Ontario regulator is warning real estate agents to watch for signs of fraudulent home sales
The body that regulates Ontario’s 100,000 real estate agents and brokers is urging them to be more vigilant when verifying a client’s identity amid a spate of fraudulent home sales and mortgages in the Toronto area.
The Real Estate Council of Ontario (RECO) memo, sent out Tuesday afternoon, reminds members that they have a legal obligation to verify the parties to a transaction who they say they are.
“You play a critical role in protecting the interests of your clients and the integrity of real estate transactions,” the memo said.
“Your duties also include constantly being on the lookout for anything that seems suspicious or inconsistent.”
The memo comes just weeks after CBC News issued a series of reports that found dozens of homes in the Toronto area were either mortgaged without the owners’ consent or sold without their knowledge. CBC News is aware of at least six properties that were fraudulently sold.
In these cases, the owners were often out of the country and had rented out their homes before individuals posing as owners put them up for sale. The police are investigating.
RECO registrar Joseph Richer said in a statement the alert was issued because the alleged scams “caused victims enormous difficulty”.
While RECO’s move has been applauded by some, others are wondering why the memo is only now being released and how agents who break the rules will be held accountable.
One of the memo’s recommendations is that agents confirm that a person looks like the photo on their ID and that “the age appears reasonable.”
“I think it ties directly to our case,” said Melissa Walsh.
Her 93-year-old great-uncle almost sold his house between himself a year ago – when suspected scammers posed as renters to gain access to his home in Toronto’s Beach neighborhood and others posed as him to put it up for sale.
Several bids were made for the home, but Walsh and her family realized it was being sold and managed to stop it.
“It’s good to see that there is more information out there and that people are being advised to be vigilant. But again — it just seems a little too late,” Walsh said.
She wonders why the practices detailed in the memo may not have been followed by real estate agents in the past, and why more aren’t held accountable for improperly checking IDs.
“This isn’t a one-off situation, it’s been happening for a while,” Walsh said.
RECO also urges its members to verify a driver’s license size and eye color to ensure they match the person renting or selling a home and to use online tools such as the Ontario Driver’s License Examination System to determine the status of that home display driver’s license.
The memo also urges real estate agents to closely monitor the details of the paperwork.
“Look for inconsistencies such as misspellings when the buyer or seller writes their name or email address, or other strange or unusual errors,” the memo reads.
In two of the cases reported by CBC News — one in which a home was sold, one in which a sale was averted at the 11th hour — there were misspellings in the sales records, and tenants who rented the homes and allegedly fake IDs were used by people posing as homeowners.
False credit reports and job references were also allegedly presented to the real estate agents who rented the homes before they were put up for sale.
RECO also suggests asking the seller questions — like old the stove or the roof — that a real homeowner would actually know, and having them provide invoices for work done and paperwork for property or income tax. Other suggested questions are when the house was bought and who the real estate agent was – details that can be checked online.
It also notes that there are legal ramifications for those who fail to properly verify an ID, including a maximum fine of $50,000 and suspension or de-registration of a broker.
The CEO of the Ontario Real Estate Association says many of the recommended practices are usually followed.
“It was a very helpful bulletin…a reminder of best practice in this area,” Tim Hudak said of the memo.
“We all have to work together for this [title fraud] doesn’t happen – whether it’s the real estate agents, the bankers, the lawyers, the mortgage fraud companies, and the law enforcement agencies. We have to close this.”
New measures could be in sight. The Ontario Department of Public and Business Services announced last month that its updated Code of Ethics for Real Estate Agents under the province’s Real Estate and Business Agents Act will go into effect on April 1.
No details were given as to what exactly this will entail, only that the code will contain a specific provision regarding fraud.
The head of one in four property insurance companies in Canada says he would like to see multi-factor ID verification become the norm in all real estate transactions. This would require a combination of a photo ID check, a credit report lookup and phone number checks to ensure it wasn’t a Burner phone.
“Fraudulent identification is too easy to obtain and cannot be the only means of verifying identity in a real estate transaction when the parties are signing in person,” said John Rider, senior vice president of Chicago Title Insurance Company in Canada.
“During that statement [from RECO] While potentially helpful as it will encourage all RECO regulated parties to be more diligent in verifying identification, it will not be enough to stop mortgage and property fraud in Ontario,” said Rider.