Seller impersonation fraud is a growing and increasingly sophisticated scam facing Texas landowners. The swindle can take months of legal hassles and title work to repair while costing thousands of dollars to property owners and potential buyers.
Real estate and title professionals can be the first lines of defense. Your careful vetting can stop fraudsters early on. But property owners also can help protect themselves.
Here are tips from two experts you can share with your clients and contacts.
BEFORE THE FRAUD
Know the Targets
Fraudsters love properties where the owner isn’t home: unoccupied land, vacant lots, raw land, vacation homes, and short-term rentals, according to Latra Szal, President of Texas National Title.
A lack of active attention at the property allows the scam to move forward. “That’s what they’re looking for,” says Roland Love, Vice President of Business Alliances and Field Operations, Dallas-Fort Worth, with Independence Title.
Occupied properties can still be targets, but someone’s much more likely to catch on: imagine a tenant or a property owner watching a stranger put a for-sale sign in the front yard.
Additionally, properties owned free and clear may be at risk because there are fewer parties involved in a sale. When lenders get involved, they’ll start vetting the transaction as well, which could uncover the scam. “If the house has a lien on it, then the thieves have to pretend to be the lender, too,” Love says. “But they do sometimes. These guys have no limits.”
Property Owners Can Set Up Alerts
Property owners may be able to register their email address and contact information with the county to receive alerts about changes to property status, Love says. Property owners can check with their county government to see if this free service is available.
Similarly, property owners can sign up for alerts with listing platforms. That way, they can quickly learn if their property gets listed by someone without authorization to do so.
If You Can’t See the Signs in Person, Find Someone Who Can
Most property owners won’t know their property is for sale unless they are searching online, says Szal.
Property owners can check up periodically in person, if convenient. If that’s not possible, it’s helpful to ask a trusted friend to look for for-sale signs or other indications of fraudulent activity. “If I’m the owner, I would want to do regular checks of the property,” she continues.
Friends, neighbors, and even total strangers can help the property owner stop fraud if it’s well known the property isn’t for sale. The property owner can post signs on the land or in the window of a building onsite saying the property is not for sale. Agents visiting the property will see the signs and know the deal they’re working on is a fraud.
Property owners can ask their neighbors to reach out if they see something suspicious.
Consider Making it Official
“If you wanted, you could hire a lawyer to record something and file an affidavit saying you have no intent to sell the property,” Love says. “A title company would pick that up in a title search. However, there can be unintended consequences with this approach. It clouds the title, may draw creditor attention, and what if the owner dies with the affidavit remaining in place?”
DURING THE FRAUD
Love advises listing agents to send a thank you note to the address the appraisal district has for the owner. “If there’s an absentee owner, they’re getting the tax statements sent somewhere else,” he explains. “I like this because it’s just a good practice to send a little Thank you for your business and I look forward to listing your property. And if the owner isn’t selling the property, I’ll get a call right away.”
Property owners will likely reach out to the listing agent when they discover a fraudulent listing. They could prove they are the rightful owners by producing relevant documentation and corroborating details. Once the scam has been uncovered, the listing agent may contact the potential buyers to stop the deal.
The agent would need to notify the MLS and report the property to the title company and underwriters. Title companies may share that information so the scammer cannot try the same tricks at a different company.
“Title companies have additional resources to prevent fraud,” Szal says. “We can do chain-of-title research and have access to systems agents and the public do not.” Some title companies have a team in place to review suspect transactions.
And, of course, contact the police and FBI when a fraud is discovered. Visit ic3.gov for more information.
Watch out for fake title companies
Criminals have started impersonating title companies as another way to steal buyers’ money.
In this new version of seller impersonation fraud, the scammers contact the buyer or agent with instructions to use a fake title company for the closing. According to the Secret Service, the scammers provide wiring instructions, and the buyer sends money to the scammers’ account.
Just like other ways to verify aspects of a transaction, taking a closer look and validating details are key. Independently verify the title company’s information. If possible, visit the company’s brick-and-mortar location and contact the bank they use.
Does this company primarily communicate via email? Review all correspondence carefully. Do their email addresses and URLs match what you find when you research the title company yourself, or is it slightly different? Are there spelling and grammar mistakes?
One red flag is if the title company conducts business using systems that are not secure, the Secret Service says. A real title company would not send wiring instructions by email without additional precautions.
You or your clients should not be pressured to move quickly, especially if you have doubts about the transaction. Asking a few questions could stop an expensive and damaging fraud.
AFTER THE FRAUD
If the fraud is only discovered after a transaction closes, there are steps property owners can take to remedy aspects of the problem, Love says. Legal actions to resolve seller impersonation fraud could take anywhere from a few months to more than a year.
It’s a good idea for property owners to retain a real estate attorney to help navigate the process regardless of how smoothly everything goes. The more time that passes after the fraud took place, the more complicated correcting the problem may be. If the parties work together, the process of signing documents to clear the title should be relatively straightforward. If the parties can’t work well together, the situation may need to be resolved in court.
If you were the listing agent or buyer’s agent on a transaction that turned out to be fraudulent, you might be contacted about what happened. You might also be asked to work with the buyer, title company, and law enforcement to clean up the damage from the fraud.
“It’s a challenge because you’ve got an innocent buyer saying I paid good money and I’m not giving up,” Love says. “The buyer has a title policy but will likely face a total loss.”
Property owners in some jurisdictions can ask a judge to make an ex parte action—one that involves only one of the parties—declaring the activity on their property was fraudulent, but some judges will not grant that action, Love says.
While property owners can do a lot to protect themselves, real estate agents can do more to identify scams and help clients.
How You Can Help
If you are a listing agent, always consider how the person claiming to be the seller contacted you. Many scammers will try to communicate only by text or email and not meet in person, Szal says. Recently, some scammers have branched out to video conferences or limited phone communication. “They will schedule a Zoom but on the day of the call, their camera happens to be broken,” she says.
If you ask for identification, does the “seller” provide it slowly or not at all? “There are a lot of searches you can do when you have the ID,” Szal says. Even an internet search can quickly show that a so-called owner is not telling the truth. “We were shown a passport ID recently with a substituted photo on it. The photo was too big,” Love says. “We found out the photo was taken off the internet and was a deceased convicted murderer.”
Ask questions only the owner would know. “If it’s vacant land, I may ask, ‘Is there anything that keeps me from being able to visit the property?’ Maybe they say no, I go out there, and I discover there’s a fence with a locked gate. A real owner would know that,” Szal says.
Not having a survey isn’t a red flag but it’s worth noting if other red flags are present, she advises. It’s likely the actual property owner would have a survey. All-cash deals are becoming more common but should also draw your attention. “Maybe they want to list below market value or close quickly,” says Love, adding those are both warning signs.
“One of the biggest signs is if the seller wants to sign remotely or even push to use their own notary,” Szal adds. “We require a vetting process for the notary. And the more the seller pushes back and asks why we are vetting the notary, the more we want to check.”
Being unable to attend the closing is a possible indicator of a scam, Love says.
The cons have become much more sophisticated in the last year, according to Szal. Earlier, criminals were using homemade contracts; now they are using Texas Real Estate Commission contracts.
Scammers have been contacting agents and listing homes in the MLS. “They’ve figured out we’ve picked up on their social engineering tricks and they’re getting creative,” she continues. “A fraudster may email the agent asking for a copy of the receipted contract and request to change the seller’s contact information. We’ve seen agents get tricked, forwarding the message to the title company asking the title company to update the details to the scammer’s information.”