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HELP! Someone stole my seller!

In this day and age, fraudulent sellers are becoming more and more common, so it’s important to be able to recognize any red flags. Learn how fraudsters can complete their scheme in this scenario.

What’s the Scenario?

Sam Seller contacts his real estate agent to list his second home. Sam says he needs a quick sale because his spouse has cancer, and the medical bills are crushing their family. Sam and his spouse live across the country with their kids, so he can’t meet you at the property himself. However, he invites the listing agent to view it themselves using the electronic key.

The listing agent views the property, checks the tax records, runs comps, and suggests that Sam list the property at $750,000, which they believe is a realistic price. Sam agrees to this listing price, and the agent sends him the listing agreement via DocuSign.

Soon enough, an offer comes in at $720,000, which the listing agent feels is a little low, so they recommend Sam counter at $740,000, with the hope that both parties will meet in the middle of their offers at $730,000. Sam does make a counteroffer, but he does not change the price. Instead, he simply requests a quick closing date, and the buyer accepts.

RED FLAGS EVERYWHERE!

Sam explains to the listing agent and the settlement agent that he cannot attend the closing in person due to his struggling business, which he needs to devote his full attention to. Sam requests that the listing agent act as his power of attorney since he cannot attend. The listing agent agrees, and the transaction closes.

YOU’VE BEEN DUPED!

Six months after closing, Befuddled Buyer gets a letter from Randy Realowner, who says he is the owner of the property and wants to know what Befuddled is doing in his house.

Of course, Sam Seller is nowhere to be found at this point. His phone number and email addresses no longer work, and nobody involved in the transaction ever actually met Sam or knows what he looks like.

Unfortunately, when someone pretends to be the seller of real estate, prices it for a quick sale, and then vanishes, real estate professionals are awash. This scheme also leaves the buyer in the lurch because in most jurisdictions, a fraudulent deed does not convey any title.

Since the seller is long gone, many buyers decide that it is somehow the fault of the listing agent and pursue a claim. With such easy access to data online, it has become incredibly simple for fraudsters to assume someone else’s identity.

First, they identify the property, either by driving past it or using online search engines. Then, they look up the owner via tax records or deed records, and, often for less than $100, create a very realisticlooking driver’s license in the name of the record title owner.

From there, it’s just a matter of coming up with a sufficiently plausible cover story for their absence, and the rest is history. Ultimately, there may not be a foolproof way to catch someone if they are a skilled and experienced fraudster. But, there are warning signs that you can look for to signal a possible scam.

LOOK FOR THE WARNING SIGNS!

• This scheme works best with raw land, where there are no locks, or vacant homes, where the fraudster can pick or drill out the old lock and replace it with a new one.

• The fraudster will often find a property that is owned free and clear with no mortgage. If there is still a mortgage on the property, the lender may notify the real owner when the settlement agent requests a loan payoff statement for the closing.

• Fraudsters likely are, or plan to be, repeat offenders, so they will go to great lengths to avoid letting anyone see their face—either in person or via a video call.

• They often favor a quick sale over an increased price.

• Sometimes, these fraudsters can’t keep up with their own lies. As with the example above, there was a change in explanations. First, he had to deal with an ill spouse, but then his excuse for not attending closing was problems with his business.

None of these on their own guarantee there is any fraud in the transaction. Even if all of these are combined, it still doesn’t mean there is something nefarious afoot. However, these are all potential red flags indicating a possible scheme.

If you suspect someone may be engaging in seller fraud, the best thing you can do as the listing agent is notify the title company or settlement agent of your suspicion.

Be sure to couch it in the nature of concerns and don’t outright accuse the seller of being engaged in fraud, since that could lead to a different type of claim being filed against you.

The settlement agent can then insist that the seller attend the closing in person or take other steps to try and verify that the seller is who they say they are.

It is also vital that you never agree to act as the power of attorney for someone in a real estate sale unless it is for your own personal transaction.

Be sure to recommend to all buyers that they purchase a buyer’s title insurance policy, as this may provide some avenue of recovery for them if their deed turns out to be fraudulent.