With the real estate market experiencing a shallow inventory, potential home buyers are seeing increased competition, leading to frequent bidding wars. In this intense environment, prospective buyers may sense the need to expedite specific steps in the purchasing process to make their offer more appealing to the seller. However, they must exercise caution, as taking shortcuts can expose them to fraudulent activities.
Regrettably, the current competitive landscape has created an ideal setting for a specific type of fraud known as seller impersonation. In this scheme, malicious actors impersonate property owners, attempting to sell properties they do not own. It is paramount that title professionals and industry associates raise awareness of this fraud and educate potential buyers on the measures they should adopt to protect themselves.
The most effective approach to avoiding seller impersonation fraud is to understand this threat and the methods by which it can occur. Both industry experts and consumers should be well-informed about the properties and transactions that are particularly susceptible to this fraudulent activity.
How it Works
The most prevalent types of wire fraud frequently involve impersonating a title or real estate agent to convince a buyer to transfer funds into a deceptive account. However, seller impersonation fraud takes a different approach. This particular scam involves a fraudster assuming the identity of an owner’s unoccupied or vacant property to misappropriate the proceeds from the sale.
To execute this scheme, scammers delve into public records to pinpoint real estate that lacks a mortgage or any other encumbrances, often focusing on vacant lots or rental properties. Through these records, they also glean information about the property owner. Subsequently, the scammers then masquerade as property owners and reach out to a real estate agent to list the property for sale, with all communication transpiring via email and other electronic means, avoiding in-person interactions.
Next, the scammer typically sets the listing price well below the current market value to generate immediate interest in the property. Upon receiving an offer, the fraudster swiftly accepts it, displaying a preference for cash transactions. The title company or closing attorney will then transfer the closing proceeds to the scammer. Unfortunately, the deception usually remains concealed until the document gets recorded with the relevant county authorities.
5 Red Flags
Here are the five distinct warning signs that may indicate seller impersonation fraud:
- The asking price is significantly below the current market value. When a deal appears too good to be true, it often is.
- The supposed “seller” rapidly accepts an offer. In legitimate real estate transactions, some degree of negotiation is typically expected.
- The property listed is an empty parcel of land. Scammers tend to target unoccupied properties because they’re less likely to be actively monitored by the owner.
- The “seller” requests the use of a remote notary. Scammers avoid in-person closings to prevent exposure to their deceptive activities.
- The “seller” claims to reside “out of town.” As part of their fabricated narrative, the scammer may assert they live in a different location than the property’s actual site, thus avoiding any potential for face-to-face meetings.
In 2017, email scammers caused the real estate industry to suffer losses of nearly $1 billion. At Closinglock, we are committed to bringing peace of mind to the homebuying experience by modernizing the secure transfer of both funds and information. And with Closinglock’s Identity Verification tool, you can rest easy knowing the seller you’re working with is exactly who they say they are.
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