Preventing Seller Impersonation Fraud

What is Seller Impersonation Fraud?

You probably already know about wire fraud, but have you heard about seller impersonation fraud? Seller impersonation fraud is a type of real estate fraud in which a scammer attempts to sell a piece of property that they do not own by pretending to be the owner of that property.

To perpetrate the fraud, the scammer searches tax records for unencumbered pieces of vacant land. This means that no one is living on the property, and there are no mortgages, liens, or other litigation tied to it. The land is completely free and clear.

Robert McNearney, attorney and partner at South Oak Title and Closing says, “Land is an easy target for these scams because no one is living there. In most cases, if you own a piece of land, you’re living somewhere else. Whether the land has been inherited or is an investment, people aren’t usually thinking about land they’re not living on. This makes it a prime target for scammers.”

Once the scammer finds an eligible piece of land, they use public records to determine the identity of the landowner. Then, they assume that identity and attempt to list the property for sale. These fraudsters will often use a real estate agent to make the sale look more legitimate. If the deal is closed, the fraud will go undiscovered until documents are recorded.

Red Flags for Seller Impersonation Fraud

Since many fraudulent sellers will attempt to use a real estate agent, agents have a valuable role to play in preventing seller impersonation fraud. And prevention starts with knowing what to look for. When selling a piece of land, keep an eye out for these common red flags.

Red Flags While Listing the Property

Always pay particular attention to unencumbered land sales. If the land is vacant and there’s no mortgage or lien attached to it, this land may have been targeted by scammers. Any time you’re dealing with unencumbered land, watch for other red flags to be sure that the land is being offered for sale by its legitimate owner.

The first clue that unencumbered land may be a target of fraud is a seller who lives out of state or out of the country. The seller’s location may not match the owner’s address that’s listed in the county tax records, or the records may show that the owner’s address is outside the United States. If these sellers are unable to meet an agent in person or unwilling to take a video call or a regular phone call, you may be dealing with a fraudster.

These individuals usually won’t respond to calls; if you do call them, they may send you to voicemail but will respond right afterward with a text. Although it’s entirely possible that you’ve called at a bad time, this behavior is concerning when paired with other red flags.

Another red flag is a seller that’s interested in listing the property well below fair market value. In fact, many fraudulent land sales are listed for under $50,000. This is designed to generate more interest in the property, facilitating a faster contract and a faster sale. Scammers have a preference for cash sales since the involvement of a mortgage lender can make it much harder for the fraud to proceed. Cash offers can also close much more quickly than financed purchases.

Red Flags Before Closing

Not all red flags for fraud occur before the property is listed. While concerning signs may have been missed early in the sales process, other red flags may emerge after the property goes under contract.

Many scammers are in a hurry to close the sale. “They create this false sense of urgency, because the more you rush the sale, the more likely it is that someone will overlook the fraud and make a mistake. They don’t want anyone to think too much about the sale or to dig into it,” McNearney explains. “You’ll hear all kinds of excuses like they need to leave the country right away, are going on vacation, won’t have access to phone or email after a certain day, or they need to close due to some urgent deadline.”

Scammers will also often insist on using their own notary to execute documents. Either the notary is also compromised and is part of the scam, or they’ve somehow acquired or stolen a notary. Similarly, the seller may attempt to send documents to the title company that are already signed and notarized. McNearney says, “Closing documents should never be signed in advance, and a trusted notary should be used in all real estate transactions.”

Another red flag to watch out for is sellers who won’t use their driver’s license or legal identification – or the one they’re providing looks fake. “Anyone can make a fake ID, especially if no one’s going to see it in person. Scammers are counting on you not knowing what an out-of-state or out-of-country ID looks like, and they’re also assuming that no one will check,” McNearney says. If an ID looks suspicious, it’s always better to verify its legitimacy.

Red flags can even appear when it’s time to wire the seller proceeds. If your seller wants the wire to be sent to an account that has a different name than the one that’s on the title, this is cause for immediate concern. Seller proceeds should always be wired to an account owned by the seller.

It’s also concerning when a seller won’t agree to use CertifID. CertifID is a technology that’s great at preventing wire fraud, but it’s also helpful for preventing seller impersonation fraud. It’s easy to use, and it protects everyone involved in the transaction.

The presence of a red flag doesn’t always mean that there’s fraud at play, but it is a sign that you need to stop, slow down, and investigate further. By taking a little extra time to verify the legitimacy of the seller, you can prevent attempts at seller impersonation fraud.

Preventing Seller Impersonation Fraud

There are very easy and straightforward ways to verify a seller’s identity, and none of these should be a burden for a legitimate seller.

Get Face-to-Face

All kinds of properties are owned by legitimate sellers who live out of town. And while it may not be possible to meet your seller in person, technology makes it really easy for you to see your seller’s face. For any transaction with an out-of-town seller, insist on a video or FaceTime call. While you’re on the call, you can also have them present their government-issued ID so you can match their ID to their face. There’s no need to mention fraud; you can simply let the seller know that this is your standard practice for sellers who live out of town.

Independently Verify

The same public search tools that scammers use to find vacant properties are also available to you. You can use reverse phone lookup to cross-check your seller’s phone number, and you can use public property records to verify the name and location of the property owner. You can also ask the seller basic questions about the property. While there’s no need to put them through a ten-question exam, you can ask them simple questions that wouldn’t be available in public records but any property owner would know, such as how long they’ve owned the property or their favorite part of the land.

Partner with a Title Company You Can Trust

It’s important to have a trusted title company as an ally for all of your real estate transactions. A trustworthy title company will insist on advanced fraud protection practices, and they can also serve as a valuable resource to you when you have questions or concerns.

When you partner with a trusted title company, you get:

• Notary protection. The title company should always use a vetted notary, especially for closings taking place out of town. While Remote Online Notary isn’t yet available in Alabama, other options for vetted notaries include other attorneys, title agencies, and banks. Your title company will ensure that the notary sits with the seller, verifies their identity, and watches them sign the documents.
  
• Resources for verification. While realtors can use public record search tools to verify a seller’s identity, your title company will have access to more advanced tools. Third-party resources such as Intellicheck can validate identity, while CertifID ensures that wire transfers are safe and sent to the right location. Title underwriters also share a database of bad actors, fraudsters, and illegitimate entities to combat fraud.
• Owner’s title insurance. Although your title company is working diligently to prevent all attempts at fraud, some attempts are still successful. Enhanced owner’s title insurance protects homebuyers in the event that they have purchased property that was sold fraudulently.
  

McNearney says, “Unfortunately, there are always going to be new types of fraud. Seller impersonation fraud is the latest scam, and it’s allowing these bad actors to make a quick buck off unsuspecting land purchasers. But at South Oak, we’re going to do everything we can to be aware of industry trends so we can protect our clients.”

You can trust South Oak to implement best practices and security measures to ensure that your real estate transactions are safe. We’re also here to support our real estate partners through ongoing education and by serving as your resource whenever you have questions. Contact us for more information about seller impersonation fraud, or order a title and schedule a closing today.