A relatively new kind of fraud is growing in the United States, and military families may be more vulnerable than the average citizen. This real estate-based fraud is called title fraud or deed fraud. While still relatively uncommon -- and people don’t actually lose their homes -- being the victim of title fraud still costs time and money. So what is title fraud, and how can you protect yourself?
What Is Title Fraud?
Title fraud happens when someone who doesn’t own a property pretends to be the property owner. This is a lot easier now, when most home sales take place via electronic communications vs. in-person transactions.
Property ownership is public information, and anyone can look up the owner of a property, often online. These databases include information such as the owner’s mailing address, which a thief can use to create fake identity documents, such as a passport or driver's license.
Using this information, a thief lists a property for sale. The listing can be through a real estate professional or as “for sale by owner.” At the time of closing, the thief shows up using the fake identification documents. In the case of a remote closing, the scammer may forge the notarization.
At closing, the thief directs the proceeds of the sale into a bank account set up using the false information then either withdraws the money or transfers it outside of the United States before anyone discovers the fraud.
Why Are Military Families Vulnerable to Title Fraud?
As both sellers and buyers, military families may be more vulnerable to title fraud because they often move long distances between areas with a lot of rentals.
When a property is vacant, such as an unoccupied rental, a thief can more easily advertise it for sale and schedule showings. A long-distance landlord won’t notice a for-sale sign in front of their vacant property. Unless you are in close contact, neighbors may not suspect anything amiss if they see prospective buyers visiting the property.
As purchasers, military families are more likely to buy quickly, often from afar, and to close remotely, such as by mail. They may not have time to talk to all the neighbors or to stop by the local courthouse. If buying in a military-heavy area, they may be more likely to buy from a landlord vs. an owner-occupant. While buying from a landlord isn’t risky itself, dealing with a non-local person may make it easier for impersonation to occur.
How to Protect Yourself as a Homeowner
Several actions can reduce the risk of title fraud as a homeowner, especially for those who live far away and rent it out
Keep your county records up to date. Check the county’s online portal to ensure that your relevant information is up to date, including your current mailing address. You’re less likely to notice a missing tax bill or other document if it isn’t coming directly to you. If you’ve been using someone else’s address, such as your parents’, consider changing it to your actual mailing address. Check the portal every now and then to ensure everything looks right.
Ask for official notifications. Check with the county to find out if you could be notified of any transactions that occur. Every jurisdiction is different, and you might want to involve a lawyer depending on the filing requirements.
Stay in touch with your neighbors. If you have any contact with your neighbors at a long-distance property, make sure they know how to reach you. It’s a good practice anyway to make sure they always have an up-to-date phone number and email address. At the same time, mention your current plans. “The new tenant is moving in at the end of August.” That way your neighbors will know if something looks wrong. Or ask them outright to contact you if they notice any sales activity. If you have any friends who live in the area or visit, ask them to do a drive-by.
Set up a Google alert. An alert for online activity should include your property address and any other identifying information that works for you. This is also a great way to keep tabs on what’s happening in your neighborhood.
How to Protect Yourself as a Purchaser
Military prospective homebuyers may want a house available by the time they move to their new duty station or leave the service for the last time. For protection:
Always, always, always buy the borrower’s portion of the title insurance. Yes, it is another expense during the already-expensive home purchase process. But title insurance is essential for so many reasons. Be sure your policy includes fraud, forgery and impersonation coverage, both at the time of purchase and post-purchase.
Leverage your military network and social media. Research the property owner using public sources. Use your military network to try to verify who they are and that they are selling a property. If the home is anywhere near a military base, someone likely knows something about something.
Research, research, research. Legitimate transactions might involve any of the following, but they can also be signs of fraud. Always do your homework on a home purchase, but especially if:
- You’re buying sight unseen.
- It’s for sale by the owner.
- It’s a great bargain.
- The closing is rushed.
- The owner is removed from the selling process, such as an estate sale.
- You’re buying in cash and a mortgage company isn’t involved in the process.
What Happens if Title Fraud Occurs
If you find yourself involved in a situation of title fraud, there is good news and potentially bad news.
The good news: The original property owner rarely actually loses their house. A fraudulent sales transaction can be proven invalid. The owner will need to prove ownership and prove the transaction was illegal, but this can be expensive, time-consuming, and stressful. Title insurance that covers post-purchase fraud can help cover the expense.
The potentially bad news: If you’re the buyer, your outcome is going to depend on that title insurance. Make sure you understand exactly what is and is not covered by the policy that you buy. Even in a clearly fraudulent transaction, if you don’t have title insurance, any money you’ve paid may be gone forever.
Title fraud is still relatively rare, but our military lifestyle makes us more vulnerable than our civilian counterparts. Most of the measures to combat this kind of fraud are pretty simple, and they’re generally good practices. Consider taking some or all of these steps to prevent becoming a victim.
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