Lew Sichelman
To curb money laundering, Uncle Sam is expanding a rule requiring settlement providers to determine and report the names of participants in all-cash transactions. But the trend of seller impersonation fraud is proving harder to stop.
First, the fraud. According to numerous sources, more and more homeowners are falling victim to seller impersonation scams, in which a fraudster claims to own a property using phony documents as proof. If no one at the title company is eagle-eyed enough to notice the rip-off, and the local recording office doesn’t spot it, either, a new deed is issued in the swindler’s name.
The con artist then turns around and “sells” the property at an attractively low price, absconding with the proceeds before anyone is the wiser. By the time the deed – no pun intended – is done, the con is long gone.
How Prevalent? Hard to Say
The scam is often run on vacant land or unoccupied vacation homes, but not always: In one recent case in North Carolina, a woman managed to obtain the title to a multimillion-dollar house despite it still being occupied by the real owner and his family.
ABC reporter Diane Wilson wrote that “according to North Carolina law, the Register of Deeds does not have a duty to verify the legal sufficiency of a deed when it is presented for registration,” although “the office can refuse to record a document if fraud is suspected.” (It wasn’t, in this case.)
In another pair of recent Massachusetts cases, out-of-town Concord landowners suddenly discovered someone had filed a fake deed with the local registry, then sold the land to someone who built a home on it.
A similar scam in Plymouth was stopped thanks to an eagle-eyed title lawyer, Alan Sharaf, who told WBZ-TV that something seemed amiss when a purchase-and-sale agreement hit his desk for an all-cash sale where the Montreal buyer had the same name as a famous Canadian soccer star.
It’s hard to say how prevalent seller impersonation fraud is. For one thing, if the targeted property is vacant land, it can be months – or even years – before the real owner even discovers the fraud. Also, this type of scam is not a separate category in most crime statistics. For example, the Federal Trade Commission says nearly $2.7 billion in losses were reported from imposter scams in 2023, but that includes all imposter schemes – not just real estate ones.
A study prepared for the American Land Title Association (ALTA) is more telling. It found that 28 percent of title insurance companies experienced at least one attempted title theft in 2023. Of those, 16 percent said they had paid claims related to seller impersonation.
Industry Coalition Seeks Changes
In August, six industry and consumer groups – including ALTA, the National Association of Realtors and the National Notary Association – formed a coalition to address this type of scam. They released an educational brief called “What Is Deed Fraud?” to publicize the issue and advocate for changes.
Among other things, the groups want better protections for taxpayer information, while keeping land records accessible and public; more ID-verification options for in-person notarizations; and new continuing education requirements for real estate licensees and notaries. The groups also want property owners nationwide to have free access to property recording notification systems – something only a handful of states currently offer.
Other than these proposed steps, though, property owners are typically on their own when it comes to combating imposter fraud. It helps if they purchased an enhanced title insurance policy when they bought the place: An enhanced policy generally covers events after the title is transferred, whereas a regular policy only covers events prior to taking ownership.
If the owner opted out of an enhanced policy and comes up against impersonation fraud, they’ll have to hire an attorney to sort out the problem. To help support victims, the six industry groups are calling on state legislatures and local governments to earmark more resources for combating fraud. They also are asking governments to step up and help legit owners reestablish titles in their names.
Some states are rising to the occasion: In New York, where deed theft was not a crime previously, a new law now names it a form of grand larceny and extends the statute of limitations, giving prosecutors at the state and local levels more time to investigate cases.
When identifying potential cases of fraud, title companies told ALTA that common red flags included transactions involving vacant land and requests to use an unknown notary. All-cash transactions also carry a higher risk, they said.
New Money-Laundering Rules for Agents
Speaking of all-cash transactions: Title companies and attorneys will soon have to report the identities of all parties involved in all-cash real estate deals. It’s part of a continuing effort to thwart drug cartels and foreign officials from laundering ill-gotten gains through American real estate.
Previously, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) required title companies and attorneys to report the names of the “beneficial owners” of limited liability corporations and the like in cash deals over $300,000 in certain locations. But starting Dec. 1, the dollar threshold will be removed, as will the geographic limits.
FinCEN also is expanding the amount of information that must be reported. Now, reporting persons must provide their names and addresses, as well as those of both parties to the transaction, plus their dates of birth and taxpayer identification numbers.
The agency also wants information about any money that changes hands, including the amounts and the names of the financial institution from which the payment was drawn. If a lender not subject to anti-money-laundering rules was involved, it wants information about that lender, too.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at lsichelman@aol.com.
