Do You Know Where Your Deed Is At?
A new wave of fraud is emerging, often undetected until it’s too late: title theft. In this scheme, imposters gather personal information of property owners and, posing as the owners, attempt to sell the property or borrow against it using the property as collateral. This fraud can manifest in various ways, from high-profile attempts like the recent foreclosure scam involving Elvis Presley’s historic Graceland to more subtle schemes that go unnoticed for months or even years.
One common scenario involves fraudsters targeting the titles of undeveloped properties or infrequently used vacation homes owned by individuals residing out of state. These fraudsters gather personally identifiable information through phishing, malware, or negligent retention of personal data. Armed with this information, they create false driver’s licenses and other identification to impersonate the true owner and compromise the title.
The Scam Unfolds
The fraudster, posing as the property owner, contacts a listing agent to sell the out-of-state property. The agent, believing the fraudster to be a legitimate seller, lists the property. An unsuspecting buyer purchases the property, and the fraudster absconds with the funds. The true owner may remain unaware of the illegal transfer for a significant period.
A recent claim involved an insured attorney representing a buyer of undeveloped land. The seller, an out-of-state individual, listed the property with a local real estate agent. Unknown to the agent, the seller had stolen the true owner's identity and provided a fraudulent driver’s license. The seller requested a remote closing, citing work conflicts. The closing proceeded without issue, and the fraudster received the funds while the buyer took possession of the property. The buyer, a contractor, began building a home on the land. Months later, as the new home neared completion, the true owner discovered the fraudulent deed transfer. The title insurer is now involved, attempting to resolve the situation and may seek equitable subrogation against the transaction parties.
Red Flags: Recognizing Potential Fraud
While schemes vary, there are often clues that an illegal fraud may be in progress. Be wary if:
- The seller is an out-of-state party.
- The realtor is unfamiliar with the owner/seller.
- Minimal personal identification is provided to validate the seller's legitimacy.
- The property is unimproved or has been vacant for an extended period.
- The seller seeks to complete the transaction remotely.
- The seller desires an expedited closing date.
- The seller’s LinkedIn or social media profiles are new with little history.
Proactive Measures for Professionals
Attorneys, realtors, and other professionals understand the established duties and standards of care. However, with the advent of remote transactions, e-signatures, and immediate transfers of funds and property, the environment is ripe for exploitation by fraudsters. In this swiftly changing landscape, heightened scrutiny is essential to protect your clients and your practice.
Stay vigilant and ensure your due diligence processes are robust. With careful attention to potential red flags and thorough verification procedures, you can help safeguard against this growing threat of title theft.
