Occupancy Fraud – It Can’t Be Done

While caveat emptor is the property law doctrine that governs real estate sales, buyers of real estate best be warned about how they represent themselves lest they be on the accusation end of occupancy fraud.

Like a forensic team closing in on a homicide suspect, underwriters can smell a property fraud scam miles away.

Like a forensic team closing in on a homicide suspect, underwriters can smell a property fraud scam miles away. If you’re buying a new owner occupied property, be prepared to expect closing delays if the lender has any concerns about occupancy fraud. Simply put, occupancy fraud refers to a buyer saying they intend to live in a property and they really don’t.

And there are a number of red flags:

  • Buying two properties in a short period of time
  • Buying down (from a larger home to a smaller home)
  • Address discrepancies
  • Buying a new owner occupied home when you already have an owner occupied home and it is underwater

According to Fannie Mae’s Loan Quality Initiative, a buyer can be asked to provide documents such as moving company contracts, utility bills, and hazard insurance policies to confirm the primary residence.

And if that’s not enough, lenders are leveraging the services of third parties that specialize in these types of investigations. Any guess who gets to pay for that privilege?

Ben Franklin said that both fish and house guests smell after three days, but occupancy fraud pretty much reeks from the giddy-up.

Leave a Reply

Your email address will not be published. Required fields are marked *