Deed Fraud – Red Flags Require Further Scrutiny

Jesi L. Wolnik, PLC
jesi@lawjlw.com
www.lawjlw.com

Recently, I received an email from a real estate agent asking for assistance with a matter that she believed was deed fraud. Here is an excerpt from her email:

I’ve been asked to list a lot in Maricopa County for $600,000. I am concerned as the Seller doesn’t seem to know much about the property. Issues I have identified include:

• Polish passports, and he says FIRPTA does not apply.
• The tax mailing address shows the owners live in Washington, not Poland.
• The passports presented look doctored.
• Signatures on the passports do not match signatures on recorded documents.
• When he calls me, his phone shows John Williams. When I call him, I get a google voice message and he normally calls me back, but rarely answers when I call him.
• He calls himself Williams, not John. And he signs his name, Williams John.

Your opinion of this?

My opinion? This agent is sharp and just caught a criminal trying to commit deed fraud!

The above scenario is common, and I regularly receive calls and emails about deed fraud. However, there are many different forms of deed fraud, so it’s difficult to give you a list of what to watch for exactly. A real estate agent needs to contemplate the totality of the circumstances and watch for red flags. A red flag is an indicator that calls for further scrutiny. One red flag by itself may not be significant; however, multiple red flags may indicate an environment that is conducive to fraud.

I am often asked, “what properties are targeted?” There’s no question that vacant land, owned free and clear, is a common target. Criminals will continue to make calls until they find a real estate agent willing to list the property.

Typical red flags include:

• The “seller” needs to list the property right away. There’s always some story to explain an urgency to sell.
• The “seller” is out of country, therefore can’t meet with you.
• The “seller” can’t meet with a mobile notary that the title company will arrange, but instead, offers to have the documents signed and notarized through his/her efforts.
• The “seller” agrees to list below market value so that the property will sell quickly.

So what was done after I received this email? With assistance, the real owner was found and notified of the criminal’s intent. I contacted senior counsel from the title insurance company to put an alert in the system for this property. Why, might you ask? Because, though this agent was alert and refused to list the property, the criminal will continue to call agents until the property is listed and sold. By placing an alert in a data system, an unsuspecting title agency or listing agent will be alerted of the potential fraud if escrow is opened at a later date.

Of course, deed fraud can take various forms. So let’s me move on to another form of deed fraud that is far more difficult to deal with. This fraud is known as “equity skimming.”

A common form of equity skimming involves a criminal who exploits a homeowner facing foreclosure or other financial stress.  How is this done? An equity skimming case I assisted with recently went like this:

• Homeowner was in preforeclosure.
• Criminal shows up at her door offering to reinstate her loan by paying past due loan payments and late fees.
• In exchange for this “kindness,” the Homeowner must agree that if she can’t repay the “loan” to the scammer in 3 months, then the Homeowner agrees to sell the property, and the criminal will have the first right of refusal to purchase the property.

We’re not doing too bad so far, right? However, it’s the remaining terms that turn the scenario into a scam.

The criminal convinces the Homeowner that the only way creditors will stop calling her is if she “temporarily” puts the property in the criminal’s name. The criminal has the Homeowner sign a deed conveying the property to the criminal. The criminal never makes any payments, of course, and sits back, waiting for the foreclosure to occur. Because the property is now in the criminal’s name, the criminal will receive the excess funds, which in this case, was over $400,000.

Equity skimming is very lucrative because the Homeowners are in financial distress, which typically means they cannot afford legal assistance to pursue the criminal, even if the Homeowner knew how to find the criminal! Criminals know this and continue to financially devastate victims with the knowledge that there is little chance anyone will ever find them.

More often than not, in all of the deed fraud cases I have assisted with, the victim first reached out to a real estate agent that they knew. By educating yourself about deed fraud, how to identify red flags, and advising the victim to seek help, you play an important role!

If you are contacted by a deed fraud victim, encourage the victim to 1) call local law enforcement to file a report, 2) contact an attorney, and 3) file a title insurance claim, if applicable.

Jesi L. Wolnik, Esq.
This article reflects only the opinion of the author, is not intended as definitive legal advice, and you should not act upon it without seeking independent legal counsel.