Did you know that acting as a straw buyer in a mortgage transaction is illegal? ‘Straw buyers’ who allow their name and credit rating to be used to obtain mortgage financing for a profit can be fined or even jailed for their actions.
Definition of straw buyer
According to the attached article in the Calgary Sun, this situation has been common in the last few years due to the recent economic boom. Individuals that act as a ‘straw buyer’ in a mortgage transaction are legally responsible for the mortgage they have obtained.
The Calgary Real Estate Board offers the following tips to help protect yourself from mortgage fraud:
-Employ a licensed mortgage broker registered under the Real Estate Act of Alberta. Visit www.reca.ca to ensure the person you are working with has a license in good standing.
-Before you make an offer on a property, have your realtor provide you with the property history. Check how many times the property has been sold, the price ranges and the comparable properties for sale in the area. Does the history seem logical to you?
-Get a market analysis on the property, provided by your realtor. If you are concerned about the value you can include, as part of your offer, a condition to have the property appraised by a designated or accredited member of the Appraisal Institute of Canada.
-Ask for a copy of the land title search (this will show the registered owner of the property as well as any mortgages registered on the title).
-Make sure your deposit is being held in a trust account.
-This is my own tip, and one that I happen to think is the most important: Trust your gut! If you have a bad feeling about the transaction that you just can’t shake, trust yourself! If something seems too good to be true, it likely is. There are plenty of other properties out there...don’t be scared to move on.