Unsuspecting real estate agents are being made unwitting accomplices to this new real estate scam! But not you, because you follow Vesta Settlements where we keep you up to date on information such as what this home title fraud (also referred to as home title theft) scam is and how you can stay safe.
According to the US Secret Service Cybercrime Investigations Division, criminals are posing as the property owners of vacant lots, rental properties, and/or real estate that is free of mortgages and other liens. They are masquerading as the property owners, contacting unsuspecting real estate agents to list the property for sale below current market value to generate immediate interest and quickly accepting offers. The criminals, however, will refuse to sign closing documents in person. Instead, they request a remote notary signing and provide falsified documents to the title company or closing attorney. A huge red flag and indication that you are dealing with criminals is if they require all communication be done electronically and refuse to meet in person.
To minimize your risks as a real estate agent, here are some tips from the Secret Service to keep in mind:
Independently search for the identity and a recent picture of the purported seller;
Request an in-person or virtual video meeting and ask to see a government issued ID, such as a valid, unexpired driver’s license;
Be on alert when a seller accepts a below market value offer in exchange for a cash and/or quick closing;
Never allow a seller to arrange their own notary closing; and
Use trusted title companies and attorneys for the exchange of closing documents and funds.
In the event a criminal is able to succeed in selling the property to unsuspecting buyers, it should be noted that a forged deed is invalid and therefore conveys nothing. A homeowner, however, may still sustain losses in the form of legal and other fees associated with clearing up the fraud. The buyer and their lender, if the buyers are funding their purchase using borrowed funds, also become victims. These parties can protect themselves against losses stemming from home title fraud, in part, by purchasing Title Insurance. Title Insurance is an insurance product that protects the insured party (“Insured”) against loss due to title defects. Title defects can be caused by a number of different issues, such as liens and encumbrances on title, forged documents, missing heirs, documentation errors, filing/recording errors at the county clerk’s office, or by fraud. As with all insurance products, the Insured’s coverage will depend on their specific policy and the exceptions to coverage therein. That said, the standard Owner’s Policy, generally speaking, protects against certain defects in title that occur prior to the Insured’s ownership of or interest in the subject property. The enhanced Owner’s policy, by contrast, offers a more comprehensive coverage which protects against certain defects in title that occur both prior to and during the Insured’s ownership of or interest in the subject property, such as defects caused by post policy forgery or fraud. This is one of the many reasons that we recommend our clients purchase the enhanced Owner’s Policy when closing on a home. If you are interested in learning more about what title insurance is and how it can help protect your clients, check out our Home Purchase Guide, Home Purchase 411, on our website (here) under the resources tab/downloadable docs.
Note, the protections offered by an Insured’s Title Insurance Policy are separate and distinct from the protections being offered by companies such as Home Title Lock (“HTL”), which purports to protect against home title fraud by monitoring and alerting homeowners whenever a change to the title of their home is recorded. Claims by the latter are currently in question and earlier this year, Ken Paxton, the Texas Attorney General, announced that his office is investigating HTL. More specifically, the Texas Attorney General’s office is concerned that several statements made by HTL – such as those claiming to provide 24/7 monitoring of a consumer’s home title, “complete protection” against home title fraud, and relating to the resolution services provided by HTL – amount to false, misleading, or deceptive advertisements in violation of the Texas Deceptive Trade Practices Act. More information by the Attorney General’s Office regarding their investigation can be found on their website (here).
Home title fraud, while not rampant, is a real risk. Real estate agents can minimize their risk of unknowingly assisting in these scams by taking the precautionary steps recommended by the Secret Service. Buyers can minimize their potential losses by purchasing an Owner’s Title Insurance Policy that includes coverage for post policy forgery or fraud. Through the enhanced Owner’s Title Insurance Policy Insureds gain peace of mind and can be assured that whenever a covered title defect arises, they will have assistance in getting the issues resolved or otherwise be indemnified and protected against loss.