Imagine finding out that the property you just purchased is not actually yours because the seller never owned it in the first place. This is a growing problem where criminals transfer the deed to a property or home without the owner’s knowledge and then sell it off to unsuspecting buyers. Deed fraud, also known as property deed theft or home title fraud, is a type of real estate fraud in which someone unlawfully files a forged deed to facilitate the transfer of ownership for a property without the actual owner’s knowledge or consent.
The client purchased a vacant lot and started the process of surveying the land to design their dream home when a person stopped by to inquire about them trespassing on the land. The real estate transaction they just completed to purchase the lot was from a false owner of the property who forged a new property deed document. They are suing for $180,000 and $1500 in attorney’s fees.
What Went Wrong
In this specific situation, the sell-side agent did not verify ownership of the property before listing it and/or did not confirm that the seller had the legal right to sell the property. The agent should have obtained a copy of the property deed from the county records department and ensured that the name on the property deed matched the name of the seller.
That said, often fraudsters come prepared for this step with fake ids and notaries to file a new deed on the property to their name before listing. This is much easier to do on a vacant property, rental/ seasonal homes as well as a home without a mortgage because there are fewer individuals around to interject during the transaction.
As a real estate agent, there are a few deal characteristics that make it more vulnerable to these types of frauds:
- Vacant Home/Lot including seasonal, rental, estate sales because the owner is not the one living on the property, which makes it harder to verify ownership.
- Remote Seller who is doing business via email or telephone only, which keeps their anonymity.
- Cash Only requirement by the seller (they don’t want a mortgage company involved in the transaction).
- The sale price is under the market to move it quickly.
- Buyers not getting title insurance, because if they did the scam would most likely be revealed.
A good idea to help your buyers avoid this in the future, during closing have the attornies record a Memorandum of Ownership document on the property which requires future deed transfers to verify the identity of the owner via additional methods such as a passport or fingerprints.
Here is a good video talking about this happening in the state of Arizona:
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