REB 127: What is Deed Fraud? And How Do You Protect Yourself?

Scammers are crafty.  The internet allows them myriad options to hone their craft.  Deed fraud seems to be gaining popularity with criminals.  What is it, and how do you prevent your property from being sold out from underneath you?

Transcript

SPEAKER_02 0:01

All right, my friends, welcome back to Real Estate Bites. This is episode 127, uh part two of a small series that I did with uh my friend Jimmy Miller to talk about some pretty important topics. And today's topic is deed fraud. Deed fraud, uh while not new, it seems to be coming more common. And this is something scary, guys. This is uh this is scary. This this deed fraud can sneak up on us, right? Uh and cause us considerable pain, expensive pain, mental and emotional anguish. Uh, and we need to be very, very vigilant about this kind of thing. Um, you know, certainly as homeowners and uh definitely as real estate professionals, we need to understand what deed fraud is, how it is uh executed, and what to look out for. So, in order to help me out with this conversation, once again, I've got my friend and industry teammate Jimmy Miller on to talk about deed fraud. So let's bring Jimmy into the studio. All right, Jimmy. So you recently had uh an event, or you know, for lack of a better word, take place inside your organization with a customer that was a deed fraud uh situation. Tell us about what happened.

SPEAKER_01 1:22

So we got a contract, and the agent that was on it, uh the listing agent, you know, she gave us a little heads up that something just didn't feel a hundred percent on this transaction. Uh the customer was in California, the property was here in Elyria. Um, and she gave us a little heads up saying something just fell off on this transaction. So we got the search, we're doing everything we can on the transaction. It's flagged for a stake survey. But we called the gentleman, tell him that it's a stake survey. We did five different quotes, uh, gave him the price, and then he's like, Well, I don't have that money. I'm like, okay. First red flag, you're selling a huge piece of property free and clear, and you don't have, you know, a thousand dollars, we'll say, to, you know, get this stake survey rolling. Then it proceeded that he wasn't calling us back. So I was calling the agent, seeing what was going on, and something just felt off on the transaction. So I start researching the the guy's name. Uh I had his ID. It was uh it looks like a legit California ID. And something just wasn't jiving with the transaction. So I did some research online, found out that this gentleman owned a joint property with an attorney I used to work with hand in hand uh for years. So I reached out to this particular attorney in Elyria and said, Hey, is this so-and-so's uh phone number? And he's like, Let me check. Pulls up the phone. That's not his number, his number is, you know, whatever. So I go, Can you reach out to him and see if he's selling this property? Because I have a contract and things aren't meshing with how it should be going at this point on this contract. So he reached out to the gentleman, he was in PA actually. Uh, he has a PA in a California address, and uh he's got a PA phone number but lives in California. He called him, and the gentleman goes, Yeah, I have a contract on it, but it's not for that amount, and um it's for quite a bit more. We're talking hundreds of thousands of dollars more. So then this gentleman proceeds to call me. Uh, we have a three-way with his attorney. We're going over it, and I said, Well, I'm just letting you know this guy is trying to sell your property. Um, there's a signed contract, um, everything is filled out. Uh he's actually sent me in seller authorization too. I said, I just want to run more one more thing by you. Is this your social security number? And he goes, Yes. So not only did this guy try selling this gentleman's property, he somehow found all of this information and basically stole his identity. So we had to stop the transaction. The seller right now, the fake seller right now, doesn't even know he still thinks the transaction is going because the stake survey was a month and a half.

SPEAKER_02 4:19

Wow.

SPEAKER_01 4:20

Out. So we still got this guy leading on and we're waiting to see what uh the police are gonna say about this. Um, but the the older gentleman who's in California was pretty distraught about it. You know, he's like, Sure, like, how can I protect myself? What can I do? And I said, Well, right now, since your property was free and clear, it sounds like these people are going for anything that a person has owned for a lengthy let's say 10 years, and if there's no mortgages on it, it makes it easier for them to say, Hey, I'm gonna try using this property and selling it. Um, but when we were listening to this guy talk and going through it, you could just tell something was off in the transaction. So that threw up a whole bunch of red flags. Um the same week, we found out that there was another gentleman in California saying he was in the UK on a different, totally different deal, different title company. They actually transferred the property though. So now that person is out of their house, which is uh it's pretty big because you gotta there's so many moving parts at that point to fix this. The money's gonna be gone because as soon as that money's wired, you know those the criminals are gonna move that money as fast as they can so it can't be touched.

SPEAKER_02 5:38

Um I'm assuming title insurance doesn't cover deed fraud.

SPEAKER_01 5:43

It doesn't. So the craziest thing right now, the underwriters, it sounds like they have come together and they're gonna be offering some different endorsements coming up for protections on this. Um, I'm still getting all the finalization of what these are gonna cover, how much they're gonna be. Sounds like it's gonna be a percentage of the owner's policy, um, or whatever the title insurance is, like 10%, 15%, 20%. Uh, we're gonna we're gonna figure that out and then we'll do another video on that, you know, for the different types of protection they can get, because it's just getting scary out there that somebody could just go and sell your property and not even know.

SPEAKER_02 6:17

That is terrifying, man. And I mean, this is the kind of crime that is, you know, it's it's easy because of the internet. Well, for that matter, it's only possible because of the internet. So, you know, what in retrospect, what could that seller possibly have done? Or what could that agent have done? I guess that's the really the thing that I would like to know. So I would like to say kudos to whoever that agent was because you know, her her intuition peaked up, she she felt there was something if you brought it to your attention, you know, you guys paid good attention, you know, something felt wrong. Uh what were the kind of things that when you're communicating to uh the the fake seller that made that just threw up red flags?

SPEAKER_01 7:01

Well, if if you've owned a property for as long as this gentleman has, and you can't give us easy answers to this, you know what I mean? For sure. It should be something you won't have to go Google, it should be right here in your head. Hey, this is what it is, you know. Um, and then you know, the big thing is just how he was speaking about the property, how his responses were. Um, he didn't have any money to you know put up. And we even said, like, they're they're gonna let you pay half of it through close, and they just want some money, you know, down to start the process. Um he's like, Well, make the buyer do it. You know, he was just throwing everything on the buyer. Um, the ID is legit, you know, it it looks like a perfect California ID, but the gentleman in the picture isn't my true seller. Wow, so like they went that far. Like the agent, she did everything she could to you know to protect the correct seller. Like if something didn't feel right, she would say, Hey, we need to take a look at this. Um, she got the ID, she got everything. It was just they're getting they're getting good. You know what I mean? They're they're with with some of those critical stuff.

SPEAKER_02 8:15

So it sounds to me, Jimmy, like it's just simply um, if you're an agent, you know, you got to pay attention and and you gotta trust your gut, right? Because that thing for for an agent who maybe wasn't as engaged, uh, which is kind of easy to be less engaged when you got an out-of-state seller and the transaction seems easy, and you know, you don't spend any time with them. Um, you know, if you're not engaged, that could have slipped right by everybody and ended up very, very badly for that person out in California. So it's very important to have a professional agent who's paying attention.

SPEAKER_01 8:49

Yeah. There's some programs out now that actually uh we're actually gonna sign up with one. You the customer actually has to take a picture with their ID. And it won't flag them if it doesn't match. It will flag us to let us, you know, know that we need to stop this transaction. This ain't the correct person signing. So, and if they don't do this, then we're just not gonna close their loan. Um and like some of these, like I have LifeLock, and my LifeLock watches any properties that we own, but they're only gonna notify you once that transfer hits. So there's nothing really up front saying, hey, you know, you're gonna get a notification if the property transfers. That's the only way. Um, because they're not really looking at different aspects of that. So my suggestion is everybody keep like an equity line. If your house is free and clear on the property, keep an equity line on the house because now you have to have correct socials, you have to have everything to get a payoff on it. And equity line payoffs are a little bit harder than regular payoffs to get. So that's just you don't have to use it, but it's not free and clear. You know it's free and clear. And that was one of my suggestions to some of these people that I know their houses are free and clear. Still an equity line on it. Make them work harder to try making that title company make that mistake.

SPEAKER_02 10:17

That's a fantastic idea, Jimmy. I appreciate you saying that. You pull that equity line, you know, you you add that lien onto the title. It's one more obstacle that that scammer, that fraudster has to get over to do this sort of thing. Good stuff. Hey man, I would love to follow up on this. I would love to do another one of these in the future when you have that full list of endorsements that are available, what they are, what they cover, what they cost. And man, I would love to know when the police investigation of this wraps up, how that turned out as well.

SPEAKER_01 10:45

Yeah, we'll keep you posted.

SPEAKER_02 10:47

All right, Jimmy. Hey man, good luck. Go north, have fun today, and uh, we'll talk soon, my friend.

SPEAKER_00 10:52

All right, thanks, coach. Talk to you soon. Thank you. Let me get my act together here.

SPEAKER_02 11:05

All right, there we go. Thank you, Jimmy, for coming on once again and teaching us here a bit about deed fraud and and and how that kind of thing goes down and what we can do to protect ourselves. Um listen, guys, these are important matters, and it just seems like every year that goes by, fraudsters, thieves, crooks, whatever it might be, they get more and more sophisticated. As our technology advances, um so do their schemes, so do their tricks, so do their frauds. And we need to ever be vigilant. And the internet is wonderful as a tool as it is, and listen, none of us can do what we do without it anymore. I mean, we are all, at least in this industry, right, in modern day sales and business, we're all dependent upon it. And uh it is a great tool. I mean, I oftentimes brag how I've executed uh um you know, real estate contract documents while sitting in a tree stand. I mean, the ability, the the flexibility that we are provided with the internet is fantastic, but along with it comes a host of risks um and and associated responsibilities. So we as pros need to be ever vigilant about what's going on with our deals, and most importantly, of course, our clients, because well, in the end, that's what all of this is really about. You know, business, it doesn't exist without people, and people are the focus, and so let's not lose sight of that ever, all right? That said, thanks again, guys, for joining me. Go here, snap that QR code, subscribe uh to the YouTube channel, share it with friends and family who might enjoy this content. And uh, as always, take care of yourselves, take care of one another. I love you, people. I'll see you next week.