Home Title Fraud: How to Protect Your Clients
For real estate agents and brokers, the issue of home title fraud is grave. From 2015 to 2019, real estate/rental fraud grew 2.6x faster than credit fraud with losses worth twice as much. Not only does your customer lose out on a property, but you also lose out on their business. The house of real estate is built on foundations of trust, and fraud is an expensive damage to repair.
What should you be on the lookout for? When it comes to home title fraud, the perpetrator can be anyone. The fraudster could be a stranger who stole your client’s identity online, or it could be someone as close as a family member, as was the case when an elderly couple learned of their grandson mortgaging their home and attempting to sell it under their noses.
Whoever the perpetrator is, their scheme follows three general steps. First, the fraudster created forged deeds using easily accessible online property data from public records. The relevant data includes homeowner’s identity and home equity, primary address and contact information, and examples of your client’s signature. Once they have what they need, scammers file paperwork with the county claiming ownership of the property. This is done so that they may take out loans against the property, sell the property with a quitclaim deed, or even inherit the property after your client’s death.
The last item is especially true of elderly clients, who are more likely to have home equity and are less adept at protecting themselves from identity theft. Finally, the most insidious part of the scheme is how much of it takes place in the dark. Both you and your client are unlikely to be aware of the scam taking place until a letter comes from the lender indicating foreclosure. Other ways the scheme is revealed too late include a client discovering they cannot sell, refinance, or transfer ownership of their property. In cases involving vacation or second homes, some may discover a stranger living on their property!
Once fraud has been discovered, the hurdles to reversing the scam are immense and frustrating. Evidence may prove scarce, law enforcement may not be able to intervene, and going to court is bound to be lengthy and expensive. In the specific case of a joint tenancy deed, proving fraud is nearly impossible. If you suddenly hear that your customer’s property is in foreclosure and if you don't move on it quickly enough, it will render a loss on the end of everyone except the scammer.
Is title insurance enough to prevent this tragedy? Not exactly. Title insurance can protect homebuyers from past title discrepancies, but it cannot keep your clients secure from new fraud attempts. The best way to protect clients from home title fraud is to uncover plots quickly. Tell your clients to keep personal information private and be wary of unsolicited requests for their bank account information or social security number. Make sure they know to review their bank account and credit reports regularly and watch for signs of identity thieves. Other things to watch include property taxes, utility bills, mortgage statements, and even the absence of expected bills. Any one document could show signs of fraud. Have clients review home information on the county record periodically to ensure accurate information is listed.
It's time to be proactive in protecting the home and home equity of your clients. Don’t wait until it’s too late - be ready and read more about the dangers of home title fraud in the visual deep dive below:
