I’ve been in real estate for more than 40 years, and the vast majority of transactions I’ve witnessed have been between people who are honest and forthright. However, I have also seen a few disreputable shysters take advantage of unsuspecting victims, which is why I recommend a trust-but-verify approach—and that includes always getting title insurance.
For example, there was once an apartment complex manager who slowly began convincing people he was not only the manager but the owner of the complex, referring to himself by the owner’s name. As old tenants moved out and new ones moved in, no one knew the manager as anyone other than the owner. Years went by and the manager decided to sell “his” complex. He found a buyer and everything was moving ahead when he conveniently lost his wallet just a few weeks before the escrow was supposed to close. Of course, his wallet contained his driver’s license, credit cards, and any other documents he could use to prove his identity.
To sell property, legal forms must be notarized, and notaries require identification. However, in this case the notary believed she knew the seller, had for years, and she felt bad that he’d lost his wallet right before the deal was supposed to close, so she cheated and notarized the apartment manager’s documents without proper identification. This, by the way, constitutes fraud by both parties.
The escrow closed and the money from the sale was deposited into the apartment manager’s account. The real owner would have remained none the wiser that his property had been sold out from under him except that his rent payments stopped coming. Had this property been raw land or even a property with structures that did not produce income, the transfer of title to a new owner could have gone unnoticed by the real owner for years.
So who is responsible here, who pays? Well, that notary could have prevented this whole thing by doing her job properly, so she is on the hook but it’s doubtful she has the money to pay for all the damages. When a lot of money is involved, whoever has deep pockets is at risk of a lawsuit.
In the end, the real owner got his property back and the apartment manager was prosecuted for fraud. However, this should be a cautionary tale. People do dumb things, even well-meaning people, so if you’re in a transaction worth millions of dollars (or even just hundreds of thousands), it’s best to do everything you can to protect yourself.
Speaking of fraud, sometimes in an effort to avoid the hassle of ordering a cashier’s check or worrying whether a check will clear on time, people use an electronic funds transfer. In real estate, the transfer can be a down payment; or in an all-cash sale, it can be for the full value of the property. The downside of all that speed and convenience is that mistakes can happen, and dishonest shysters can take advantage of honest, hard-working people.
Here’s how it works. During the escrow process, emails fly among buyers, sellers, lenders, Realtors, and escrow officers. As the escrow reaches the deadline, all the final details have to get buttoned down and things can feel a little frantic. This is when the shyster strikes. He uses an email address that looks legitimate, purporting to be from the escrow officer or Realtor, and sends an urgent message to the buyer saying the down payment needs to be wired immediately and to follow the instructions below, which include a specific bank routing number. Once the money is wired, it’s gone.
The moral of the story? Double-check the details. Get title insurance. Work with people you trust and don’t cut corners for the sake of convenience.
If you have questions about property management or real estate, please contact me at email@example.com or call (707) 462-4000. If you have an idea for a future column, share it with me and if I use it, I’ll send you a $25 gift certificate to Schat’s Bakery.
Dick Selzer is a real estate broker who has been in the business for more than 40 years.