A real estate broker is a professional who is licensed by the state and is authorized to assist clients with real estate transactions. As such, they are bound by a very particular set of codes and must abide by certain standards of professional conduct.

Many of the regulations that they are supposed to follow were specifically put into place to deal with the issue of fraud. They also help prevent fraud from occurring during a transaction for real estate or property.

Generally speaking, real estate broker fraud occurs when a broker makes a misrepresentation regarding one or more key elements in connection with a sale. Fraudulent behavior may also be demonstrated when the broker provides misinformation about themselves, such as their credentials or work history.

Broker fraud is one of the most common types of legal issues when it comes to real estate cases. In some instances, when the practice of an entire real estate company involves broker fraud, it can be called “brokerage” (as opposed to broker) fraud.

What are Some Examples of Broker Fraud?

There are many ways that a broker can commit broker fraud. Some of the more common examples of broker fraud include:

  • When a broker breaches or includes an intentional misrepresentation in their broker agreement contract;
  • If they include details in a foreclosure listing that make it a scam;
  • When a broker fails to follow all of the full disclosure requirements;
  • If they commit title insurance fraud or other various scams, such as short sale scams or phantom sales.
  • When they make a misrepresentation regarding a property’s dimensions, age, prior ownership, and so forth;
  • If the broker uses a fake license or does not have the credentials that they claim to have; and
  • When a broker delegates work to another party (e.g., a different broker) without receiving the client’s permission, especially when that decision affects the client in a negative way.

In addition, the facts of a broker fraud claim can often vary because it may depend on the local geographical conditions. For instance, in an area that is subject to flooding, broker fraud might involve misrepresentations about the flood conditions of a particular area or the flood damage done to certain homes.

What are the Consequences of Broker or Brokerage Fraud?

Being convicted of broker fraud can lead to many serious legal consequences. The reason for this is because home and commercial real estate transactions typically involve large sums of money. Thus, a broker’s fraudulent conduct can cause a party to lose very significant investments.

The consequences for broker or brokerage fraud may include:

  • Monetary fines;
  • Loss or suspension of their real estate license;
  • Damages awards to plaintiffs to help them recover any losses; and
  • In some cases, depending on the severity of the charges involved, criminal punishments may be issued.

Additionally, when a broker gets convicted of broker fraud, they are not only breaking the codes and regulations associated with their license, but also many other areas of law, including federal laws.

For example, escrow fraud is when a broker intentionally misuses the funds they were given to keep in a buyer’s escrow account. Depending on the facts of a case, they could be found guilty of committing theft, grand larceny, bank fraud, and wire or mail fraud (contingent on how they transferred the money). Being convicted for any of these charges can easily lead to a prison sentence.

How Can I Avoid Real Estate Broker Fraud?

There are a couple of ways that a client can avoid being tangled up in a lawsuit involving broker fraud. The first is to make sure that the broker and their brokerage firm have a good reputation. This can be confirmed by family or friends who have used them before, by researching them on the internet, or by having an attorney look into them.

The second way a client can avoid falling victim to broker fraud is to thoroughly review any documents that are part of the real estate transaction. In other words, the client should read the fine print and question any terms that they do not understand. Look out for third parties or other people who were not involved in the original transaction. If the client still feels unsure, then they should contact a real estate lawyer for further assistance.

Finally, the client should try and gain a general understanding about the real estate transaction they are entering into (e.g., purchasing a house, obtaining a mortgage, or keeping funds in escrow). The more familiar the client is with the process, the more likely they will be able to spot something that seems off. Again, the safest way to ensure legitimacy is to hire a lawyer for help.

Should I Hire a Lawyer for Help with Real Estate Broker Fraud?

Broker fraud can lead to very serious financial losses and missed opportunities regarding further property transactions. Therefore, you should consider hiring a local real estate lawyer if you have any concerns about your property and broker fraud.

An experienced real estate attorney can represent your interests during settlement negotiations or in any type of required court hearing or meeting. An attorney can also perform research that will give you more information about the property. They can research any broker personnel to check the accuracy of their background credentials.