Real Estate Fraud Part 1: The Set Up - Buyer Beware
According to the Federal Bureau of Investigation, 9,359 cases of real estate fraud were reported in 2024 resulting in a loss of $173,586,820. Insurance typically does not cover these kinds of losses and the potential impact on an individual can be devastating since real estate is often a large part of an individual’s net worth. To further compound the problem, it is unknown how many cases of real estate fraud go unreported each year. This series of articles will identify some of the most common types of fraud in real estate transactions so that both buyers and sellers of real estate can be aware of the potential danger.
Imagine this scenario – you find the house of your dreams listed on a “For Sale By Owner” website at a price that is too good to be true. You immediately text the contact number and ask to look at the property. Your contact apologizes that they can’t meet you in person due to caring for their sick mother out of town. They explain that they must sell urgently to move in with their mother and raise cash for her operation, so a buyer needs to have immediate cash, which (lucky for you) you have. You ask if you can call to ask some questions, but they explain that all communication must be by text (due to Mom’s condition). You proceed with caution, but the seller gives immediate text responses to all of your questions, so you start to feel more comfortable. They offer that you can inspect the property all you want, but they apologize that you will have to look through the windows to see inside. Not wanting to miss out on this deal, you do your due diligence in 24 hours as requested: you inspect the property, you get a quick title report on the owner to verify the name and lack of liens, and you look at the paperwork provided by your contact to make sure the information is correct. It all checks out. The seller insists that they do not want to use a local title company to do the closing, but, given the time constraints, it is best to do everything remotely. As an added gesture of goodwill, before you wire the funds, you are sent a copy of a Fed Ex receipt showing the key will be delivered to you in the morning and a copy of a confirmation from a moving company showing that the contents of the house will be moved the following day. As a finishing touch, the seller asks if you wouldn’t mind unlocking the door for the moving company when they arrive (it’s the least you can do).
Once the closing is complete, you can’t believe your luck! However, the next morning, the bad news comes in waves. First, the key doesn’t arrive. Texts and calls to the seller go unanswered. The moving company says they have no record of the moving contract. The bank says the wire transfer can’t be reversed. As panic slowly sets in, you check the recorder’s office and find that the deed was recorded. That means everything is alright, right? Wrong. You have been a victim of seller impersonation fraud.
Future articles will discuss the red flags that could signal seller impersonation fraud, prevention tips and information on other types of real estate fraud.