The Increasing Importance of Educating First-Time Buyers about Property Fraud

Published by GlobalX on Feb 20, 2020

First-time buyers (FTB) were one of most significant buyers segments 2019 that helped prop up the market.

Since 2016, FTBs have made up 51% of all residential property transactions using a mortgage, according to data from Yorkshire Building Society.

Despite a stuttering property market last year, favourable interest rates and strong employment levels meant that FTB transactions exceeded pre-financial crash levels.

The 353,436 FTB transactions completed using a mortgage last year marginally bettered the 353,130 transactions completed by this demographic in 2007.

The figures from 2019 were also 2% higher than those a year earlier and a 16% increase from before the referendum in 2015.

In terms of total property transactions, NAEA propertymark data indicates that FTBs became more important in 2019, rising from 25% to 27% year on year.

A quarter of agents believe that FTB’s influence on the market will increase further in the year ahead despite this their needs aren’t being addressed by the industry.

When such a vital segment of property transactions is made up of inexperienced stakeholders, it is vital that experts within the sector are providing additional hands on to advise and protection.

Fraud happens to everyone

Despite the growing dependency on FTBs this isn’t always the case. In one such example, a young FTB couple failed to receive adequate guidance during their property sale which resulted in a successful fraud.

Having secured £94,000 to finance their property sale, a young couple were left shocked to discover the money they sent to their conveyancer had vanished before the deal was complete.

Devastatingly, cyber criminals had intercepted the email communication between the conveyancer and the buyer.

Fraudsters then created a convincing looking email domain and continued communicating with the couple using the new email address. Having gained the confidence of the couple, the property money was sent to the fraudsters account and was swiftly withdrawn.

When social engineering and fraudster communication is so convincing, it can be very difficult to differentiate between fake and legitimate sources. While it is easy to assume that younger buyers are a lot more tech savvy and therefore a lot more aware of online scams than previous generation, they can still fall victim to professional criminal activity.

Protecting first time buyers

In this instance, client education is vital and law firms should be warning all clients, especially those new to the property sector, about the warning signs of property fraud.

While conveyancers can rely on tools such as Lawyer Checker and AML checks to reduce their risk of property fraud, the general public do not which is why its so vital that conveyancers educate their clients on potential risks to look out for.

Putting robust processes in place to deal with and identify the murky world of property criminals is vital in fully protecting your firm and clients.

Simple steps such as informing your clients at the start of the transaction that you won’t be changing your bank account details can help raise awareness of suspicious emails they may receive.