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Banks and real estate agents have been hit by a $15 million Auckland property valuation scam which insiders say is "becoming an epidemic".
An investigation is believed to be focusing on at least four people suspected of using fraudulent property valuation documents to rip off banks. Banks say
they are working with police.
One source told the Herald on Sunday the scam was thought to involve $15 million in money lost and false valuations. He said there was "no doubt" banks had been duped into handing over loans on fictitious valuations - and possibly even on entirely fictitious properties. "A couple of mortgage brokers and bank managers are looking a bit sad. The banks are deeply in a hole, because they have paid out much more than the value of the property."
One bank is understood to have taken out a "mareva injunction" to freeze the funds of one of the alleged fraudsters, none of whom have been arrested. Real estate experts say the crooks could use the money to renovate houses or buy other properties. They could pocket the money and flee from the debt.
The Herald on Sunday understands that two of the people being investigated are well-known in body-building circles. One source said the scam was known as "The Body Builder Case".
The fraudsters have targeted a South Auckland real estate agency for deals involving multi-million-dollar North Shore properties.
Able Realty First National, based in Papatoetoe, says its sale and purchase agreement forms have been used to present bogus valuations to banks.
A spokesman for Able Realty told the Herald on Sunday he was too scared to give his name. "There's too much money involved... multimillions. That frightens me. I don't want someone coming looking for me with a baseball bat."
The Herald on Sunday revealed last month that fraudsters had tried to scam more than $1 million from banks by submitting bogus valuations on two North Shore properties. The adjoining properties in Mairangi Bay sold last April for $1.7 million. The valuation presented to the banks - which they exposed as fictitious - was for $2.85m.
The Able spokesman said he found out the firm's documents were being used when he was called by Westpac, ASB and BNZ banks, querying the documents.
"It was a surprise. I thought, 'Somebody has done a deal here... There's going to be a big commission'. But the properties were in Mairangi Bay and Castor Bay... for two to three million dollars. You are looking at 10 times what we would sell places for.
"Why would they pick on us?... a small agency in the middle of nowhere?"
He said he had no idea how the fraudsters had got hold of the documents, some of which included his name and that of one of his sales people. He didn't believe anybody in his office had leaked them.
"In the past, we've had people coming in asking to buy forms from here. We've been offered money for them. I said to them, 'go to Whitcoulls'."
He said it was the first time he had heard of such a scam in 20 years.
He said he had contacted the Real Estate Institute which had sent a lawyer to investigate. The institute was satisfied the company was not involved in the scam. "The alleged fraud involved the use of a forged and altered agreements for sale and purchase of the real estate agency without the knowledge of the agent or the real estate agency," it said.
"The institute's preliminary investigations suggest the agreements were used to encourage banks to lend money on properties whose prices had been inflated. REINZ has been assisting the fraud units of two trading banks and will continue to assist them where possible."
It is believed the institute is meeting one of the banks this week to find out how serious the fraud is.
The banks themselves are remaining tight-lipped. Westpac spokesman Craig Dowling confirmed the bank was investigating more than one case of fraud.
"Our fraud unit is working with the police. It has been highlighted to our staff to be particularly vigilant about documentation. "
The ASB referred all inquiries about the case to the police.
The Able Realty spokesman said he believed the banks knew who was responsible. "Somebody went to the bank to apply for a loan. They know. Whether they press charges is another thing. Would they want to sully their reputation just to catch these guys?"
Blue Hancock from the Institute of Valuers believed the cases revealed in Auckland may be just the tip of a valuation fraud iceberg.
"If there is one out there, there are likely to be more."
How the scam works
* Fraudsters obtain sale and purchase agreement documents from a bona fide real estate agency - possibly by theft or by doing a previous property deal with an agency, then blanking out the details, leaving just the letterheads and other useful information.
* Bogus valuations are made on a selected property, inflating the price well beyond its real value. These are used to persuade banks to lend much more money than they would normally.
* It is also believed the scam has been used to obtain money on entirely fictitious properties.
* The money gained from the scam is used to do expensive renovations on properties, increasing their value even further, or to buy new properties. On fictitious properties, the fraudsters simply take the money and run.
