Humber/Ontario Real Estate Course 3 Exam Practice

Which statement accurately describes a straw buyer in the context of real estate?

1. A straw buyer acts as the real buyer's agent openly.

2. A straw buyer conceals the identity of the real buyer.

3. Value fraud usually involves selling a property at an artificially low price.

4. An undisclosed second mortgage is not generally viewed as mortgage fraud.

5. Mortgage fraud might be suspected if the sale price of a property is close to its current market value.

6. A straw buyer is typically used to secure a legitimate property deal quickly.

The correct answer is: A straw buyer conceals the identity of the real buyer.

A straw buyer is someone who purchases property on behalf of another individual or entity, typically to conceal the true identity of the actual buyer. This arrangement is often used to circumvent certain restrictions or to obtain financing that the real buyer may not qualify for. In essence, the straw buyer completes the transaction and provides their own name for the purchase, thus hiding the involvement of the actual buyer. This practice can lead to legal complications and is considered deceptive, as it obscures the true ownership and intent behind the transaction. Understanding this concept is crucial for those in real estate because it highlights potential unethical practices and risks involved in property transactions. The other options present scenarios that either mischaracterize the actions of a straw buyer or describe different real estate issues that do not align with the specific definition of a straw buyer. For instance, discussing value fraud or undisclosed second mortgages does not pertain directly to the role of a straw buyer in a real estate transaction.