Real estate title fraud, also known as title theft is one of the latest in fraudulent activity in relation to identity theft. Real estate title fraud occurs when a person changes the ownership of your property to themselves without your knowledge. The scammer will forge your signature on a deed (document showing your ownership) and record it with the county register of deeds. This will appear as if you have sold your property or transferred ownership. Once the new fraudulent deed is recorded the scammer becomes the new legal homeowner and can sell your property or take out a loan against it. That is until you, the rightful owner of the property, discover this and fight to fix it.
Real estate title fraud is a real threat and affects not only the current homeowner but others as well. In 2019 in Detroit, Michigan a 65 year old disabled woman named April Walker entered into a "Residential Lease with the Option to Buy" with a man named Derrick, who presented her with a deed "proving" he owned the property. For over two years Ms. Walker faithfully made her monthly payments and made repairs to the property to make it livable. She was so excited to be a homeowner that she didn't mind the hard work and financial responsibility she entered into, including the back due utility bills owed that Derrick informed her she would have to pay in order to get water and electricity. On April 1, 2021 Ms. Walker made her final payment and euphorically celebrated. Derrick texted her saying he would bring her the deed on April, 11. He would never show, disconnected all phone numbers, and it turned out that the property management company he worked for didn't exist. In June 2021, Ms. Walker received a summons to housing court accusing her of trespassing in "her" home she put so much time and money into. There are many more stories like this one. There are many victims to these types of scams. It has become so common in Detroit that real estate lawyers and housing advocates say it affects as many as 1 in 10 tenants facing eviction. While the situation was terrible for Ms. Walker, one must also sympathize with the Florida company that rightfully owns the property. They are now have to go to court and prove they never sold their property to a man named Derrick, or to April Walker.
In a similar situation, a property owner in Washington DC fell victim to the fake deed scam. Two individuals forged signatures and recorded fraudulent deeds for multiple properties, and then secured mortgages against them. The rightful property owners now have to prove that they never sold the properties to these individuals, and that the liens are not legitimate. This can be very challenging, time consuming, and expensive.
If you own more than one property keep a close eye on all of them to make sure no one has moved in or changed the locks. Look for signs of activity and maybe have a trusted neighbor notify you if anyone is at the property when you are not. You can still be at risk even if you only own one property. Watch your utility and tax bills. If you haven't received one in a while, check with the utility company and tax assessor to be sure the name and/or address that those bills should be delivered to hasn't been changed. If they have been changed check on your deed with your county. You can typically do a deed search online and it will show whether a new deed has been recorded on your property. Unfortunately with these measures it can still be too late to prevent the theft. Will the advertised "title lock" programs prevent real estate title theft? No, not really. Your home title cannot technically be "locked." The programs monitor your title and alert you if there is a change to it. This may help you catch the theft sooner however, the theft has already occurred. You now have a legal battle ahead of you to prove the identity theft and ownership of your property. There are identity, credit and cybercrime fraud experts that offer a much more comprehensive protection plan. With real estate title theft being a digital crime these companies are able to evaluate your security practices and do a full cybersecurity checkup for you and your family.
One of the most effective ways to protect yourself against real estate title theft is with an owner's title insurance policy. This is purchased when you buy your property. An owner's title insurance policy can protect you against purchasing a property that is not legally being transferred to you. The title company will do an extensive title search on the property to verify ownership, get a copy of all deeds recorded, discover liens and verify ownership and other relevant information. An owner's title insurance policy may also cover your legal fees if your preventative measures do not catch the theft in time. Most people do not find out their title has been stolen until they receive a foreclosure notice, due to the fraudulent home equity loan not being paid. If you have an owner's title insurance policy the title company will be your first call if you do receive the foreclosure notice. This will begin the process of proving the loan is not yours and you are the rightful owner of the property.