One of the fastest-growing real estate cyber fraud schemes in 2023 is seller impersonation fraud, where someone finds a vacant or non-owner-occupied property and attempts to impersonate the property owner and sell the property. Using public records, business email compromise and good old-fashioned persistence, these fraudsters try to trick the Realtor, title company and buyer into thinking they are the real owner of the property and can sell the property, all before the real owner gets wind that their property is being sold.
You can be part of stopping this crime in its tracks.
A fast-moving fraud
This fraud has spread quickly around the country, and the schemes are run with precision.
Cheri Hipenbecker, general counsel, Knight Barry Title Group, said she first began noticing the fraud in Florida in the spring of 2022.
“Any time we had a vacant property and we weren’t meeting with somebody in person to handle the transaction, our spidey senses were raised and we tried to track it down,” she said.
She believes Knight Barry first noticed the fraud in Florida because it is easy to get a deed online there by going to the property appraiser’s office for any county in the state.
Hipenbecker then noticed these schemes creeping up into Wisconsin in the fall of 2022. By that time, Knight Barry had trained its staff and had a system in place to help identify it.
David Tandy of Texas National Title noted that over the last five years, his company had seen about two dozen wire fraud attempts and thwarted all but a couple.
“All of a sudden, we hit 2023 and we’ve had nine attempts at seller impersonation fraud,” he said. “It just blows your mind that someone would have the nerve to impersonate a seller, list their property and get a buyer in a contract.”
He said he knows of a statewide company that has stopped 70 different attempts since late last year.
Tyler Adams, co-founder and CEO of CertifID, noted that an increasing number of new customers had seller impersonation fraud as their entry point to CertifID’s products.
CertifID did a short survey in April which found 57 percent of title professionals surveyed had seen at least one case of seller impersonation fraud in the first quarter, and 73 percent had seen an increase in seller impersonation fraud year-over-year.
“We know from the Secret Service and the FBI that this is not some hacker in their basement; these are criminal organizations,” Tandy said. “Normally they are backed by state-supported actors in other countries. They’re like large criminal organizations, with whole staffs of people, linguists, IT personnel, title insurance experts, attorneys, and information database experts.”
He said he found one online database that listed all the property parcels in the state of Texas, as well as the entire United States.
“There are 13 million parcels in Texas, and they could download all 13 million,” Tandy said. “There’s more than 155 million parcels in the United States, they can download all 155 million, and know whether they are vacant properties or not.”
Adams agreed these schemes are becoming more sophisticated and organized-crimeesque.
“There’s a group operating in the Midwest, where they’re going and using drones and taking high-quality pictures of land and putting them online,” he said. “And the listings have become impressive. It’s not just some random listing.”
Adams also said that often, the person who is doing the impersonating is a money mule.
“They are not the brains of the operation,” he said. “That is all being done at a much more sophisticated criminal level, but none of those people are showing their faces.”
Instead, he said, they are on online message boards offering $5,000 or $10,000 to someone to go sell the property for them. All of this is done through encrypted channels, making it easy for the criminals to move on without getting caught should a money mule get caught.
Regulators share red flags
In January, the U.S. Secret Service issued an alert on real estate scams concerning vacant properties.
It began, “The U.S. Secret Service has observed a sharp increase in reports of real estate fraud associated with vacant and unencumbered property. Criminals are posing as real property owners and through a series of impersonations are negotiating the sale of properties which are vacant or lien free. Criminals are using similar techniques that continue to be deployed in real estate specific business email compromise (BEC) schemes, to include open-source research.”
The Secret Service provided the following outline of the scheme:
- The criminal searches public records to identify real estate that is free of mortgage or other liens and the identity of the property owner. These often include vacant lots or rental properties.
- The criminal poses as the property owner and contacts a real estate agent to list the targeted property for sale, and requests it be listed below current market value to generate immediate interest.
- The criminal, posing as the property owner, refuses to sign closing documents in person and requests a remote notary signing.
- The criminal (or co-conspirator) also impersonates the notary and provides falsified documents to the title company or closing attorney.
- The title company or closing attorney unwittingly transfers the closing proceeds to the criminal.
- All communication is electronic, not in person.
The alert said, “The fraud is often discovered when recording the transfer of documents with the relevant county. This scheme has particularly affected elderly and foreign real property owners, but it is not limited to these groups, because there are no means to automatically notify the legitimate owners. Therefore, the burden of verification is on the real estate and title companies.”
The alert provided the following ways to help prevent seller impersonation fraud:
- Independently search for the identity and a recent picture of the seller.
- Request an in-person or virtual meeting, to see their government-issued identification.
- Be on alert when a seller accepts an offer below market value in exchange for receiving the payment in cash and/or closing quickly.
- Never allow a seller to arrange their own notary closing.
- Use a trusted title company or closing attorney to coordinate the exchange of closing documents and funds.
Since the Secret Service put out its alert, several state and local regulators, as well as industry associations, have issued their own warnings.
At the end of August, the Nevada Division of Insurance and Division of Real Estate issued a consumer alert warning Nevadans of the rise of real estate identity theft and fraud. They noted that real estate owners, buyers and licensed real estate and insurance professionals have all ended up as victims of these elaborate identity theft schemes.
It said the scam works like this: “Scammers search public records to identify owners of real estate that is free of a mortgage or other liens, most often targeting vacant lots and investment, vacation or rental properties that are non-owner occupied. The scammer then poses as the owner and contacts a real estate agent to list the property for sale. Once an offer is made, the scammer quickly accepts it, then sends falsified documents to the title firm or closing attorney. The closing proceeds are then transferred to the scammer leaving the fraud typically undiscovered until transferring documents are recorded with the applicable county.”
The divisions shared the following red flags to look out for, shared with them by the American Land Title Association (ALTA):
- Seller is difficult to reach via phone or refuses to meet via video call; only communicates via text or email.
- Seller sets listing price lower than the current market value and wants a fast cash sale with little or no fee negotiation.
- Seller refuses to attend signings, always claiming to be out of town.
- Seller requests to use their own notary.
- Seller demands proceeds be wired.
- Seller has a different address than the owner’s address or tax mailing address.
- Seller refuses or is unable to complete multifactor authentication of identity verification.
They also shared the following precautions ALTA advises title and real estate professionals take to thwart these crimes:
- Contact the seller directly at an independently discovered and validated phone number.
- Send mail to the seller at the address listed on tax and property records.
- Ask the seller’s real estate agent if they have personal or verified knowledge of the seller’s identity.
- If using a remote notary, be sure the notary is fully vetted and approved by your state; otherwise, the title company should arrange for an in-person notary signing at an attorney’s office, title agency, or bank.
What can you do?
There are several things industry members can do to stop these frauds.
One of the most important is educate and work with Realtors in your area. In today’s environment, Realtors are hungry for listings and may jump the gun and send out a listing agreement after one discussion with the purported seller if they don’t know the things to look for, Hipenbecker said.
Tandy agreed it’s important for real estate agents, title agents and customers to educate each other and ensure they are all verifying the person selling the property is actually the property owner. He said training efforts have been very effective. The Texas Real Estate Commission issued an announcement warning about seller impersonation fraud, quoting Tandy and Leslie Midgley, executive vice president and CEO of the Texas Land Title Association.
“The bulletin went out on Friday, April 23, around 11 a.m.,” Tandy said. “By 7 p.m. that evening, an agent in Houston had tracked down my phone number and called me. She said, ‘I think maybe I’ve got all six of the red flags you mentioned, I think this might be fraud.’ So, we talked about it.”
He said the seller had never talked to the agent, who was a buyer’s agent, only texted or emailed, even in response to a voicemail. She had seen the listing on Zillow For Sale By Owner (FSBO) and started talking to her client about it.
It’s critical to look for those red flags.
If the seller is “unavailable” to attend the closing in person, using a remote online notary (RON) is a great option since a RON includes several ID validation processes. "It would be very difficult for a criminal to successfully impersonate a seller in a RON session,” Tandy said.
“If it’s a vacant land deal, that’s your first indication that you likely need to be a bit more cautious,” Adams said. “Then go back to the real estate agent and ask them for some details around it, like have you met this person face-to-face? Is there any indication that they were trying to sell it really quickly? Was it at or below asking price?
“Then as the transaction moves forward, if there starts to be any anxiety around the speed of the transaction, the desire for all cash versus another type of deal, those sorts of things are super important.”
He said CertifID suggests if there is any question that the transaction is not legitimate, start asking for information not in the public record, such as the original title commitment from when they bought the house.
“So much of the documentation is public. That’s why real estate transactions get hit so bad as they are,” Adams said. “So, you have to get a little bit more creative.”
It is also a good idea to pick up the phone or send a letter right away to the owner of the property in order to confirm whether they actually put the property up for sale.
“As soon as your order comes in, go in and look up the tax mailing address, where the real owner receives their tax bill, and send a letter to that address,” Tandy said. “If you have any suspicions, send it by snail mail, and if you get even more suspicious, send it by FedEx.”
Hipenbecker said another key thing to do is control the closing transaction.
“So long as we control the signing, control how the deed is executed, then we can control the final outcome to stop that fraud,” she said.
That means selecting the notary public, whether the notarization is being performed in person or remotely. The only time Knight Barry allows a seller to choose the notary is if the staff has an existing relationship with the chosen notary. If the seller is signing the documents overseas at an embassy, follow up with the embassy and confirm that they met with the person on that particular day to sign the deed.
Adams said there is a difference between ID validation and identity verification. ID validation is verifying that the ID card presented is legitimate, but identity verification digs deeper to verify whether the person is who they say they are. He said CertifID has created technology that helps the title company with this piece.