In 2008, the FBI issued a warning about the neighborhood’s latest scam, title deed fraud. Thieves have found ways to steal homes without the owners knowing. Known as real estate fraud, here’s what it is and how you can protect yourself.
What is real estate fraud?
Title fraud is where a criminal steals a home by forging a deed. They then illegally transfer ownership of the house without the permission of the real owners. It’s basically when a fraudster steals your home and sells it or takes out a loan against it without you even knowing. When the mortgage is not paid, the property goes into foreclosure.
The scammer first finds a property they want to steal, usually a property with equity. They will then forge documents that transfer ownership of the house to themselves. After filing the paperwork with the proper authorities, they now have legal ownership of the property. They then either sell the property to third parties who don’t know it or take home equity lines of credit (HELOC) against the property and don’t pay it back. Some criminals also took out multiple mortgages on the property.
According to the FBI, there are other variants that criminals can adopt when looking to steal property. Scammers find a vacant home, such as a rental property or a vacation home, and find out who the owner is with a little research. They then steal the owner’s identity, illegally transfer the title to their name, and pocket the proceeds from selling the property or getting a HELOC. In some cases, criminals steal a house with the family still living there. They sell the house to a buyer without the family even knowing about it. Legitimate owners continue to pay the mortgage on a house they no longer own.
How can a title deed be stolen?
Title fraud combines two common scams, identity theft and mortgage fraud. Once the fraudster finds a property they want to steal, they then steal someone’s identity. They use the stolen identity to create fake social security cards, fake IDs, and other counterfeit documents. Criminals then forge your signature on a fraudulent bill of sale to transfer assets to their false identity. Many states require the seller, two witnesses, and a notary to sign for the deed to be registered.
Title fraud is essentially a forged document. When a seller (the transferor) transfers ownership of a property to a buyer (the transferee), they are also transferring the deed and title. A deed is the physical legal document showing that you own the property. A title is not a physical document, but a concept that designates who has legal ownership of the property.
The forged record is usually sent to your county clerk of court and filed in your county public records. The clerk only checks that the documents are correctly completed, he does not check if the sale of the property is correct. After submitting the forms to the county clerk, the criminals take legal ownership of the property.
What happens if your title deed is stolen?
Once your title deed is stolen, criminals sell the home to unsuspecting buyers or fake buyers (partners in crime using stolen identities). They may also decide to take a HELOC against the property. Once they have the money, they disappear. As a real home buyer, you are unfortunately not aware of the theft until it has already happened. Since the documents are fraudulent, the house does not legally belong to the scammers, so their goal is to quickly take advantage of the scam and get away, making it difficult for people to catch the criminals before they it’s not too late.
Unfortunately, victims can lose their homes as a result of title fraud. Trying to resolve the issue can cost tens of thousands of dollars in legal fees, as it requires involving the title company, lender, buyer and seller, and taking the matter to court. Title fraud can also impact your credit score.
How likely is title fraud?
The FBI states that while home theft is not very common, anyone is at risk of having their property stolen. Those most vulnerable to real estate fraud are seniors and homeowners whose identity has been stolen. Vacant properties and properties not regularly monitored are easier to steal and transfer illegally. Properties with a large amount of equity are also more likely to be targeted
The FBI reported that in 2017 there were 9,654 real estate fraud cases, resulting in over $56 million in losses. Real estate fraud has increased significantly since then, with 11,578 real estate fraud cases reported in 2021, totaling more than $350 million. This is a 20% increase in the number of cases and a 525% increase in the value of losses. These figures include all real estate fraud, however, and title fraud is only a small part of it.
How to protect yourself against real estate fraud
According to the FBI, the best thing homeowners can do is be vigilant. Title theft is not covered by your homeowners insurance policy, your HOA, or the banks. According to the FBI, here are some other steps you can take to protect yourself against real estate fraud.
- Open all letters you receive from a mortgage company, even if your name is not on them. Find out what it says and follow for more information.
- Periodically verify all of your property information through your county’s deeds office. You can do this for free or for a small fee. If you see something you don’t recognize, look at it.
You can also subscribe to credit monitoring services, use strong passwords, and exercise caution when clicking on links or attachments to help protect against identity theft. If you have vacation property, have someone check the house regularly to see if there are any signs for sale or unauthorized activities on the property.
Are Home Title Locking Services Worth It?
You can use a monitoring service such as “house title lock”. Title deed locking services, however, do not prevent title fraud, nor is it a lock as the name suggests. It monitors title activity and provides alerts when there is a title change, but only after it has happened. In most counties, you can access property records for free. The chances of title deed fraud are low, so you’ll need to see if it’s worth it. These services generally do not cover legal fees and other costs to clear your title from fraud.
Some companies claim that their title and deed locking services will alert you before, during and immediately after real estate fraud. Some offer services protecting you against property theft, equity theft, rental income theft, title obfuscation, lien filings, and unauthorized use, among many others. It’s important to do your research to see what’s covered, their reviews, and whether the cost is worth it based on the services they provide.
What to do if you are a victim of real estate fraud
If you are the victim of real estate fraud, you will need to act quickly. Contact financial institutions so they can freeze any funds that fraudsters can get their hands on. Call your county recorder and send them all the documents they need.
Then you need to contact local authorities, the FBI and the Federal Trade Commission (FTC). If the fraud happened when you concluded, title insurance may cover it, so contact them to see what your policy says. Finally, contact an experienced lawyer so that he can help you take the necessary legal steps.
Although title fraud is rare, it is real and there have been victims who have unknowingly lost their homes or suffered significant financial loss. Focus on your protection, monitor your credit and be on the lookout for any suspicious documents.