Real Estate Council of Alberta Fundamentals Practice Exam

In real estate fraud, what is often the purpose of a straw buyer?

1. To gain direct ownership of property

2. To impersonate legitimate buyers in transactions

3. To artificially inflate property values

4. To conceal financial activities

The correct answer is: To impersonate legitimate buyers in transactions

The role of a straw buyer in real estate fraud is primarily to impersonate legitimate buyers in transactions. This individual acts as a facade to facilitate the purchase of property on behalf of someone who may not qualify for a mortgage or who wishes to hide their involvement in the transaction. Straw buyers are often used to circumvent regulations or to obscure the real buyer's identity for various illicit purposes. This practice can help in executing schemes like mortgage fraud, where the real buyer may not have the financial means declared or might have a history that would disqualify them from obtaining financing. Therefore, the primary intention of using a straw buyer is to present a misleading front that allows the actual buyer to enter the real estate market without scrutiny, thus enabling fraudulent activities while maintaining an appearance of legitimacy.