Real Estate Council of Alberta Fundamentals Practice Exam

What does a "Straw Buyer" do in a fraudulent transaction?

1. Provides a false identity to obtain a loan

2. Reinforces inflated property values

3. Sells their credit information to others

4. Manipulates contract terms for legal advantages

The correct answer is: Sells their credit information to others

In a fraudulent real estate transaction, a "Straw Buyer" typically refers to an individual who is used as a front to disguise the true buyer's identity. While the selected answer indicates that the straw buyer sells their credit information to others, the most accurate understanding involves the role they play in facilitating fraudulent transactions without being the actual buyer. A straw buyer is often used to secure financing or purchase property under false pretenses. This can involve providing a false identity to lenders to obtain a loan or even allowing someone else to benefit from the property while they assume the risks and responsibilities. The essence of a straw buyer's function is to create the illusion of legitimacy, thereby helping in manipulating the transaction to achieve goals that wouldn't be possible under direct participation of the scheming buyer. This fraudulent practice is designed to mask the true nature of the transaction and can lead to significant financial and legal implications. It is important for participants in real estate transactions to recognize these tactics to help prevent fraud.