Protecting Against Seller Impersonation Fraud

There is a concerning increase in seller impersonation fraud in the real estate industry, and individuals engaging in these fraudulent activities have successfully stolen substantial sums of money that rightfully belong to others. As a title agent today, it's essential that you familiarize yourself with this trend to be able to guard against the issue. Let's start by understanding how this kind of fraud typically occurs.

Fraudsters use various methods, including drive-bys, drones, and online search platforms, to survey neighborhoods and identify potential targets, such as vacant lots, vacation properties, or rental properties. These properties frequently have high market value and often have no existing mortgage. By examining land records, fraudsters can determine the property owner’s name and create a plausible legal description. Armed with this information, they falsely represent themselves as the owner or relative of the owner to proceed with their fraud. Subsequently, they contact a listing agent, usually through online channels, and list the property often below market value, stressing the need for a quick sale, preferably to cash buyers.

Once a contract is signed and it's closing time, the fraudulent seller conveniently (and often suddenly) is "out of town" and requests the closing agent to send the necessary documents for signature, stating they will arrange their own notary. Simultaneously, they instruct the agent to wire the funds from the sale to their bank account.

To mitigate the risk of becoming a victim of this kind of fraud, consider incorporating additional precautionary measures into your processes. Some recommended suggestions include:

• Verify the seller's address using tax records and run the seller’s email and phone number through a verification program, and conduct additional due diligence as needed. If you find discrepancies, stop…drop…and question until you are completely satisfied.
• Manage the notarization. Require the notary act to be performed by a reputable, approved notary, whether online or in person. It's preferable to choose a notary who utilizes a credential scanner or multifactor authentication (MFA) for document execution.
• Verify the seller's identity using a third-party service provider who utilizes Knowledge-Based Authentication (KBA) questions that the seller must answer.
• Use public records to your advantage. Compare previously recorded signatures or use previous sales values to help determine if a deal is "too good to be true."
• If you have suspicions, require that the seller proceeds to be sent via check instead of a wire transfer and pay close attention to the reaction you receive, as it may provide crucial insights.
• File Fraud Reports as soon as you suspect or confirm an attempted fraudulent act.
• Educate industry partners and consumers about the methods employed by fraudsters, your efforts to combat fraud, and how they can protect themselves from becoming victims of fraud.

There is no silver bullet to eliminate fraud but trusting your instincts when something appears suspicious and incorporating the tips above could save you significant expense and grief. Additionally, implementing eClosings with Remote Online Notarization (RON) could also serve as a valuable deterrent against this type of fraud. Perpetrators often shy away from appearing on camera and are unable to answer Knowledge-Based Authentication (KBA) questions, making eClosings an effective safeguard. Learn how RamQuest can assist you with eClosings.