Understanding Fraud Claims by Real Estate Buyers and Sellers
The process of buying or selling a home can be complex and overwhelming, requiring careful attention to details and potential legal risks. One significant risk that both buyers and sellers should be aware of is the possibility of fraud. Fraudulent activities can have severe consequences, including financial losses and legal disputes. This article provides a basic overview of fraud claims for buyers and sellers of residential real estate in New York State.
What is Fraud in the Context of Real Estate Transactions?
Generally, fraud in residential real estate transactions refers to the intentional misrepresentation or concealment of material facts by one party with the intention of deceiving another party. Fraudulent acts can occur at any stage of the transaction, from the initial negotiations to the closing of the sale. The party committing fraud may be the buyer, seller, real estate agent, or any other party involved in the transaction.
There can be many types of fraudulent activities in real estate transactions, such as:
- Misrepresentation of Property Information: This occurs when a party provides false or misleading information about the property, such as its condition, size, zoning restrictions, or history of renovations.
- Concealment of Defects: Failing to disclose or affirmatively hiding significant defects or problems with the property, such as structural issues, mold, or termite damage, can be considered fraud.
- Mortgage Fraud: This involves providing false information or documentation to secure a mortgage loan, such as inflating income or concealing existing liens on the property.
- Title Fraud: Title fraud occurs when someone fraudulently transfers ownership of a property without the knowledge or consent of the legal owner.
There are key required legal elements to successfully bring a fraud claim, and all of the following must be established:
- Material Misrepresentation: The plaintiff must demonstrate that the defendant made a false statement or concealed a material fact related to the real estate transaction.
- Intent to Deceive: The plaintiff must prove that the defendant intended to deceive or defraud them by making the misrepresentation or concealing the information.
- Justifiable Reliance: The plaintiff must show that they reasonably relied on the false information or concealment to their detriment.
- Damages: The plaintiff must have suffered actual financial harm as a result of the fraud.
Remedies for Fraudulent Real Estate Transactions
When fraud is proven in a real estate transaction, various remedies are available to the injured party:
- Rescission: The defrauded party can seek to rescind the transaction, effectively canceling the contract and returning both parties to their pre-transaction positions.
- Damages: The injured party may be entitled to monetary compensation for the losses incurred due to the fraud. This can include reimbursement for expenses, lost profits, and other damages.
- Punitive Damages: In certain cases where the defendant's conduct was particularly egregious, punitive damages may be awarded to punish the wrongdoer and deter similar behavior.
Statute of Limitations
It is crucial to be aware of the statute of limitations for fraud claims in New York State, prescribing the last day on which a lawsuit may be filed based on fraud; if you miss that date, it will be impossible for you to pursue your claim in court. Generally, a fraud claim must be filed within six years from the date the fraud was discovered or could have reasonably been discovered. However, it is advisable to consult with an attorney, as there may be exceptions or shorter timeframes depending on the circumstances.
Preventing Fraud in Real Estate Transactions
Prevention is always better than litigation when it comes to fraud in real estate transactions. Here are some practical steps for buyers and sellers to minimize the risk of fraud:
- Due Diligence: Conduct thorough research and inspections of the property, including obtaining professional inspections, reviewing title reports, and verifying the accuracy of information provided by the other party.
- Consult Professionals: Engage reputable real estate agents, attorneys, property inspectors, and mortgage brokers who can guide you through the transaction and help identify potential red flags.
- Documentation: Keep accurate records of all communication, contracts, and disclosures exchanged between parties. Written documentation can be invaluable in case of a dispute.
- Title Insurance: Obtain title insurance, which provides protection against potential title defects or fraudulent transfers.
Fraudulent activities can have devastating effects on buyers and sellers involved in residential real estate transactions. Understanding the basics of fraud claims is crucial for both parties to protect their interests and minimize the risk of falling victim to fraud. By being vigilant, conducting due diligence, and seeking professional advice, buyers and sellers can navigate the real estate market with greater confidence and peace of mind.
If you believe you are a victim of fraud or have been accused of fraud regarding a real estate transaction, please contact Peter J. Gregory at (585) 512-3506 or firstname.lastname@example.org to review your options.
This publication is intended as an information source for clients, prospective clients, and colleagues and constitutes attorney advertising. The content should not be considered legal advice and readers should not act upon information in this publication without individualized professional counsel.
McConville Considine Cooman & Morin, P.C. is a full-service law firm based in Rochester, New York, providing high-quality legal services to businesses and individuals since 1979. With over a dozen attorneys and a full paralegal support staff, the firm is well-positioned to right-size services tailored to each client. We are large enough to provide expertise in a broad range of practice areas, yet small enough to devote prompt, personal attention to our clients.
We represent a diverse range of clients located throughout New York State and New England. They include individuals, numerous manufacturing and service industry businesses, local governments, and health care professionals, provider groups, facilities and associations. We also serve as local counsel to out-of-state clients and their attorneys who have litigation pending in Western New York courts. For more information, please contact us at 585.546.2500.