Fraud: Examples And Warning Signs For Smart Investors

Fraud plays a major role in real estate lawsuits, but most of the time the issues aren’t intentional. Most people are sued for miscommunication and accidents, rarely over intentional negligence and purposeful fraud. It’s important to realize that everything that is stated will be interpreted by the listener. Courts have broken these issues into different “degrees” of fraud, to help define the problems they will create.

Description and Degrees of Fraud

It can be helpful to think of fraud as a spectrum. When we discuss the fraud spectrum, we’re discussing the intent of the person being accused of fraudulent activity. Here is a breakdown:

Understanding fraud is useful for understanding insurance. Most insurance companies will not cover gross negligence or fraud.

Examples of Different Degrees of Fraud

Now remember, most lawsuits you’re likely to face as a real estate investor are not the result of intentional fraud. But this spectrum is useful for showing how liability can attach with different levels of intention or involvement on your part. Here are some examples of what types of situations fall under different parts of this spectrum.


You might encounter any number of these situations as an investor. For now, the most vital information for you to know is that fraud and liability go hand in hand.