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Unmasking Real Estate Scams — Why Title Insurance Is Essential

While con artists have been around since the dawn of time, rapidly evolving technology is creating new fraud frontiers. In 2023, scammers stole over $1 trillion from victims worldwide.

Real estate buying and selling is particularly susceptible to these efforts, with an ever-increasing variety of insidious schemes constructed to exploit unsuspecting buyers, sellers, and real estate professionals.

Building wealth via purchasing property has long been considered a cornerstone of the American dream, but the complex nature of these transactions can leave hopeful homeowners ripe for financial loss to crafty cybercriminals leveraging advanced AI tools.

At Landtrust Title Services, we’re dedicated to educating brokers, agents, attorneys, and their clients about the rising tide of real estate scams and how title insurance can protect against these cleverly camouflaged threats. Let’s delve into the latest developments, what to watch out for, and how today’s buyers can ensure they’re guarded against fraud.

Staying Vigilant

The FBI’s Internet Crime Complaint Center (IC3) reported a surge in real estate fraud last year, with the unwary losing millions of dollars in funds that can be highly difficult to get back.

Criminals are getting more sophisticated, utilizing a dizzying plethora of online antics and digital hacks to target unsuspecting buyers and investors. Many types of scams can occur at any given time in the buying, renting, selling, investing, or financing process, so it’s critical to be able to quickly identify red flags.

Wire fraud, where scammers impersonate legitimate parties to trick victims into sending money electronically, is a particularly invasive tactic. Fraudsters use sophisticated spoofing software to impersonate legitimate email addresses and phone numbers to send phony instructions and funnel a client’s hard-earned money into their own accounts. 

Business email compromise (BEC) schemes (a form of phishing) frequently are attempted in this industry where large amounts of money are at stake, according to an analysis by the Financial Crimes Enforcement Network (FinCEN). BEC attacks are the starting point for some 90% of real estate-related cybercrimes.

The shift towards online property listings, virtual tours, and remote closings has created new opportunities for cybercriminals to intercept communications and manipulate deals. That’s why the experts at Landtrust are laser-focused on providing a secure platform to send and receive wiring instructions and other sensitive information. 

The National Association of REALTORS® (NAR) recommends taking these steps to protect your business and clients from opportunistic BEC scammers:

  • Never send wire instructions (or any personal or financial information) via e-mail.
  • Always verify money transfers with a phone number that’s been independently obtained.
  • Double-check email addresses and call the sender if you’re unsure they actually sent the email.
  • Don’t use unsecured wifi — and do always use a secured email and transaction management platform. 
  • Never open suspicious attachments.

First-time homebuyers are twice as likely to be targeted by real estate fraud, so it’s essential to ensure your clients proceed with caution and do your due diligence.

Your Secret Weapon Against Title Fraud

Title fraud, a specific type of real estate scam, involves the illegal transfer or alteration of property records. Criminals can then transfer ownership without the real owner’s permission and sell it, or use the deed as collateral for fraudulent loans. 

This can happen in several ways, including forging documents, stealing identities, or taking advantage of elderly or absentee homeowners. Here are some warning signs to watch out for:

  1. Unsolicited offers: Receiving unexpected offers to buy or sell your property, especially if you haven’t listed it for sale.
  2. Unknown liens or mortgages: Discovering liens or mortgages on your property that you didn’t authorize.
  3. Changes in property records: Unexplained changes in your property’s title or ownership records.
  4. Suspicious communications: Emails or phone calls from unknown parties requesting personal or financial information related to your property.
  5. Unusual activity notices: Receiving notifications of activity on your property from local authorities or financial institutions that you didn’t initiate.

In the bustling Upper Midwest market, many homes have a history going back one hundred years or more, and the likelihood of encountering title issues increases significantly. 

A crucial partner for forward-thinking real estate professionals, the team at Landtrust uses all available resources to perform an exhaustive title search for any signs of past or present fraud attempts during the closing process that may create a cloud on title and helps ensure a safe and productive transaction for all involved. 

Consumer Education

While vigilance is vital, complete protection comes from having a strong defense in place. That’s where title insurance comes in. A one-time, affordable premium safeguards your client’s real estate investment for years to come. This single payment provides coverage for as long as they or their heirs own the property.

Unlike other types of insurance that protect against future events, title insurance primarily covers past events that may affect ownership rights and guarantees a clear and marketable title for the future.

During the title clearance process, our skilled officers can uncover encumbrances and other defects that could derail the sale and facilitate open communication with the property owner. We’ll provide a comprehensive title commitment as well as its exclusions or exceptions, which should be reviewed carefully with your client and their attorney.

Despite the increasing threat of real estate scams, many potential buyers remain unaware of the risks, and 60% say they received little to no education about real estate fraud from their agent, title agency, or attorney. Protect your clients from the threat of real estate fraud and cybercrime — partner with the team at Landtrust Title Services today.

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