Protect Yourself and Your Client’s From Title Fraud
If they can steal your identity, steal your car, and steal your money, can someone steal your house?
Deed fraud, also called title fraud, is getting a lot of publicity lately. Deed fraud happens when a person records a deed that appears to be valid, but it is not. Sometimes, the owner’s signature on the deed is forged, or the deed may be signed by a Trust or entity that looks like it has ownership of the property but does not. The purpose of the fraudulent deed is to create the appearance that a fraudster owns property. The valid owner is usually not aware of the fraudulent deed.
Here is one way it works. The fraudulent deed is recorded at the Recorder of Deeds office making it appear as if the fraudster owns the property. Next, the fraudster advertises and sells the property to an innocent buyer. This works best with vacant properties or where the property is sold to a buyer “sight unseen.” The buyer is often enticed with a low price for a quick cash deal. Eventually, the true owner discovers the fraud. Then, the dispute regarding ownership is between the true owner and the innocent buyer – the fraudster is gone with the buyer’s money. Although the true owner has superior title over the “duped” buyer, the owner must clear their title on their own or the title is not marketable because the forged deed of the fraudster was post-settlement. Buyers rarely just sign a deed over without trying to contest ownership, and any lawsuit is expensive.
How can you prevent it from happening to you?
First, a homeowner must pay attention to their property. This is easy if it is your residence, but if it is a vacant property, the homeowner must establish surveillance and secure the property. However, even this is sometimes not enough. There are buyers who are so anxious to buy a property that they do so sight unseen. They rely on photos on the internet of what they are buying. It is easy for fraudsters to copy photos from legitimate real estate websites and create a false listing. Buyers need to be especially vigilant and go through established Realtors® to investigate. When in doubt, you can also consult a real estate attorney. Often, buyers are dazzled with a property and price that looks too good to be true. They succumb to the pressure to act now before someone else gets the deal. When buyers buy a property sight unseen, fraud can happen even with owner-occupied properties.
If sounds too good to be true, it probably is.
What can homeowners do to protect themselves? Homeowners have two good ways to help defend themselves against deed fraud. First, every buyer should get Enhanced Owners Title Insurance when they purchase real estate.
Homebuyers can get a standard title insurance policy or, for slightly more, an enhanced policy. One of the many benefits of an enhanced title insurance policy is that it includes post-policy deed fraud in its coverage. This means that if a homeowner is a victim of certain kinds of deed fraud, they can submit a title insurance claim to the title insurance underwriter to provide coverage for the claim.