Like most things in life, real estate fraud follows trends. Recently, in the Title Insurance industry, we’ve seen an uptick in real estate fraud involving vacant land. In this post we’ll detail some red flags to be weary of and what we, as Title Agents, do to combat against such fraud.
If it’s too good to be true…
A realtor, seller, wholesaler, or long-lost cousin reaches out to you (because they know you’re an up-and-coming real estate mogul) with an unbelievable deal on a piece of land that is priced way under market value that just came up for sale. However, you need to act fast before someone else snatches it up. The first and most important way to avoid being taken advantage of is to use your common sense and better judgment. As the saying goes ‘if it’s too good to be true, it probably is.’ If that 1.5 acre lot that would normally go for $250,000 to $300,000 is being offered to you at $75,000…somethings up. You don’t need a Title Agent to tell you that there may be something wrong with this scenario.
Absentee seller
Although not a red flag in and of itself, one should always be a little extra vigilant when the seller of a subject property isn’t around and wants to close through the mail. When dealing with an absentee seller it’s always wise to, at the very least, speak to the purported seller on the phone. Of course, anyone can pose as the potential seller, but usually fraudsters won’t be as bold to impersonate the seller over the phone. Ask them specific questions that only the true property owner would know. Remember, they want as minimal interaction as possible to not cast any doubt as to their legitimacy. As the Title Insurer we have access to the mailing address for property tax and legal notices. With their correct mailing address, we can mail them copies of the Title Binder and other ancillary documents to verify the rightful owner is aware of a potential transaction involving the subject property. Additionally, we verify their authenticity with at least two forms of current identification that contain the proper mailing address.
Timing
If the purported seller is continuously pushing for a fast closing, that’s a red flag. Buying a vacant piece of land involves a lot of due diligence on the part of the buyer. (We’ll cover that in a future post.) This homework (see what I did there?) is not something that should be taken lightly or rushed through. Who wants a 1.5 acre piece of paradise only to find out that you can’t build more than an outhouse on it?
Parties
Verify the authenticity of all the parties to the transaction. Although not a requirement, a seller will usually have an attorney representing their interests in the transaction. If the seller is only represented by a realtor, who also is pushing for a quick closing or refuses to discuss the transaction over the phone, be cautious. Verify the legitimacy of the realtor, same can be done with a quick search of the Department of Banking and Insurance website. Also, verify the authenticity of the seller’s attorney, who should be licensed in the state where the property is located.
Signing on the dotted line
As the Title Insurer we verify that the signatures presented on the proposed conveyance documents match those of documents previously recorded against the subject property. Additionally, we can verify the authenticity of the notary that notarized the documents.
Are these precautions a guarantee that you won’t be duped, bamboozled, swindled, bilked, conned, taken for a ride? No, but with a little common sense and some precautionary measures, it will go a long way to protecting you and your future real estate empire!
Written by Sohail Tariq, Vice President - Providence Abstract LLC