Real Estate Fraud

The real estate industry has its fair share of fraud cases, and you could be caught in the middle. Whether you are caught in the middle of committing the offense or have been accused of committing real estate fraud, the chances are high that you will go to court.

A conviction for the offense can lead to severe consequences, including incarceration, fines, and restitution to victims. Depending on your career, you might face disciplinary actions for the offense.

Our job at the California Criminal Lawyer Group is to ensure that you get the best possible defense strategy to fight the charges you are facing. We have dealt with thousands of real estate fraud cases and can equally represent you by developing a solid defense strategy.

Definition and Overview of Real Estate Fraud

Real estate is a lucrative industry in California. The value of the property involved can encourage various parties to engage in criminal activities to cash in on the industry. When real estate fraud occurs, it usually involves large sums of money.

Real estate fraud is one of California’s criminal fraud laws that cover several fraudulent offenses. It is any type of fraud committed in relation to real estate transactions.

The definition of criminal fraud under California law is:

• An act committed that will benefit you over another person

• You commit the act by knowingly and willingly concealing some facts or misrepresenting them

• An action intended to cause harm to another person or induce another person to act in a way that hurts his or her interests

Real estate fraud is usually convicted under different laws, but commonly under theft laws. Other forms of real estate fraud can be classified as civil offenses unless they meet certain conditions that escalate them to criminal offenses.

Some of the laws that can be applied when prosecuting real estate fraud include:

1. California Grand Theft Laws PC 487

Real estate fraud is a form of theft by false pretenses. The elements of the offense under this statute include:

• You knowingly and willingly make a false representation to deceive a real estate owner or mortgage lender

• You intended to persuade the victim to grant you possession ownership rights to the property or a loan

• The victim allowed you to have possession or ownership of the property based on your false representation

Most instances of real estate fraud fall under grand theft since most real estate properties are worth more than $950.

2. Foreclosure Fraud Laws Civil Code 2945.4

Foreclosure fraud is a specific statute that deals with any fraudulent transaction in relation to foreclosure. Any property facing foreclosure is usually listed as a public record. The record provides sufficient information, which can be used to defraud the distressed homeowner.

The fraudsters usually promise to help the homeowner avoid foreclosure or provide consultation and guidance to the homeowner at a fee. The common elements of foreclosure fraud include:

• Collecting the fees before you perform the service you were offering

• Charging excessive fees for the service

• Taking property or any form of security as collateral for the payment of the service

• Taking money from a third party in relation to the services you should perform without notifying the homeowner

• Taking power of attorney from the homeowner, therefore, making it impossible for him or her to choose another person to act on her behalf in legal matters

• Attempting to convince the homeowner to sign an illegal contract

You can be charged with both grand theft and foreclosure fraud if the facts of the offense satisfy the requirement of each offense.

Foreclosure fraud occurs in several ways, including:

• Transfer of title from the homeowner to the defendant so that the owner can either rent it back or repurchase it. Usually, the defendant will possess all the equity in the home and evict the homeowner.

• Causing the homeowner to sign over the ownership of his or her home in the pretense that he or she is getting a better deal (such as reduced mortgage payments) to protect his or her home. The defendant will provide blank documents (with a promise to fill them later) or present ineligible or complicated terms that the homeowner cannot understand).

• Phantom foreclosure scams where the defendant pretends to offer foreclosure help services only to vanish after he or she receives payment. The homeowner might discover the scam too late when he or she cannot save the home from a foreclosure

3. Rent Skimming Civil Code 890

Rent skimming is an offense in which:

• You intentionally fail to repay the mortgage using the rent proceeds from the first year

• You intentionally collect rental income from a property which you do not own or to which you have no right to receive rental income (this form of rent skimming can further expose you to charges of trespassing)

You can be exempted from rent skimming charges if:

• You used the proceeds of the income to pay for necessary and unforeseen medical expenses for you or your family

• You paid licensed contractors or suppliers to correct any violations of the law on the habitability of the rental property (supposing you did not have another source of income)

Single offenses of rent skimming subject you to civil offenses. However, if you commit more than one act of rent skimming, you can face both criminal and civil penalties.

4. Forging Deeds PC 115

Penal Code 115 forbids recording a forged real estate deed or documents in public records. The offense is charged under California’s laws against forgery. The elements of the offense include:

• You provided a false document for filing, recording or registration in a public office or caused another person to file, record or register the forged document in any California public office

• You knew that the document was either false or forged when you committed the offense

• The document, if genuine, could have been filed, registered or recorded in the public office

A false or forged document is one that:

• Provides information which the government is legally allowed to act upon

• The information on the material affects the rights of a third party, such that the law requires the filing of the document in a public office

You could be charged with different forms of real estate fraud, including foreclosure fraud and rent skimming, as discussed above. You could also be accused of other forms of real estate fraud such as:

1. Illegal Property Flipping

Property flipping is a legal real estate transaction where a realtor, mortgage broker, or property appraiser buys a home and quickly resells it at a profit. In such cases, the person has purchased the house under its market value because the homeowner was in distress (due to foreclosure), or the house is in poor condition.

The buyer can make a few improvements or repairs before resealing at its actual market value or closer to the market value.

An illegal property flipping transaction occurs when the defendant purchases a property below its market value. However, he or she will over-represent the actual value of the property to resell or acquire a mortgage.

The defendant will usually involve other parties, including:

• A real estate appraiser

• A straw buyer

• Real estate agents or brokers

• Mortgage brokers

• Other parties that willingly facilitate an illegal flipping

For an unlawful flipping to occur, the defendant must take steps to make the sale look as legitimate as possible. For example, by hiring a real estate appraiser, he or she can convince the appraiser to overvalue the home.

Therefore, the defendant cannot be guilty of property flipping if the buyer fails to examine the actual value of the house, and the defendant does not provide any documents to convince the buyer of the value.

Illegal property flipping can overlap with predatory lending, where the mortgage broker knows of the illegal flipping scheme, processes, and files a fraudulent loan document.

2. Predatory Lending

Predatory lending is an offense, which occurs when, a lender:

• Uses aggressive sales tactics to impose abusive and unfair loan terms on a borrower

• Takes advantage of the borrower's lack of understanding of the complex transactions involves

• Uses deception when offering the loan

Lenders involved in predatory lending schemes usually strive to derive the maximum value of a loan without regard for the borrower's ability to repay. These schemes can be based upon:

• Targeted marketing based on discriminatory practices such as education, race, ethnicity, age

• Abusive loan terms such as large prepayment penalties, approving loans without regard for the buyer’s ability to repay, charging higher interest rates than promised, unnecessary balloon payments

3. Straw Buying Schemes

Owning a home through a mortgage requires that you have good credit. In straw buying schemes, the defendant approaches a straw buyer to purchase a property on his or her behalf. The straw buyer may receive some money to encourage him or her to participate in the scheme.

The defendant requests the straw buyer to transfer ownership to him or her but then does not repay the mortgage. The straw buyer will then have to raise money to fund the mortgage. Some of the parties commonly involved in these schemes include real estate brokers or agents, home sellers, homebuyers, straw buyers, and mortgage brokers.

Straw buying schemes often overlap with other forms of real estate fraud, such as illegal flipping or predatory lending.

The straw buyer usually ends up with the responsibility for repaying the mortgage without his or her knowledge. If he or she defaults (which may happen because he or she is not aware of the obligation), the bank will foreclose on the property.

The straw buyer ruins his or her credit and might be forced to declare bankruptcy. In some cases, the straw buyer will also face criminal charges for participating in the scheme. You can be charged under various laws, including laws that prohibit:

• Forgery

• Rent skimming

• Theft and

• Foreclosure fraud

Penalties for Real Estate Fraud

The penalties for real estate fraud depend on the circumstances of the crime, and the statute applied when prosecuting you.

If you are charged under California’s grand theft laws, the offense is a wobbler offense based on the specifics of your case and your criminal history. The penalties for a misdemeanor grand theft conviction include summary probation, a year in county jail and $1000 in fines.

The penalties for a felony conviction include:

• Formal probation

• Incarceration in jail for 16 months, two or three years

• Fines of up to $10,000

The penalties under foreclosure fraud laws will depend on whether the offense is convicted as a felony or a misdemeanor. The penalties for a misdemeanor conviction include a maximum term of one year in county jail and a fine of up to $1000. You may be sentenced to misdemeanor probation instead of jail time.

The penalties for a felony conviction include felony probation, a jail term of 16 months, two or three years, and a fine not exceeding $10,000. The court might also apply sentencing enhancements based on the circumstances of your case.

• If the value of the property exceeds $65,000, you will spend an additional sentence of one to four years in state prison

• If the fraud involved amounts greater than $100,000, and you are convicted of two or more felonies simultaneously, you will serve an additional sentence of up to five years and a fine of $500,000 or twice the amount involved (whichever is higher)

• The court might order you to pay restitution to the victim(s)

• Action against your professional license including suspension or revocation

Rent skimming can be a civil or criminal offense based on the details of the case. You would face civil penalties if you committed a single act. The sentence will include:

• Paying the actual damages to the victim

• Paying the reasonable attorney and legal fees the victim incurred

• Additional fines as the court may determine

Multiple acts of rent skimming subject you to criminal charges. The penalties, in this case, will depend on whether the conviction is for a misdemeanor or felony rent skimming

A misdemeanor offense includes a maximum of one year in county jail and a fine of up to $10,000. The penalties for a felony conviction are 16 months, 2, or 3 years’ incarceration in state prison and a fine of $10,000. The penalties apply for each offense you commit. A prior rent-skimming conviction on your record subjects you to additional sentencing as well.

Filing false deeds in relation to real estate fraud is a California felony. You face penalties such as:

• Formal probation

• A county jail sentence of 16 months, two or three years

• A fine not exceeding ten thousand dollars

All felony convictions for real estate fraud also attract additional charges, especially those that cause substantial loss to the victim. These sentence enhancements include:

• An additional year if the victim lost more than $65,000

• An additional two-year sentence if the victim lost $200,000 or more

• An additional three years for any losses exceeding $1,300,000

• An additional four years if the victim lost more than $3.2 million

• An additional one to five years is you committed multiple acts of felony real estate fraud, and the victim lost more than $100,000

Real estate brokers who engage in real estate fraud could also lose their licenses or face disciplinary actions for the offense.

Legal Defenses

Charges for real estate fraud can have severe effects, including loss of your professional license and incarceration. You will also have a criminal record, which will affect your employment pursuits. Fortunately, you can fight the charges you are facing by applying the relevant legal defenses.

The legal defenses you use will depend on the details of the case. Some of these defenses are:

1. You lacked a Fraudulent Intent

Real estate fraud requires that you act intending to defraud the victim. However, if you did not intend to defraud the victim, you cannot be guilty of the offense.

Some of the ways you can prove you lacked a fraudulent intent include:

• Asserting the belief that you acted in good faith

• You were not aware that the act was fraudulent

• You were forced to commit the offense by a threat to your safety or that of another person

• You acted following the fraudulent advice of another person who you didn't know had a criminal intent

The burden of proof in fraud crimes lies on the prosecution to prove that your actions are beyond a reasonable doubt fraudulent and were committed with the intent to defraud.

You could also prove that you lacked a fraudulent intent if you took the necessary steps to fulfill your promises to the victim. For example, if you are charged with foreclosure fraud, but you took the actions required to provide the services for which you were paid, the court might have to dismiss your charges.

2. Mistaken Identity and False Accusations

Mistaken identity can often lead to charges and prosecution for real estate fraud. Most of the culprits in real estate fraud use false identities to defraud their victims. You can, therefore, be a victim of both identity theft and face charges of real estate fraud.

Since these transactions also involve numerous parties, you could be falsely accused of committing the offense. A fraudulent person could also hide behind a reputable company to manipulate victims and defraud them.

Another scenario that can lead to charges and a conviction for real estate fraud is false accusations. A person can accuse you of committing the crime out of spite or trying to cover up his or her wrongdoing.

An experienced real estate fraud defense lawyer can identify the typical inconsistencies that lead to mistaken identity or false accusations. He or she can use witnesses to fight the false accusation or misidentification.

3. Consent from the Owner

If you have the permission of the property owner to engage in a real estate transaction, you may not be guilty of real estate fraud. Cases such as those of rent skimming cannot stand if the owner gave you the right or permission to collect rent from the premises.

This defense is common where the transaction involves a property belonging to an older person. He or she might forget or be confused about the permissions he or she gave, leading to charges.

Sometimes, a person could also consent to you handling a real estate transaction, but later, he or she changes his or her mind and accuses you of fraud

4. Insufficient Evidence

The prosecution must present sufficient evidence to prove that you committed the offense, beyond a reasonable doubt. If the prosecution cannot provide such proof, then it would be unjustifiable to convict you for the offense.

Based on the circumstances of the offense, the court can dismiss the charges, or you could be convicted for a lesser offense.

Plea Bargain

Plea bargains are an essential tool, especially when the prosecution has overwhelming evidence that shows that you committed the offense. In such cases, it would be futile to deny the charges. However, you can negotiate for a more favorable settlement depending on the facts of the case.

For example, if you are facing charges for a wobbler offense, your attorney could negotiate with the prosecution to have the charges reduced to a misdemeanor.

When these charges are reduced, you get lesser sentencing and fines.

You could also get alternative sentencing, such as probation instead of incarceration. In such a case, you can serve your time without significant interruption in your work or daily life.

Find a San Jose Criminal Attorney Near Me

Real estate fraud is rampant crime in California, often involving large sums of money. Therefore, if you are charged with the offense, you face a greater risk of incarceration and paying hefty fines and restitution for the offense.

Charges for real estate fraud can often capture individuals who are not involved in the offense or who, in good faith, find themselves facing charges.

If you are arrested for or charged with real estate fraud, your best bet would be to hire an attorney. Fraud cases are often complicated. You may be dealing with several laws, which might count as additional offenses in court. Such situations require the experience of a California Criminal Lawyer Group. The expertise of an attorney can make a significant difference in your case, including whether you are convicted and the penalties you receive.

Call us for a consultation at 408-622-0204 so that we can evaluate your case and discuss your defense options.