Title agencies play a critical role in the commercial and residential property markets as they serve as the trusted party that ensures the transfer of clear and marketable title from seller to buyer. They also serve to protect mortgage lenders that require the assurances of first lien positions after new mortgage loans are funded. This process involves special skills, an understanding of the public records system and meticulous attention to detail. Now, title agencies are leveraging their transactional knowledge and expertise to manage a new threat to the great closing experience they are committed to providing: protecting their customers from fraud.
The recent rise in seller impersonation fraud is the latest example of this. Seller impersonation fraud occurs when scammers pretend to be the rightful property owner and hire a real estate agent to sell the property, diverting funds to fraudulent accounts after the closing. This trend began as a simple scam a few years ago. Bad actors were looking for the quick sale of vacant lots priced in the tens of thousands range. That was just the beginning, or the low hanging fruit as they say.
Fast forward to today, seller impersonation has now been perfected by scammers working together on what appears to be a nationally coordinated effort. The potential to harvest large sums of money has attracted the resources of organized crime syndicates. They’re increasingly emboldened and they are targeting higher value properties. In the case of a property owner in Connecticut, the fraud was only discovered months later when a $1.5M home was being built on their land.
What lessons should we be taking from the seller impersonation scams that are spreading across the country?
Fraud Isn’t Going Away Any Time Soon
Let’s face it. Real estate transactions are perfect targets for cybercriminals. They combine large sums of money, are easy to identify due to the open public records databases and have limited consumer awareness. The result? More stolen funds every year, to the tune of $446 million in 2022 according to a recent advisory by the FBI.
The entire system of property changing hands in the U.S. involves so many parties. That means not only complexity for the consumer, but also the potential for obfuscation of red flags; lack of responsibility for preventative measures; and lack of liability when things go wrong. That is evident from the recent case of a property owner in Arizona whose land was sold to an imposter.
Fraud Isn’t Simple
Be prepared for any and every tactic to be circumvented. For example:
- Requiring an ID card is a great step. Guess what? Fake IDs cards aren’t that difficult to obtain. In fact it’s as simple as visiting a supermarket kiosk in some states, where scammers can generate state-issued drivers licenses or change the addresses on licenses with just a few pieces of information on the victim.
- Requiring a video conference call to match an ID holder with the document is also useful. But, we have seen examples of bold fraudsters show up and get validated with the fake ID.
- Requesting a property tax record is a great idea. Be aware that the address can sometimes be changed in the public record without knowledge by the owner.
- Overnighting checks prevent you from wiring money to a fraudulent account. But how do know you are even dealing with the rightful seller in the first place?
The key is to incorporate multiple layers of protection into your strategy. This resource from ALTA does a great job of outlining the key steps you should consider in the case of preventing seller impersonation.
Fraud Can’t Be Fought Alone
It will be a persistent, maybe even forever, threat that requires multiple layers of protection. Today it’s seller impersonation. Tomorrow it’s payoff fraud involving lender impersonation. The next day it could be buyer fraud or other new scams.
The only way to stop fraudsters is to become too difficult or expensive for them to attack. That means addressing the key choke points: verifying identity and other key details before any money changes hands. Invest in fraud prevention across your people, process, and technology so that when the fraud attempts come at you—and they will continue to come—they have less chance of finding an entry point.
These developments are part of the new normal of the title industry. Criminals are using the latest technology to improve the sophistication of their impersonation and scale of their attacks. You’ll need to find technology of your own to meet that challenge.
ALTA recently recognized this in the updated Best Practices Pillar II. According to Diane Tomb, CEO of ALTA, “We’ve made huge strides in awareness on wire fraud. Now, in addition to providing resources and education, we’ve codified the use of wire verification services as an industry best practice.”
It’s a lonely road for a title professional who is expected to be the last line of defense without the right help and support. Leverage the Best Practices provided by ALTA and lean on resources like CertifID in your fight against fraud.
Tom Cronkright is co-founder and CEO of CertifID. He can be reached at [email protected].
Call Title Junction, LLC at (239) 415-6574 to work with a reliable, experienced, professional, and dedicated title services company that will help you navigate your complex real estate transactions.
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Title Junction is a full service real estate title company serving the area of Fort Myers, Cape Coral and the entire state of Florida since 2005. The company handles a number of real estate title services for both commercial and residential properties.
Have questions? Give us a call at 239.415.6574.
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