Recently, I was reminded of a scam where the fraudster tries to sell a property they don’t own. It goes like this. The scammer finds an unoccupied property and checks public records to see if there are any loans or liens on the property. If there aren’t, and the deed was recorded decades ago—especially if the property owner lives out of the area—the fraudster takes action.
He contacts a Realtor and requests that “his” property be listed for sale at a below-market value because he wants to “generate immediate interest.”
He doesn’t want a lawn sign, but he does want a cash sale with a quick escrow. He says he cannot meet in person because he is caring for his sick Aunt Mabel. In fact, he needs the proceeds from the sale to cover the cost of her care. He can call, but he cannot do video meetings because of bad reception or a broken web camera. (The scammer wants to avoid anyone who can identify him, and he certainly doesn’t want a photo available for law enforcement after the scam.)
The property attracts buyers who have been priced out of the market; they jump at the opportunity to bid. The scammer accepts the first offer but says he cannot sign in person (again, because he cannot leave poor Aunt Mabel). Consequently, he promises to supply a notary for all necessary documents for the title company.
Most title companies prefer to work with known notaries because are concerned about fraud, but if they cannot work with someone they know, they accept verified credentials. Unfortunately, forging a notary’s credentials isn’t all that difficult. If the payout is high enough, a fraudster will spend the money for a high-quality forgery.
Once the documents are delivered, the fraudster requests that proceeds from the sale be wired rather than having a check mailed to specific address (wire transfers are harder to track). Sadly, the fraudster will be long gone before anyone realizes what happened. Often, no one is the wiser until the owner inquires as to why she didn’t get a property tax bill, only to discover that she is no longer listed as the property owner.
The loser in this transaction depends on the details. Because it was an invalid sale, the title is returned to the original owner. If the buyer goes through a title company, the buyer will be fine. If the buyer caves to the demands of the fraudulent seller and doesn’t use a title company, then the buyer will be the big loser. If a title company is involved and didn’t catch the fraudulent notary, the title company will suffer the financial loss. You can see why the thought of fraudulent transfers makes title companies so persnickety about everything.
Several years ago, a real estate agent was called to list an apartment complex. The agent met with the owner, Joe, who lived onsite in one of the units. All the tenants greeted Joe graciously, saying he had been a great landlord for years and they were sorry he was selling the property. Joe assured them he was looking for a buyer who would treat the tenants well. While the Realtor was showing the property, Joe pulled him aside in a panic and said he’d lost his wallet and didn’t know what to do.
The agent was also a notary, and he told Joe not to worry about it. He trusted him and wouldn’t require Joe to show his identification. Once escrow closed and Joe left town with his $14 million in proceeds, the actual owner got in touch with tenants to find out why he was no longer receiving rent checks. Come to find out, Joe was the onsite property manager, not the owner. He’d been lying to tenants for years.
The moral of the story is to trust but verify. Cross the t’s and dot the i’s, and when there’s a delay because someone is double-checking something, sit back and relax because it is better to be safe than sorry.
If you are the victim of a scam, please report it to local law enforcement authorities immediately. It can happen to the best of us, especially when you’re not involved in real estate transactions on a regular basis. If you suspect that a real estate agent was involved in fraud in any way, please contact the California Department of Real Estate.
If you have questions about property management or real estate, please contact me at rselzer@selzerrealty.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.