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Fraudsters trying to take advantage of Auckland's overheated property market have tried to rip off more than $1 million from banks in a valuation scam on two North Shore properties.
The scam has been brought to light by the Institute of Valuers, which believes it could be just the tip of a valuation fraud iceberg.
The bogus valuation for two adjoining properties in the upmarket North Shore suburb of Mairangi Bay was submitted to three banks a few weeks ago to secure a loan.
The properties sold last April for $1.7 million. The valuation presented to the banks - which they exposed as fictitious - was for a cool $2.85 million.
The president of the Institute of Valuers, Blue Hancock, said he believed the bogus valuation was still being presented to banks as late as last week. Hancock said a complaint had been made to the Serious Fraud Office.
The Property Institute, which incorporates the Institute of Valuers, issued a warning last week after Auckland banks were targeted by similar scams.
In one case, a valuation was submitted on a made-up company letterhead. It apparently included genuine phone numbers which would go to a message system advising that all valuers were temporarily unavailable but would contact the caller soon.
One source said the fictitious documents were sophisticated enough to fool the eye, although another commented that there were many mistakes within them.
Hancock said one case involved a fraud of more than $400,000. "They were being very, very devious," he said.
It is believed the fraudsters were using the money to renovate houses, or to buy several homes. It was also possible they could use a false name, take the money and flee from the debt.
Hancock said he feared there could be many more such scams, going unnoticed by lenders.
"If there is one out there, there are likely to be more," he said. "The banks could be subject to this all the time but they never realise it. It's a question of risk and time in checking things to the nth degree."
Craig Dowling, a spokesman for Westpac, confirmed his company was looking at more than one case of fraud but would not go into further details.
"While it is being investigated, the extent of any of that [potential losses] is up in the air. It may or may not lead to losses, depending on whether you catch the people."
A BNZ spokeswoman said she knew of no identified cases of the fraud at her bank.
The red alert from the Property Institute has also thrown up evidence of other cons, albeit less sophisticated, and for much smaller amounts, in provincial towns throughout the country.
Hancock said that soon after the warning was issued, he received emails from valuers in the North and South Islands of a few cases of genuine valuation documents being altered by loan applicants for "only a few thousand dollars".
The frauds were brought to light when, months down the track, valuers were asked to go back and review the house for further financing and had come up with a lesser figure.
One expert said that because the property market had been "hot" in the past four to five years and growing so quickly, scammers might have thought if the valuation was wrong they would still be "covered" by the increase in the property's value.
However, there was now greater scrutiny as a result of the tightening housing market.
Banks contacted by the Herald on Sunday said they had strong security measures to deal with fraud.
Hancock, however, said it was a reminder for institutions to be vigilant "especially when dealing with bigger numbers".
He advised them to ask for original documents and to check the credentials of valuers and their firms before doing business.
Westpac's Dowling said the fact that the matter was being talked about "means we [banks] are involved in the process of investigating, finding and bringing to account those people who have tried it".
