Recently, one of my REALTORs received a phone call from someone who lives in Spain but owns property in Ukiah. The caller wanted to sell his 800 acres of unimproved land and needed to do so somewhat quickly because he had some family medical expenses to cover. The seller seemed reasonable and motivated, so the REALTOR was excited, but also wary.
Working with out-of-town clients complicates real estate transactions, and any time a buyer or seller refuses to meet in person for the entire transaction (even if the reasons seem legitimate), it raises the question of whether this person is who they say they are. Because of this, the REALTOR checked public records on this property. They verified the owner’s name and the fact that the owner lives in Spain. So, she felt better. She asked the owner to send documents to verify his identity, and he sent pictures of his driver’s license and passport.
She then emailed documents to list the property, but she also came and talked to me because this was an unusual situation. She had the copy of this guy’s passport in hand. I immediately called our sales manager, and he had the same weak feeling in his stomach that I did in mine. We did a little research, only to find out that three different REALTORs had been working with an owner of the same name, but whose documents showed a different photo. One of the REALTORs had not only listed the property, but had found a buyer and the property was in escrow!
We quickly realized there was a substantial scam underway, but we had very few tools to address the problem. The best insurance against this sort of thing is title insurance, which is why title companies are so particular about verifying documents. Title insurance not only confirms whether there is a clear deed, but it also guarantees the identities of the buyer and seller.
Title insurance lists any liens, easements, or other covenants recorded against the property. It also protects against forgeries and counterfeit documents. For example, true story, a woman with a gambling addiction forged her husband’s signature so she could borrow against the house to repay her gambling debt. When the couple’s house went into foreclosure, the husband was awfully surprised to see his signature in his wife’s handwriting encumbering the home.
If you are buying a home and need a conventional loan, the lender will require title insurance. But even if you are doing a private-pay loan (or no loan at all), title insurance is worth investing in. With title insurance, not only are documents carefully reviewed, but notary publics are paid to confirm that the signature on a public document matches the signature of the person buying and/or selling the property.
Many title companies now insist customers use one of their in-house notaries. Clearly, this is impossible if a seller is in Spain. There’s no Redwood Empire Title Company office in Madrid. Presumably, a local title company would request the seller go to the consulate or embassy for a notary in Madrid, where a fraudulent seller may be reluctant to present a forged passport.
Generally, the only real estate transactions that go without title insurance are transactions between parties who know and trust each other, as in the case of a parent selling a property to their child. Even then, title insurance safeguards all involved. It guarantees that old deeds of trust have been paid and reconveyed properly.
Back to the Spain case, I don’t want to suggest that we won’t work with out-of-town clients. We do it all the time. I am saying that the more adamant they are that they cannot travel here at least once to sign documents, it’s worth raising an eyebrow and doing a little research.
It is incumbent upon the buyer or her REALTOR to assure that the person selling the property owns it. If there’s any doubt, you can talk to neighbors who might know the seller or see if you can locate folks who represented the owner when they purchased the property (the REALTOR or lender, for example). But really, the best way to protect yourself is to buy title insurance.
Title companies can do more than a simple public records search to assure the lawful owner is also the seller. I would normally have said this is so rare, but since we just had a single owner show up on three passports with three different photos, maybe it’s not as rare as it used to be.
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.