Avoid fraud when buying a home

The prospective home buyer might be implicated whether or not the fraud is intentional

IN THIS segment of our series we look at fraud and how to avoid it when buying your home.

The prospective home buyer might be implicated whether or not the fraud is intentional. You might well be dragged into fraudulent activities by another party.

Buying your house through an intermediary (such as an estate agent, mortgage originator or a developer), makes it even more important to contact the bank to find out exactly what they will require from you in order to finalise your bond approval.

You should check that the intermediary you are working with is registered and has the relevant expertise. FNB would like to advise you to look out for some of the following scenarios that might help you identify possible fraudulent activities.

Income fraud: This occurs when you deliberately overstate your income in order to qualify for a bigger bond. This could happen in the following ways:

Intentional income fraud

This fraudulent activity becomes intentional if you, or through the help of an intermediary, state a higher income amount than you earn on an application form and create false documentation to support the figures.

Unintentional income fraud

The fraud becomes unintentional when you apply for a bond stating the correct income but the intermediary gives false information about the income.

This can be avoided by asking to see what has been submitted on your behalf and making sure that you carefully read and understand documentation regarding your transaction.

If you don't understand it, allow yourself some time to do so before you sign on the dotted line.

Finding someone to help you might also be advisable if there are areas where you need assistance.

Remember that you might encounter problems at a later stage if fraud goes undetected, even if it is committed by parties acting on your behalf.

Providing false documentation

The bank will require various types of information when you apply for a bond, including a pay slip from your employer.

But in some cases you may not have a pay slip to prove your income. The intermediary might say that they can help you by making a fraudulent pay slip and other relevant documents as required by the bank, in return for a fee. If you agree, the intermediary will create a false profile for you. The pay slip will show a false company name, income, tax number etc.

The middleman will then create a false bank statement.

Employment fraud

This occurs when a borrower claims self-employment in a non-existent company or claims a higher position in a real company so as to provide justification for the fraudulent representation of their increased income.

This behaviour could have serious consequences for you and should be avoided.

Hiding personal debts

Part of the disclosure process when applying for a bond will include telling the bank what monthly debts you have to pay. This may include school fees, groceries, petrol, transport costs, or amounts that you may owe friends or family.

Not fully disclosing these is considered fraud because the bank would not have provided the same bond if they had known about your true monthly expenses.

Identity theft

Identity theft involves stealing another person's identity document, or other information, to be used fraudulently to obtain credit from a bank or licensed financial services provider.

These activities are malicious and are often treated with serious penalties if the perpetrator is caught. To avoid being a victim of identity fraud always keep your personal details and your identity document safe.

Buying a house in a good condition

Before you decide whether or not you want to buy a house, make sure you see it and that you are happy with its quality.

Visiting a house will assist you in making sure that first, the house exists, and second that it is in good condition. Do not rely on photos.

Should you decide to buy the house, make sure you sign an offer to purchase and insist on seeing the final approval offer from the bank.

Do not pay any money to the intermediary unless it is in writing and stated as part of your loan agreement. If the intermediary mentions other costs you were not previously aware of, ask them to provide you with the details of the financier and double-check what you need to pay.

Marital status fraud

Lying about your marital status when applying for a bond could also be classified as fraud. In most instances people lie about their marital status because their spouses are listed on the credit bureau and are unable to get credit.

The implications of fraud

There are many consequences related to fraud. First, should you fail to make your monthly bond repayments, you will not be protected by the National Consumer Act (NCA).

The NCA protects customers if the bank has provided finance irresponsibly to them. This means the bank will have to settle the debt if it is found that the credit assessment was carried out incorrectly. If incorrect details are provided, the bank will not be liable.