Red flags specific to real estate agents/developers/brokers/sales representatives

Real estate agents and developers

In addition to other red flags, we have identified the following specific red flags relevant to our business and industry:

• Client arrives at a real estate closing with a significant amount of cash.
• Client purchases property in someone else’s name such as an associate or a relative (other than a spouse).
• Client does not want to put his or her name on any document that would connect him or her with the property or uses different names on Offers to Purchase, closing documents and deposit receipts.
• Client inadequately explains the last minute substitution of the purchasing party’s name.
• Client negotiates a purchase for the market value or above the asked price, but requests that a lower value be recorded on documents, paying the difference “under the table”.
• Client pays initial deposit with a cheque from a third party, other than a spouse or a parent.
• Client pays substantial down payment in cash and balance is financed by an unusual source (for example a third party or private lender) or offshore bank.
• Client purchases personal use property through his or her company when this type of transaction is inconsistent with the ordinary business practice of the client.
• Client purchases multiple properties in a short time period, and seems to have few concerns about the location, condition, and anticipated repair costs, etc. of each property.
• Client insists on providing signature on documents by fax only.
• Client over justifies or over explains the purchase.
• Client’s home or business telephone number has been disconnected or there is no such number.
• Client uses a post office box or General Delivery address where other options are available.
• Client wants to build a luxury house in non-prime locations.
• Client exhibits unusual concerns regarding the firm’s compliance with government reporting requirements and the firm’s anti-money laundering or anti-terrorist financing policies.
• Client exhibits a lack of concern regarding risks, commissions, or other transaction costs.
• Client persists in representing his financial situation in a way that is unrealistic or that could not be supported by documents.
• Transactions carried out on behalf of minors, incapacitated persons or other persons who, although not included in these categories, appear to lack the economic capacity to make such purchases.
• A transaction involving legal entities, when there does not seem to be any relationship between the transaction and the activity carried out by the buying company, or when the company has no business activity.
• Transactions in which the parties show a strong interest in completing the transaction quickly, without there being good cause.
• Transactions in which the parties are foreign or non-resident for tax purposes and their only purpose is a capital investment (that is, they do not show any interest in living at the property they are buying).
• Transactions involving payments in cash or in negotiable instruments which do not state the true payer (for example, bank drafts), where the accumulated amount is considered to be significant in relation to the total amount of the transaction.
• Transactions in which the party asks for the payment to be divided in to smaller parts with a short interval between them.
• Transactions in which payment is made in cash, bank notes, bearer cheques or other anonymous instruments.
• Transactions which are completed in seeming disregard of a contract clause penalising the buyer with loss of the deposit if the sale does not go ahead.
• Recording of the sale of a building plot followed by the recording of the declaration of a completely finished new building at the location at an interval less than the minimum time needed to complete the construction, bearing in mind its characteristics.
• Transaction is completely anonymous–transaction conducted by lawyer–all deposit cheques drawn on lawyer’s trust account.

Real estate brokers and sales representatives

In addition to other red flags, we have identified the following specific red flags relevant to our business and industry:

• Client sells property below market value with an additional “under the table” payment.
• Client purchases property without inspecting it.
• Client is known to have paid large remodelling or home improvement invoices with cash, on a property for which property management services are provided.
• Client buys back a property that he or she recently sold.
• Frequent change of ownership of same property, particularly between related or acquainted parties.
• If a property is re-sold shortly after purchase at a significantly different purchase price, without corresponding changes in market values in the same area.