No one wants to find out they’ve been involved in a sham real estate transaction. However, faked documents and fraudulent title transfers are significantly more common than most people realize. The concept of deed fraud isn’t new. This issue has existed for decades, most typically with unoccupied property and especially with deceased property owners, but it is growing in popularity in devastated neighborhoods where there are a huge number of unoccupied, zombie properties, putting property owners, and investors at risk.
Learn what deed fraud is, how it occurs, where it’s on the rise, and how to avoid a wrongful or unlawful property transfer.
What is deed fraud?
Deed fraud can take many forms, but it generally occurs when a property deed or title transfer is executed and recorded without the genuine and current owner’s permission or knowledge. This method is most typically employed in the case of deceased property owners or vacant properties that are not being monitored or maintained.
The supposed “buyer” obtains ownership of the property by falsifying the owner’s signature on the deed, either with false identification or a fake notary signature and stamp. The new “owner” can then rent the property, move in, or sell it to a legal buyer by transferring ownership to them. The property can be transferred to a new buyer without the present owner or heirs knowing if the fraudulent transfer and sale occur swiftly.
To provide a layer of protection from the false deed to themselves, some crooks would create a fictitious name for the first deed transfer and then transfer the title into their own name.
Increase in deed fraud
This technique has been widespread in various states, including Florida, Pennsylvania, Ohio, Indiana, and Michigan, with the bulk of incidents occurring in places with a large number of unoccupied properties, such as South Florida; Philadelphia and Pittsburgh, PA; Cleveland, OH; Detroit, MI; or Lake County, IN. In some locations, the rise in title fraud has prompted municipalities to implement new systems that automatically notify property owners when a title transfer is recorded.
When I was looking at a non-performing mortgage loan for a deceased borrower as a note investor, I witnessed deed fraud firsthand. The title was transferred years after the borrower died. Fortunately, due research revealed the situation at hand, and I realized it was considerably more serious than merely foreclosing on the deceased homeowner to reclaim title to the property.
How investors can protect themselves
Deed fraud is most common in abandoned homes, especially those that aren’t maintained or inspected regularly. If you own vacant real estate, it’s a good idea to have someone check on it regularly and, if possible, set up alerts with the county recorder’s office to notify you if the property’s ownership changes.
Do your due diligence before getting into a purchase agreement or closing on an empty home if you’re in the process of buying one. Check public records for previous title transfers to see if there has been a recent title transfer, especially a quitclaim deed, and request that the title company conducts a thorough background check on the current property owner, including verifying multiple forms of identification to prove they are the owner before closing. Most counties, and even some states, do not enable the recorder’s office to verify the integrity and authenticity of the document being registered, so it is up to the closing firm or the investor to do so.
If your property has been wrongfully transferred to an unauthorized owner as a result of deed fraud, the first thing you should do is notify the county recorder’s office and submit a report with the local authorities. It can be difficult to track down the thief if a long period has gone since the transfer and the property has been resold, especially if they used a false name. This means that the most important thing a property owner or investor can do is keep an eye on and maintain any property they own or are interested in, particularly if it’s vacant.
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Do your homework and dig up your realtor’s license
You’re on the right track if your realtor has the adequate industry experience to warn you about a possible phishing scam. You may also inquire about an agent’s email security by asking if they utilize two-step authentication. Then, to be extra safe, make sure your agent is licensed.
A realtor who is licensed is held to a higher level. Agents are obliged to carry their pocket card, which displays their license number, with them at all times in several states. All you need to do now is ask. You may also lookup state-issued professional real estate licenses online.
It’s also a good idea to keep a lookout for agents that exhibit “phishy” conduct and terminate relations with them if necessary:
To be sure an agent you met on the phone is trustworthy, do some research on them. This will also assist you in detecting real estate frauds over the phone.
One of the simplest types of fraud prevention is to check up on any realtor you choose to work with, as well as any financial correspondence you receive. Nonetheless, there are many more excellent realtors than bad ones. You might ask your loan officer for a recommendation for a respected realtor with whom they’ve previously worked effectively.
A good rule of thumb to remember is that licensed realtors with an online presence should have reviews that reflect their service’s quality and integrity. You can even confirm whether or not an agent is a member of a professional organization. Here is a list of the top-ranked residential real estate state associations.
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