdiction in California. Unlike the federal system, which has a uniform set of rules and procedures governing plea agreements, California Superior Courts are each governed by their own rules and procedures. This makes consistent plea bargaining in real estate fraud cases quite difficult.
However, the entire process of plea bargaining in any criminal case (whether in federal or California Superior Court) is governed by what is called the “plea bargain rule,” found in the Penal Code. The plea bargain rule provides that no plea of guilty or nolo contendere shall be accepted by the court unless it is made voluntarily by the defendant and with the consent of the defendant’s attorney.
In addition, the plea bargain rule requires the prosecutor to state on the record in open court the terms of the offer. The court must also inform the defendant that he/she has a right to withdraw the plea if the court does not accept the plea bargain.
FAQS Regarding California Real Estate Fraud
What is real estate fraud?
Real estate fraud is any type of fraudulent activity involving real estate transactions. This can include things like falsifying information on mortgage loan applications, forging signatures on real estate documents, or using straw buyers to purchase a property.
What are some common real estate fraud schemes?
Common real estate fraud schemes include inflating the price of a property, misrepresenting its condition, and failing to disclose important information about the property.
How can I avoid becoming a victim of real estate fraud?
There are a few things you can do to avoid becoming a victim of real estate fraud.
- Be sure to do your research on any property you are considering purchasing.
- Be wary of anyone who is pressuring you to make a decision quickly or who seems to be hiding important information.
- Always use a licensed real estate professional when buying or selling property.
What should I do if I think I’ve been a victim of real estate fraud?
If you think you’ve been a victim of real estate fraud, you should contact your local law enforcement agency or the FBI. You should also get a lawyer to discuss your legal options.
What should I do if I am accused of real estate fraud?
If you are wrongly accused of real estate fraud, you should hire an experienced criminal defense attorney immediately to help you navigate the legal process and protect your rights. Hiring an attorney also increases your chances of not being convicted for a crime you did not commit.
What is the Role of a criminal defense attorney in real estate fraud?
A criminal defense attorney can help in a real estate fraud by representing the accused in court and working to prove their innocence. They may also be able to negotiate a plea deal with prosecutors to reduce the charges or penalties the accused faces.
How to choose a real estate fraud criminal defense attorney?
Even though every case is different, there are several factors to consider when choosing the right defense attorney for your case. These factors include:
- The attorney's experience
- Their reputation
- Their success rate in similar cases
- Their availability
Additionally, it is important to find an attorney who is a good fit for you personally and who you feel comfortable working with.
Can a real estate Fraud Conviction Affect my License?
If you have been convicted of real estate fraud, it may be challenging for you to acquire a new real estate license. But if you are already licensed, a criminal conviction is not automatically disqualifying for a real estate professional license in California. The California Bureau of Real Estate will determine in each case, taking into account the nature and seriousness of the offense, along with other factors such as the length of time since the offense, and any evidence of rehabilitation. However, if you are facing a felony charge of real estate fraud, your license may be canceled automatically.
Find a Santa Ana Criminal Attorney Near Me
Real estate fraud is complex and it can significantly affect your life and your business. If you are facing real estate fraud accusations in Santa Ana, you might need our help at the California Criminal Lawyer Group to navigate the legal process. Our experienced attorneys are standing ready to fight your charges and protect your rights. Call us today at 714-844-4151 and speak to one of our skilled real estate fraud attorneys.
