How to Protect Yourself from Real Estate Fraud
What every homebuyer should know about common types of fraud in real estate
Anyone who has searched for a new home understands that a real estate purchase is one of the most exciting, overwhelming, and complicated transactions a person can be involved with during his or her lifetime. Unfortunately, fraudsters also recognize the complex nature of homebuying and know how to use it to their advantage.
While you’re wrapped up in the myriad of details in the hectic days leading up to your closing, organized crime groups could be preparing to capitalize on your distractedness by making you the next victim of real estate fraud. Their crimes range from cashing out home equity lines to selling your property from underneath you.
So, how do you protect yourself from becoming a victim of fraud? Let’s take a look at some of the most common types of fraud and the signs to watch out for.
Buyer Beware: Common Types of Fraud
To safeguard your property and prevent significant financial loss, it’s important to understand the common types of real estate fraud. These include:
- Seller Impersonation Fraud – One of the newest, fastest-growing forms of real estate fraud, seller fraud is when a fraudster impersonates the owner of a vacant or unoccupied property to steal the funds from the sale. To carry out the fraud, the scammer searches tax records for unencumbered pieces of land, meaning that no one is living on the property and there are no mortgages, liens or litigation associated with it. Once the fraudster finds an eligible piece of land, they can determine the identity of the landowner using public records and assume that identity to list the property for sale. They may even use a real estate agent to make the sale look legitimate.
- Property Transfer Fraud – As mentioned above, property fraud can occur if a scammer forges your identity and transfers your property into their name, recording a document in the official records. This fraudulent activity can make it appear as if the scammer owns your home or property.
- Mortgage Fraud – Another common type of fraud in real estate, mortgage fraud involves multiple types of scams. One example is when fraudsters trick homeowners into signing high-interest mortgages and registering them against the property. In other cases, a fraudster may impersonate a homeowner and obtain a mortgage against their property without their knowledge to collect the cash value of the mortgage.
- Wire Fraud – Real estate wire fraud happens when a hacker poses as one of the parties in a real estate transaction, such as a title company agent, real estate agent, or attorney. The fraud occurs when the customer mistakenly “wires” money to the wrong person or entity. The hacker may send fake account details via email or other means and then convince the buyer to divert their closing costs into a fraudulent account. For example, a criminal may use a similar email address and steal a company’s logo to make it look like the email came from a title company or real estate agent.
Identifying the Signs of Possible Fraudulent Activity
Taking preventative steps to protect your personal information can minimize the risk of fraudsters exploiting this information for their own gain. In addition, there are signs you can watch out for that may indicate you are the target of real estate fraud, including:
- Unexplained notices regarding changes to your title
- Suspicious property transfers
- Irregularities in documentation
- Unexpected notices from your municipality
- Urgency to move forward with the real estate transaction by a title company agent, real estate agent, or attorney (who is, in actuality, a fraudster)
- A change in wiring instructions
- Confusing email communication from parties in the transaction
Get to Know Industry Safeguards Against Fraud
In today’s increasingly online world, with vast amounts of information publicly and readily available, fraudsters are finding it easier than ever to create legitimate-looking documentation to perpetrate real estate fraud. That’s why the title industry is taking steps to make fraud far more difficult and less tempting to commit. These measures include:
- Secure Online Closings – Reliable e-closing platforms offer top-notch security, including encryption and multi-factor authentication, and ensure document integrity and authentic digital signatures. Documents are prepared by the title company and uploaded to an online remote notarization platform. When buyers and sellers log on, they can review the documents and consult with their agents. Signers electronically sign and the notary electronically notarizes each document as required. As a security measure, each completed document is then tamper sealed.
- Identity Verification – This crucial, in-depth process involves linking an individual to the information they provide. The signer’s identity is electronically validated to a much higher standard than in a traditional paper-based notarization. For example, their photo ID is validated using -database-driven tools such as knowledge-based authentication and software-based analysis.
- Secure Wire Transfers – Since real estate transactions are especially vulnerable to wire fraud, whereby a hacker tricks a customer into mistakenly wiring money to the wrong person or entity, secure wire transfers are a must in the title industry. This security is made possible through software platforms that verify identity and bank details in mere minutes, prior to any funds being transferred. These software platforms may also include wire fraud insurance and fraud recovery services.
What to Do If You Become a Victim of Real Estate Fraud
If fraud happens to you, or if you detect suspicious activity, it’s essential to act fast and take the following steps:
- Contact the relevant authorities – Visit your local police department, call the FBI, and, if applicable, file an identity theft claim with the Federal Trade Commission (FTC). Contact your financial institutions so they can freeze any funds that fraudsters may try to obtain. You can also notify one of the three credit bureaus (Equifax®, TransUnion® and Experian™) of the fraud.
- Work closely with your title company – Contacting your title company can aid in the process of investigating the fraud and can help you understand what happened and what your next steps need to be.
- Access legal resources for victims – The Michigan State Police Fraud Investigation Section’s teams investigate and assist federal and local law enforcement agencies with investigating criminal activity related to fraud and identity theft while providing victims with available resources to prevent further victimization. More information may be found at https://www.michigan.gov/msp/divisions/specialinvestigation/fraud-investigation-section
Vanguard Title Is Committed to Protecting Buyers and Sellers
At Vanguard Title, we’re dedicated to keeping you safe from fraud throughout the closing process. One way we protect you is by partnering with CertifID, an easy-to-use technology solution, to securely exchange wiring information and guarantee each wire transfer up to $1,000,000.
Plus, we guide buyers and sellers through the process every step of the way. Your peace of mind is our top priority when helping you to buy, sell, or refinance a home or commercial property.