Hello Jessica,
Unfortunately this is yet another fraud vector the title and settlement industries will need to manage. The access to property ownership records and open source information on individual identities makes seller impersonation scams an easy and lucrative target. While no one can prevent these scams from taking place, we can, as an industry, prevent the fraud from materializing into a full closing where buyer and title company funds are stolen. Here's how we think about mitigating this risk:
- Education - internal and external regarding the threat and what to watch out for - internet lead, lack of face to face interaction, "absentee" seller, below market list price etc.
- Confirm identity - if the transaction is being referred from a real estate professional, confirm that they have met with the client face-to-face or at least have engaged in a video-style chat where the seller's identity has been confirmed. If it is coming in as a FSBO seller, conduct due diligence online and ask for a face-to-face meeting or video conference to confirm identity.
- Understand the "why" - make sure the story you are being told makes sense. Why is the seller engaging in a sale? Does it make sense give the neighborhood, business district, buy-sell terms etc. If it does not feel right, tap the brakes.
- Ask for bank credentials up front - assume the seller will be receiving a wire transfer and obtain the bank credentials up front via an electronic wire transfer verification platform or a signed and notarized Disbursement Authorization Form. Having the seller go through a third party identity verification process early in the transaction (when I say early, we do this at our title agency at the time of title commitment delivery for all out of state sellers), will provide an important marker early in the transaction. If it is a fraudster, you will likely identify that at this phase.
- Control the closing process - if the seller is not able to close in person, you must hire the notary and share with the notary the documentation you obtained up front to confirm the identity of the person showing up as the "seller" to the notary syncs with your documentation. NEVER accept signed and notarized documents from a notary that is not trusted. Our title agency uses a national notary service such as Signature Closings but there are others. Also conduct a gut check of where the seller is asking to meet the remote notary and attempt to tie that to another address in the seller's name in that location. For example, I'm in MI and there are "snowbirds" that spend winters in FL and AZ. If a seller is asking for a closing in one of those states, we would ask for an address in those states to verify property ownership. Out of country notary requests should be a huge red flag as should any power of attorney being asked to close outside of the state and on a remote notary basis.
- Confirm signatures and identity documentation before disbursement - after the closing (in person or via a notary) conduct a review of all documents and signatures and compare those to the signature on the purchase agreement, disbursement authorization form etc.
- If it's too good to be true, it likely is - this is the soft tissue side of risk management. Empower your teams to raise their hands if something just seems too good.
Candidly, we spend quite a bit of time vetting files where the seller has not met anyone in person at the start of the transaction. We dig in hard at the time of title commitment delivery to verify identity. If we are not comfortable, we hit the brakes and bring the referral partner into the discussion and work through our concerns. We have turned transactions away in our agency when it did not feel right and the referral partner failed to engage at the level we requested.
We are also vetting a full RON solution for all out of state or "absentee" sellers. We also use CertifID to verify the ID of sellers at the start of the transaction. If we are not comfortable with a wire, we fire up the check printer and go old school...
Aligning people, process, technology and culture is tough, but it seems to work at scale.
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Thomas Cronkright Esq.
Executive Chairman
Sun Title Agency of Michigan, LLC
Grand Rapids MI
+1 (616) 317-4221
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Original Message:
Sent: 03-09-2023 09:21
From: Jessica Kopp
Subject: Seller Fraud
Good Morning All,
Regarding the real estate scam where a fraudster impersonates the real owner of a property and tries to sell property they don't own.
I know underwriters are suggesting a letter mailed to the tax bill address and that there are a few vendors who offer services to help verify the seller's identity. I would love to hear what everyone is doing to combat this.
Thank you!
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Jessica Kopp
Operations and Administration Manager
Gowey Title
Medford WI
+1 (715) 748-7028
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