The threat posed by wire fraud has commanded quite a bit of attention from the real estate ecosystem. But as the housing industry has gotten better at tackling it, fraudsters have been hard at work developing more creative scams.
In January, a report from wire fraud prevention firm CertifID in conjunction with the U.S. Secret Service, notified the title industry of a rise in what is known as vacant lot fraud, or seller impersonation fraud.
“We started to hear a lot about seller impersonation fraud early on in the year,” Tyler Adams, the CEO of CertifID, said. “We polled our entire database of customers recently and we asked them if their company had experience seller impersonation fraud in the last six months and 56% of title companies have experience it in the last six months and 73% are seeing more attempts this year compared to last.”
In a vacant lot or seller impersonation scam, public records are searched to identify real estate that is free of mortgage or other liens, as well as the identity of the property owner. Oftentimes this leads to the discovery of vacant lots. Then, posing as the property owner, the scammer contacts a real estate agent to list the property. All of the communications occur through digital or email interfaces. The property is then listed, typically below market value to generate interest in the listing. When it comes to close on the sale of the property the scammer will request a remote notary signing. The scammer then impersonates the notary and returns falsified documents to the title firm or closing attorney involved in the transaction. The title firm then transfers the closing proceeds to the scammer.
“You hear about people getting duped by people pretending to be title companies or Realtors and directing parties within the transaction,” said David Kennedy, the CEO of Fidelity Land Title Agency of Cincinnati. “That is the typical fraud that we usually see with someone impersonating somebody already involved in the transaction and trying to get them to send the wire to the wrong place. This time was different though because they were pretending to be a party in the transaction right from the very beginning.”
Kennedy’s firm had a close encounter with vacant lot fraud earlier this year, but they caught it before the transaction closed.
“We’ve been hearing about this type of fraud for two years, but this was the first time that we have actually seen it take place here in our area,” Kennedy said. “We are glad we felt that something fishy was going on and that our technology partner, CertifID, verified those feelings for us.”
According to CertifID, vacant lot fraud is usually not discovered until the time of recording or transferring documents with the applicable county.
“This recent trend involving seller impersonation is particularly concerning, as the real property owner is typically not aware nor in a position to prevent the fraud, until it is too late,” said Thomas W. Cronkright II, Executive Chairman of CertifID. “Unfortunately, it’s just the latest evolution of wire fraud that affects title companies, law firms, lenders, realtors, and home buyers and sellers.”
In Florida, Christian Ross of Ross Law Ross Title, said there are plenty of warning signs you can keep an eye out for even prior to reaching the closing table.
Like the fraudster Kosofksy’s firm dealt with, Ross said to be wary of a seller who has an out of state ID and home address and is using a notary from a third state.
“We’d get people who would be impersonating someone who’s forwarding address was in Michigan, so they would get a fake ID with a driver’s license from Michigan with the correct forwarding address on it, but then they would be in England for the signing and then they’d want the money sent to a bank in Singapore,” Ross said. “That definitely tipped us off because very few people really live like that.”
Ross also noted that warning bells ring for him when fraudsters posing as sellers are “almost too easy to work with,” and that they are always mysteriously out of town.
His firm has begun the practice of mailing letters to the property owner’s home address as listed on tax and property records, especially if the property being listed for sale is not their primary residence.
In addition to Ross’ red flags, ALTA suggests comparing the seller’s signature to previously recorded public documents, to manage the notarization process and only use validated contact details, such as the mailing address on tax records, to contact the seller.
“Knowing scammers are constantly changing tactics, ALTA members frequently share their latest experiences defending against fraud with other real estate professionals via meetings, communication portals and educational events,” Blosser wrote. “While it is a big win every time a title agent identifies and stops fraud, the sooner fraud can be detected in a transaction, the better it is for everyone. Certainly, everyone involved in a real estate transaction has a role to play in combating fraud.”
