Keeping a close watch on emerging trends in the real estate market is important for industry professionals and prospective homeowners alike. Unfortunately, one of the newest and fastest-growing trends to increase in occurrence this year is a crime known as seller impersonation fraud.
Also known as vacant land/lot fraud, owner fraud, and absentee seller fraud, seller impersonation fraud is a real estate scam where 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.
According to an October 2023 survey by CertifID, a whopping 77% of real estate firms reported seeing an increase in seller impersonation fraud attempts since the start of last year. That makes it one of the leading strategies of fraudsters and a significant contributor to the $400 million in victim losses due to real estate fraud in 2022, as revealed by the FBI in its latest IC3 report.
In August 2023, a case of seller impersonation fraud in Connecticut made national headlines when a man claimed that a $1.5 million home was being built on his property without his permission. The resulting lawsuit stated that someone fraudulently sold the land to a property developer.
The rightful owner and his family had long owned the disputed plot of land, which was left undeveloped, and accused a local attorney of fraudulently selling the land deed to a local firm. The attorney allegedly used a forged power of attorney document to say he was the property owner’s lawyer and to execute the sale of the land. What’s more, the forged document falsely stated that the owner lived in Johannesburg, South Africa, even though he resided in New York at the time of the crime.
Scenarios like this are happening all over the country as fraudsters become more sophisticated and learn new tactics to compensate for the lower housing market transaction volume. That’s why it’s essential for real estate professionals and prospective buyers to know what to look out for and how to protect themselves from this insidious crime.
Red Flags for Real Estate Professionals to Watch For
Confirming the identity of potential clients is just one way that REALTORS® can protect themselves and their clients from seller impersonation fraud, especially with more agents working remotely and communicating with clients through email and text. Here are signs of suspicious sellers to be on the lookout for:
- Absentee Owners – Listing property that is non-owner occupied, such as vacant land, unoccupied acreage/ranch land, rental property, second homes, or vacation homes.
- Low-Priced or All-Cash Deals – A prospective seller asks to list the property below market value and will only accept offers from buyers willing to pay all cash.
- New Lead – A lead for a vacant land sale comes through an online portal or a similar lead service and has no previous relationship with you. Scammers will submit their fraudulent listing request to multiple brokerages or real estate agent sites at a time to see who will agree to list the property.
- Unknown Seller – The property is listed through a For-Sale-By-Owner website that shares the listing on public platforms, and no one knows the seller or speaks to them until a buyer makes an offer.
- Communicates Only Through Text/Email – The seller avoids face-to-face and phone conversations; their voicemail activates when called, but they respond through text or email.
- Rush to Close – During negotiations, the seller readily accepts almost all terms, showing no objections to proposed fees or commissions and prioritizing a quick cash transaction.
- Refuses to Attend Closing – While initially willing to attend the closing in person, the seller suddenly becomes unavailable, but still wants to sign the documents with a notary (often in a different city).
- Suspicious Wire Instructions – The seller provides wiring instructions to a bank that is not located close to the property or the mailing address for the tax bill.
- Suspicious Phone Number – A reverse search of the seller’s phone number shows it as a completely unrelated name or as unknown.
If you believe you may be a victim of fraud, be sure to cease all communication with the seller, terminate the listing, and notify all parties of the fraud.
Red Flags for Buyers to Watch For
Buyers who are looking for vacant land on which to build or considering the purchase of an unoccupied home should also remain vigilant in looking for common signs of seller impersonation fraud. Speak with your real estate agent and pause the transaction until you can verify its legitimacy if:
- The listed property is vacant land.
- The seller lives out of town and requests a remote or virtual closing.
- The listing price is below market value.
- The seller accepts an offer quickly, with little-to-no negotiation and a preference for cash sales.
- The seller wants to use their own remote notary or refuses to meet and close in person.
How To Stop Seller Impersonation Fraud in Its Tracks
By working together, buyers, real estate agents and title professionals can stay vigilant against seller impersonation fraud. Above all, trust your gut. If a deal or seller seems suspicious, slow down, ask questions, and complete your due diligence. In addition, agents can fight back against fraud by utilizing these best practices:
- Use identity verification technology – Handles identity verification of the vested owner in the transaction deterring fraud. Should be used upon first contact with potential seller.
- Check the tax or appraisal records online – If the property address and mailing address are different from where the seller appears to be calling from, the seller may be impersonating the property owner.
- Send a confirmation letter for the property at both the property address and the mailing address for the tax bill – The letter should provide the agent’s contact details and request the property owner reach out to confirm their intent to sell.
- Access the Secretary of State corporate records online for properties owned by an LLC or corporation – These records include the name and address of the manager, registered agent, and/or officers, who can help verify the true property owner.
- Ask the seller to provide a government-issued photo ID via email – Verify that the address on the ID matches the tax records and compare the signature with recorded documents in the County Clerk’s real property records, such as a deed of trust.
- Set up a video call with the seller – Although they’ll likely refuse the call, you can ask the seller property-specific questions that only the owner would know.
- Request copies of documents that only the property owner would have – This includes a copy of a tax bill, utility bill, copy of the settlement statement, title policy or survey from when the property was purchased.
- Perform a reverse directory search on the phone number provided – This will reveal the owner of the phone number or indicate if it’s unknown, suggesting the use of a “burner” phone.
- Work with a trusted title company – Choose one that has implemented the latest in fraud detection procedures.
Vanguard Title Protects Against Seller Impersonation Fraud
Vanguard Title employs many of the protections listed above. We continually invest in new tools, processes, and education for our employees and clients to stay ahead of fraudsters’ newest techniques to scam unsuspecting property owners. For more details, contact your account representative.
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