Seller impersonation fraud threatens American homeownership

With real estate inventory at a near-record low, buyers seeking a place to call home are facing stiff competition as bidding wars continue to be commonplace. In such an environment, buyers may feel pressure to bypass steps in the transaction to make their bid more attractive to the seller, but they should be wary that taking shortcuts can expose them to fraud. 

Unfortunately, today’s competitive market has created the perfect environment for seller impersonation fraud — a type of fraud in which bad actors impersonate property owners and attempt to sell property they don’t own. It is critical that title professionals and our industry partners spread awareness about this type of fraud and educate buyers about the steps they should take to protect themselves.

The U.S. Secret Service reported a steep rise in seller impersonation in an advisory it issued this year. According to a recent survey, 73% of real estate firms reported an increase in seller impersonation attempts this year. However, with increased vigilance by real estate professionals and buyer education, these scams can be spotted. We can reverse this trend.

The best way to avoid being the victim of seller impersonation fraud is to understand the threat and how it can happen. Professionals and consumers should be aware of the type of properties and transactions that are the most vulnerable to this type of fraud.

How fraud works

Scammers search public records to identify real estate that is free of a mortgage or other liens. These often include vacant lots or rental properties. The identity of the landowner is also obtained through these public records searches.

Scammers pose as property owners and contact a real estate agent to list the property for sale. All communications are through email and other electronic means and not in person.

The listing price of the property is typically set below the current market value to generate immediate interest in the property.

When an offer comes in, the scammer quickly accepts it, with a preference for cash sales.

The title company or closing attorney transfers the closing proceeds to the scammer. The fraud is typically not discovered until the time of recording of transferring documents with the applicable county.

Hope for the future

Fortunately, there are precautions that title and settlement companies can take to help prevent this fraud. First, they should contact the seller directly at an independently discovered and validated phone number. Title professionals can also ask the real estate agent if they have personal or verified knowledge of the seller’s identity.

There are several ways title professionals can verify a seller’s identity. This can be achieved by sending the seller a link to go through identity verification using a third-party service provider, running the seller’s email and phone number through a verification program or asking conversational questions to ascertain the seller’s knowledge of property information not readily available in public records.

Title professionals can also compare the seller’s signature to previously recorded documents to ensure they are the same. They can also compare the sales price to the appraisal, historical sales price or tax appraisal value to ensure nothing seems out of the ordinary.

If remote online notarization is available for the transaction, it can be used to ensure there is multifactor authentication of the seller by a title company’s approved and vetted notary. 

Of course, the easiest way for buyers to protect themselves is by purchasing a homeowner’s policy of title insurance, which often has additional fraud protection. We also recommend that all current property owners sign up for free property monitoring services that are usually offered by their county recorder’s offices so they can be alerted of any suspected fraud before it is too late.  

If you or someone you know believes they may be a victim of seller impersonation fraud, we recommend filing a fraud report with local and state law enforcement and the FBI at IC3.gov. 

As an industry that prides itself on protecting homeowners and their greatest investments, we take these threats to prospective homebuyers and homeowners seriously. That is why we have taken steps to spread awareness about seller impersonation fraud and educate homebuyers about how they can protect themselves. We encourage our industry partners to continue sharing best practices and tips to prevent more of these scams from taking place. 

ALTA encourages all stakeholders involved in the transaction to become educated about this fraud.

Diane Tomb is CEO of the American Land Title Association, the national trade association representing the land title insurance and settlement services industry, which employs more than 120,000 people working in every county in the United States.

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