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With 2024 well underway, the title industry is in a strong financial position. According to a recent Allied Market Research report, the title insurance market was valued at $56.8 billion in 2022 and is estimated to reach $161.6 billion by 2032. That’s good news for entrepreneurs wishing to start their own title companies.

However, while the title industry is booming, its profits aren’t the only thing on the rise. Real estate fraud is also increasing as fraudsters become savvier in their efforts to steal from unsuspecting consumers. This type of crime occurs when one person or party commits fraud in connection with the purchase, sale, rental, or financing of real estate property.

Real estate fraud can take place in any phase of a transaction involving real property, from the mortgage application and/or approval phase through the closing — and it’s more common and costly than you may realize.

In fact, CertifID’s 2024 State of Wire Fraud report found that 1 in 20 Americans who bought or sold a home within the past three years have been victims of some type of real estate fraud. What’s more, the median amount in consumer losses exceeded $70,000, arising from down payments stolen from buyers and net proceeds taken from sellers.

As a title company owner, how can you protect your clients from falling victim to fraud when they’re purchasing a home or commercial property? It starts with staying up to date on fraud prevention and protection and educating yourself on the most common types of scams affecting the industry.

Staying Alert to Common Types of Real Estate Fraud

As fraudsters become more sophisticated in their schemes to steal thousands of dollars from buyers and sellers, it’s essential for title companies to step up their efforts to understand how these scams are carried out. To that end, a few of the most common types of real estate fraud include:

  • Wire Fraud – A lucrative scam for hackers, real estate wire fraud occurs when a fraudster poses as one of the parties in a real estate transaction, such as a title company agent, real estate agent, or attorney. The criminal uses fake email accounts, phone numbers, or websites to impersonate a legitimate business and convince the buyer to divert their closing costs into a fraudulent account. The customer then mistakenly “wires” money to the criminal or organized crime group. About 13,638 people were victims of wire fraud in the real estate and rental sector in 2020, with losses of more than $213 million, according to FBI data.
    Example: Two days before closing on her home purchase, Mrs. Smith receives a legitimate email from the title company with wiring instructions for the down payment. Within 24 hours, she receives another email with the identical email signature and updated wiring instructions, and she sends the wire. At the closing, when the title officer tells Mrs. Smith she hasn’t received a wire, she shows her the emails she received. It turns out the second email was sent by a fraudster impersonating the title company, with wire instructions to a criminal’s account. Mrs. Smith has lost nearly $30,000.
  • Seller Impersonation Fraud – One of the newest and fastest growing real estate crimes, seller impersonation fraud targets vacant land. With this deceptive scheme, fraudsters fake the identities of legitimate property owners with the intent to sell properties they have no legal rights to. They first comb through public records to find unencumbered pieces of land, meaning that no one is living on the property and there are no mortgages, liens or litigation associated with it. Once they target potential properties, they use tax records to find the identity of the rightful landowner. Then, they contact real estate agents, impersonating the real property owners, and ask them to list the properties for sale. As many as 56% of title companies have experienced this new type of fraud in the past year, according to CertifID.
    Example: Several acres of vacant residential property in a suburban area have been owned by an LLC for the past year. Unbeknownst to the LLC, the property is conveyed to a Mr. Wilson via a quit claim deed, which was notarized by a non-existent notary. The land is sold to the fraudster and the buyer begins building a home on it, only to become entangled in a legal mess with the LLC.
  • Title Fraud – As indicated by the name, title fraud takes place when a person uses fake identification or forged documents to steal the identity of a homeowner and take away their legal ownership of a property. Once fraudsters secure a property’s title, they can re-mortgage it, sell it to an unsuspecting buyer, or find another way to benefit from it and get away with the proceeds. Often, homeowners don’t learn about the insidious crime until they receive notice of missed payments or try to sell the property. Victims lose the right to mortgage their home, can no longer leverage the equity and can’t sell until they re-establish their title rights through the courts.
    Example: The Brown family has lived in their home for over a decade. Using forged documents, a criminal transfers the home’s title into his name and secures a hefty mortgage against the property. The family isn’t aware of the fraud until they receive an eviction notice, resulting in a financial and emotional crisis.

How Title Professionals Can Prevent Fraud

These nightmare scenarios are all too common, but they can be thwarted with the help of title professionals who are aware of fraud risks and take simple measures to protect their clients, including:

  1. Processes and Education – Make an ongoing effort within your title company to identify and prevent fraud. This includes working with your real estate agent partners, sharing recent data and news stories, and talking to the teams and lenders you engage with.
  2. Industry Tools – Take advantage of the latest fraud prevention tools, including technology, to add the strongest layer of protection through two-factor authentication, multiple device verification, and knowledge-based questions to verify an identity.
  3. ALTA Best Practices – Continue to adhere to The American Land Title Association’s Best Practices for safe and successful real property transactions. Go through the traditional methods of reviewing state or country issued ID’s, request to meet in person, and request additional proofs of ownership, such as a deed, when necessary.

Identifying the Signs of Possible Fraudulent Activity

 One of the keys to remaining vigilant in preventing real estate fraud is to educate your clients about the signs that may indicate they are a target, including:

  • Unexplained notices regarding changes to their title
  • Suspicious property transfers
  • Irregularities in documentation
  • Unexpected notices from their municipality
  • Urgency to move forward with the real estate transaction by a title company agent, real estate agent, or attorney (who is, in actuality, a fraudster)
  • A change in wiring instructions
  • Confusing email communication from parties in the transaction

What to Do If You Suspect Real Estate Fraud

If fraud happens to your client, or if you detect suspicious activity, it’s vital to act fast and work with your client to take the following steps:

  • Contact the relevant authorities – Have your client visit their local police department, call the FBI, and, if applicable, file an identity theft claim with the Federal Trade Commission (FTC). Their financial institutions may be able to freeze any funds fraudsters try to obtain. They can also notify one of the three credit bureaus (Equifax®, TransUnion®, and Experian™) of the fraud. If the fraud is based on money sent out, immediately contact the bank to notify them.
  • Keep in touch – Staying in close communication with your client and obtaining as many details as possible can aid in the process of investigating the fraud.

How Proliant Takes a Stand Against Fraud

 At Proliant Settlement Systems, we diligently protect our franchisees’ information so they can successfully and confidently operate their businesses — and, in turn, protect their clients. For example, through our best-in-class fraud-protection software, our franchisees can verify wiring instructions and mitigate the risk of wire fraud during the closing process.

Plus, we’re continuously expanding our list of benefits to our franchisees to help prevent fraud. With Proliant providing all the tools and expertise necessary for success, you can confidently move forward with your clients and services. And your clients can enjoy peace of mind while reaching an exciting milestone in their lives.

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