4 Tips for Combatting the Rising Property Fraud Crisis with Proof

‍This article was originally published on Inman.

Fraud related to buying and selling real estate – including mortgage fraud, wire fraud and title fraud – is rampant. Sellers misrepresenting information about real estate on the market increased 22.6% in the second quarter of 2022 from the prior year. Wire fraud (when a fraudster siphons money from the buyer during the transaction) and title fraud (when a fraudster transfers the title of a property to an illicit third party) are also on the rise, with over half of all transactions showing signs of wire and title fraud risk – nearly double the risk of this kind of fraud seen in 2021. Last year, New York was the top state for instances of mortgage fraud, followed by Florida and Rhode Island. In Utah, officials are warning land buyers and owners about a concerning increase in scams related to vacant lots and land parcels. 

Factors beyond our control are causing rates of property fraud to surge

Hardworking consumers, real estate agents, mortgage lenders, title agents, attorneys and law enforcement are all impacted by property fraud. What’s especially troubling is the fact that rising rates of property fraud are largely being driven by factors beyond our collective control. For instance, high interest rates coupled with limited housing supply make it more difficult to buy and sell homes, which puts pressure on consumers and real estate professionals. This pressure can cause the involved parties to neglect to verify if the seller’s identity matches the property owner for a given listing, or fail to vet the bank account owner linked to wire instructions prior to taking action.

An aging population is also causing rates of property fraud to increase. As the Baby Boomer generation ages, a massive shift of generational wealth is taking place, creating plentiful opportunities for property fraud, often orchestrated by targets’ own family members. At the same time, the rise of cyber fraud overall is exacerbating the prevalence and severity of property fraud. As digital attack surfaces continue to expand, fraudsters are getting smarter, more determined and better equipped. In fact, at the current rate of growth, damage from cyber attacks will total $10.5 trillion annually by 2025 – a 300% increase from 2015 levels.

How County Recorders, Listing Agents, Title Agents and Buyers can fight back

With interest rates remaining high, a large population growing older, and fraudsters becoming more brazen and resourceful, fighting back against property fraud has never been more important. Here are four ways the real estate community can work together to stop property fraud:

1. County recorders can help prevent illegal property transfers

A common property fraud trend involves fraudsters forging documents for transferring real estate so they can put a property in their own name. To do this, fraudsters will commit identity fraud to impersonate the “grantor” on a property deed or work within a sophisticated fraud ring – one that includes a fraudulent notary executing the paperwork in the owner’s name, giving the appearance of legitimacy. County recorders can play a vital role in preventing these illegal transfers, as transferring property typically requires paperwork to be recorded with your county. As property fraud increases, some county recorders are requiring an ID check before recording a transfer of ownership, matching the ID against the owner on file. This is a crucial security policy that every state and county should employ. 

County recorders seeking security beyond an in-person ID check can implement new policies that require proof of ID when recording a deed including, scanning government ID, performing a biometric comparison and looking up your identity in authoritative databases.  But they don't need to invent a security policy; there's already a federally vetted one called NIST IAL2, which government agencies are now referencing.  Proof is currently the only platform that can sign a deed with IAL2 level verification.

2. Listing agents can require identity verification before listing a property

Real estate listing agents should always be on the lookout for the telltale signs of property fraud: the seller is looking to make a quick sale, the seller wants to price the property under market value, the seller refuses to meet in-person and only communicates over email or text, and/or the supposed owner does not live at the property (e.g., it’s vacant land, a vacation home or a rental property). But with property fraud reaching all-time highs, listing agents need to do more than just be on the lookout. One of the simplest and most cost-efficient actions listing agents can take to protect themself and their community is to require a seller to verify their identity before agreeing to list a property. For example, when executing a listing agreement, real estate agents can use Proof to verify a signer’s identity and execute the agreement with an authenticated electronic signature – an easy, all-in-one solution.

‍3. Title agents can verify the seller’s identity at the opening of a title or escrow transaction 

The best time to stop property fraud is before it starts, but if a fraudster is successful in bringing a property to market, title agents have a timely opportunity to once again verify the seller’s identity. Proof can be used in the standard title agent practice of collecting buyer and seller information at the opening of a title or escrow transaction, so when title agents reach out to collect and verify seller information and/or execute disclosures and authorizations, they should also require the seller to verify their identity with Proof. Doing so can give title agents confidence that the seller is who they say they are and that they’re not an imposter trying to sell someone else’s property. If the seller can’t pass Proof’s identity verification process or refuses to cooperate, title agents should take great care in proceeding with the transaction or decline the transaction altogether.

4. Buyers can require sellers to complete online notarization

Imagine you’ve been searching for your first home for well over a year. One day, you stumble upon what looks like your dream listing, so you make an offer. To your delight, your offer is accepted and you’re on your way to the closing table! Now, imagine you find out – after the closing – that your dream home was sold to you by a fraudulent seller and the transaction is being reversed. Property fraud is a devastating experience for real estate owners, but it also poses significant emotional, financial and reputational harm for everyone involved. This is why  closing represents a critical, last step in fighting back against property fraud. 

By completing online notarizations with Proof during the closing, buyers and sellers can have confidence in their notarized documents. After both buyers and sellers complete a multi-step identity verification process, signers are instantly connected with a duly commissioned and background-checked notary. With online notarization, both the audio and video from the closing session is recorded and retained, providing a level of evidence not available in traditional notarization. This means that if it's determined that the seller fraudulently obtained rights to the property or was impersonating the owner, the video will show what the fraudster looked and sounded like during the closing, which can be used as evidence to help reverse the transaction.

‍Be proactive about protecting yourself, your loved ones, and your business

Gone are the days of fraud being limited to credit cards and social media accounts. Today, people – even family members, in some especially unfortunate instances – are increasingly stealing property via fraud. Leveraging Proof’s identity-assured e-sign and online notarization, the real estate community can work together to proactively restore trust in every transaction, starting from the county recorder’s office and ending at the closing table.

If you’re concerned about property fraud, consult with your local county’s Registry of Deeds Office to see if they offer free property fraud alerts. Such tools can alert you whenever a document is recorded in your name, giving you the opportunity to report any suspected fraud before it’s too late. If you suspect you may be the victim of property fraud, reach out to your local law enforcement and county recorder immediately.