Fraudulent transactions involving vacant properties are on the rise and are a significant source of claims for title insurance companies. While seller impersonation fraud may involve any type of real property, it is more likely to occur where the property is vacant land, not occupied by the owner and unencumbered by a mortgage. These transactions involve a fake seller who does not have any personal relationship with an attorney, real estate agent or title company and will only communicate through phone calls, texts or email.
Red Flags of Seller Impersonation Fraud
Here are things to be on the lookout for:
- Vacant land
- No outstanding mortgages
- Seller is in a hurry
- Real estate agent never meets the seller
- Seller refuses video calls and in-person meeting/closing
- Typographical errors and non-matching signatures on documents
- ID appears to be cut and pasted together
- Suspicious Notary acknowledgments claiming to be from a U.S. Embassy or foreign country attorney
- Wiring instructions listing third-party payees and foreign banks
- Multiple foreign countries are involved based upon review of the documents (Example: Wire goes to Germany and documents notarized in France)
- Closing documents are executed and sent to a title company without first confirming what the title company will require for closing
- Property is listed below market value
- Seller’s address does not match the tax mailing address
- Seller insists on a cash buyer
Combatting Seller Impersonation Fraud
Here are ways to protect yourself and your clients from seller impersonation fraud:
- Pursue enhanced identity verification protocols (Example: Reverse phone look-up, cross reference information on tax records, ask property-specific questions that only the real property owner would know)
- Train staff on red flags
- Implement multi-step document authentication (Example: Cross check notary records, verify digital signatures, compare seller’s signature to past recorded documents and review the document’s metadata)
- Cross-reference seller information in public land and tax records
- Use encrypted communication platforms for sharing sensitive information and wire transfer instructions
- Verify seller requests by utilizing multiple contact methods (Example: Reach out directly to the seller using information directly from the tax records)
- Verify that the real estate agent has met the seller
- Stay informed of fraud schemes by participating with real estate associations and title companies
- Ask questions. Is the transaction too good to be true? (Example: Property being sold is listed below market value, fast closing, cash deal)
- Use only trusted notaries, remote online notarization or arrange signing at a secure office location
Bottom Line
Seller impersonation fraud will continue to evolve. Be vigilant in every step of the transaction and protect a client’s purchase by obtaining an ALTA 2021 Owner’s Policy on their behalf. An ALTA 2021 Owner’s Policy insures a property owner against loss or damage sustained or incurred by reason of unmarketable title, including forgery, unauthorized transfer and improperly executed deed. When issuing a title insurance commitment for vacant land, most title insurance companies will require a Confirmation Letter be sent to the address shown on the tax assessor’s records. This Confirmation Letter should be sent out as early as possible and should be used in all of Harris Beach Murtha Cullina vacant land transactions.
Harris Beach Murtha’s Commercial Real Estate Practice Group and is continually monitoring fraudulent schemes and trends. Harris Beach Murtha Cullina’s title agency can underwrite title insurance policies through Stewart Title Guaranty Company, Fidelity, Chicago Title Insurance Company and Commonwealth. If you need a title insurance policy or have questions about this or related issues, please reach out to the firm’s Title Counsel and Title Services Manager Aurora Mali Perry at 716-200-5124 and aperry@harrisbeachmurtha.com, attorney Molly A. Sleiman 716-200-5115 and msleiman@harrisbeachmurtha.com; or the Harris Beach Murtha attorney with whom you most frequently work.
This alert is not a substitute for advice of counsel on specific legal issues.
Harris Beach Murtha’s lawyers and consultants practice from offices throughout Connecticut in Bantam, Hartford, New Haven and Stamford; New York state in Albany, Binghamton, Buffalo, Ithaca, New York City, Niagara Falls, Rochester, Saratoga Springs, Syracuse, Long Island and White Plains, as well as in Boston, Massachusetts, and Newark, New Jersey.
