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Real Estate Investor’s Guide To Avoiding Scams

December 11, 2024

Investors aren't the only ones changing their methods as market conditions evolve. Fraudsters are likewise modifying their techniques when the amount of real estate sales declines. Real estate transactions have long been a popular target for cybercrime scams, as the payouts can be enormous. 

Because of the current connection, a fraudster does not even need to be in the same state or nation to conduct these crimes.

International rings of cybercriminals specialize in numerous sorts of real estate scams that can be carried out by email, phone, or the Internet.  

The majority of wire fraud tales in the press feature phishing scams and company email compromises aimed at the buyer's down payment or mortgage payback.

Another type of wire fraud occurs before the contract is signed, and investors seeking a good real estate deal are great candidates. 

Recently, the American Land Title Association (ALTA) issued an advisory regarding a growing practice of deed fraud targeting unoccupied properties. Here's how the scam works, what red signals to look for, and how a title and closing agent might assist. 

How Fraudsters Pose as Owners and Commit Fraud

As the inventory of existing residences decreases and the opportunity to leverage company email compromises diminishes, fraudsters are hunting for unoccupied vacant land to repeat the false owner scam.

Instead of waiting to embezzle money from a legal sale, scammers pose as the owner and deceive a real estate agent into listing the property for them. According to ALTA, there has been an increase in this form of fraud before the winter vacations.

Marshall Sklar, a Boca Raton real estate broker, received a surprising phone call after closing on a vacant property. On the other end, a woman said the property had been taken. The agent reviewed the documents and discovered that the contact information, wiring instructions, and name of the recipient of the money did not match the name of the seller.

The fictitious owner made a false ID with the true owner's personal information and signed a listing agreement with another real estate agency. Fortunately, the true owner signed up for property fraud alerts on the Palm Beach County clerk's website and was notified when a new deed was filed transferring her property's title. 

Sklar had to get the $200,000 back before it was lost forever, and time was running out.

scammer access denied

Here is a breakdown of how fraudsters carry out the unoccupied land scam: 

  1. Online public records are checked to locate vacant land that is free of mortgages or other liens. The search includes vacation homes, rental properties, and homes with deceased or elderly owners. 
  2. The identity of the owner has been confirmed. Fraudsters call a real estate agent to list the property for sale. 
  3. They may make a phony ID to prove they are on the vesting deed and have the authority to sell the property. The majority of conversations will be performed via email or text, rather than in person. 
  4. Scammers will price the property below market value and prioritize all-cash offers. 
  5. In the end, they desire their notary. They may impersonate the notary or collaborate with an unscrupulous notary to execute forged documents, such as the bogus deed that alerted the Palm Beach County clerk's office.  
  6. Money is transferred to the fraudster's account by the buyer, lawyer, or title company.
  7. A phony deed is filed in the public land record system, and it may go unnoticed until the buyer tries to sell the property or the true owner finds the mistake. 

Red Flags To Avoid Fake Owner Scam

Investors must use caution because the property listing is real but the owners are not. To avoid being scammed, be aware of these red signals before your next purchase.

  1. The lot contains properties without active owners. While there has been an increase in criminals targeting vacant land, any property without an owner living on it is susceptible to a fake owner scam and deed fraud. Buyers are likely to want to swing by and look at the home before making a purchase, thus the scammers want to reduce any suspicion of mischief from the true owner. This means that vacation homes that are not used for short-term rentals, as well as properties with elderly owners in care facilities, are typical targets of the scam. 
  2. Below is the market list price. If an offer appears too good to be true, it could be a fake owner scam. Be wary of listing prices that are lower than comparables in the region. Consider leaving the transaction if the seller is evasive.
  3. Cash-only offers. Fraudsters prefer to deal with all-cash offers because they speed up the closing process and reduce the number of specialists participating in the transaction. Not only does a loan often extend the inspection period, but demands such as appraisals and other due diligence may provide additional opportunities to expose the deception.
  4. A feeling of urgency. Scammers want to finish the transaction and get the money as soon as possible to evade detection. 
  5. Demands that their notary be used. To finish the deal, use a closing lawyer or title agency. These experts will execute the closing documents using certified notaries or collaborate with reliable notaries and loan signing agents. There is a screening procedure to verify the authenticity of an outside notary if one is required.

How To Avoid Fraud In A Real Estate Deal

Landowners are notified by numerous county clerk's offices when suspicious activity takes place, such as when a new deed is recorded on their land. Reporting the crime to your bank and the police, however, could not accomplish anything by the time the warning is triggered. At this stage, recovering the money might be an impossible task.

Because procedures are in place to recognize the warning signs, working with a title and closing company like IndyLegal can help stop these frauds from succeeding.

As an impartial third party, a title company should objectively confirm the seller's identification, learn their legal right to sell the property and look for discrepancies in the wiring instructions.

Meanwhile, the technological platform utilized in these RON sessions scans and identifies phony identification documents, and our remote online notarization partner, Notarize, also verifies a notary's qualifications. 

The title insurance coverage guarantees that your financial interest in the property is recovered if the scam is discovered days or years after closing, even though these scams are frequently discovered before closing. Investors are shielded by an owner's policy from fraudulent deeds, unidentified heirs, and other title problems that could result in disputed ownership and legal actions.

To learn more about how to avoid fake owners and scams, be sure to check our resources here.

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8315 W. 10th Street
Indianapolis IN 46234
317-214-6023

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