Protecting Yourself From Home Title Theft

The new digital economy has opened up unprecedented opportunities for scammers and fraudsters, but that doesn’t mean old-fashioned offline fraud has gone away.  In fact, it’s quite the opposite.  Home title theft, an increasingly common scam, very often is conducted with old-school analog paper and ink.  It’s a growing problem, and it’s one that can rob you of your property without ever attracting your attention. 

How Title Theft Happens

Most criminals target low-hanging fruit, and that’s the case with home title theft.  Typical targets include investment properties with absentee landlords or properties owned by recently deceased seniors with out-of-town next-of-kin.  The common denominator is a lack of hands-on attention from the property owner. It’s rarer for the home you actually live in to be targeted, but that can happen too. 

Once a target is identified, the actual theft is shockingly simple.  The scammer fills in a blank deed – available online or at any office-supply store – with the legal description of the property, gleaned from the county or city’s public records and the names of the current owner and a purchaser.  The scammer goes to a notary with the deed and a fake ID, or forges a notarization, and he or she then files the fake with the municipality’s registry of deeds. 

For fees that usually total well under $100, the scammer now apparently “owns” property worth hundreds of thousands.  

How Title Fraudsters Profit

Once they’re the owners of record, getting physical possession of the (usually empty) property is simple. As the apparently-legal owners of the property, scammers can call a locksmith to have the locks changed. If questioned it’s easy enough to pass it off as a foreclosure, or to spin a tale of bad tenants taking off with the keys. If the property is poorly secured to begin with, the criminals can simply break in and replace the locks themselves with new ones from the hardware store. 

Once in, scammers have a number of opportunities to siphon away the equity you’ve built up in the property.  They can sell it, potentially even to multiple buyers.  They may rent it as well, especially if it’s a multi-unit building, fattening their take with the tenants’ rent checks and security deposits. This can go on indefinitely, with an inattentive absentee owner. The scammer can continue to collect rent even when showing the building to potential buyers, just as a legitimate owner might. As long as the criminal follows local ordinances about giving appropriate notice before entering an occupied suite, there’s no reason for anyone to question it. 

Another option is to draw down the property’s equity through an equity-backed loan, either a simple home equity loan or a home equity line of credit (HELOC).  At that point, the fraudster can simply take the profits and get out of Dodge or continue to solicit rentals or purchase offers until there’s a sign of trouble.  They can even loot the equity from your primary residence while you’re living in it, oblivious to your new “landlord.”

What Title Theft Means for You

If you’re victimized by title theft, you’ll be faced with a long, hard road to get your property back.  You’ll need to file a civil suit to re-establish title, which can cost you significantly, especially if the fraudster has gall enough to contest your suit in court. 

It sounds crazy, but the ones who don’t cut and run with their ill-gotten gains have little to lose by dragging out the process.  If they lose, they’ll face criminal charges, but if they persist, there’s a chance you may simply run out of money and give up.  After all, they have possession of one of your biggest assets. 

Recourse and Prevention Are Limited

At this point, it’s completely understandable if you’re shaking your head and asking: “How is this possible? Don’t they check these things at the registry?”  The answer is usually “no.”  As a rule, the registry is just there to record the title information, not to investigate or verify it.  In real-world practice, there are a few outliers in either direction.

In Florida’s Miami-Dade County, for example, clerks at the registry to question a document’s authenticity.  Riverside County, California, which was hit hard by foreclosures and title fraud during the 2008–2009 mortgage crisis, takes a more proactive approach. Clerks there are encouraged to scrutinize deeds and to involve law enforcement if they suspect any hanky-panky. 

Title insurance may not help you much either. The standard form of that product protects you against any title-oriented fraud that took place before you bought the house. To put it a different way, it protects the person who buys from the scammer, but not the person the scammer stole the property from. Some companies are now beginning to offer coverage against title theft scams, but if you want that feature, you’ll have to actively seek it out. 

Title Fraud Protection Services

If you’re concerned enough by now to do a bit of Googling, you’ll discover pretty quickly that a number of services offer to protect you against title theft and title fraud.  These services take a number of common sense steps to detect signs of fraud.  They’ll monitor your credit reports for loans against properties or against any changes to your title or mortgage. 

These services are typically offered on a subscription basis, which means that a simple annual fee or monthly payment can give you a measure of peace of mind.  The weak point in this whole proposition is that you can do all those things for yourself, and perhaps more, and save yourself the fees. 

Protecting Yourself From Title Theft and Fraud

If your property is a potential target for title theft, you can take several steps to proactively protect yourself.  Buying new-and-improved title insurance with fraud protection is a start if you can get it.  Other crucial steps include: 

  • Visit the property: Are people living there that you don’t know about?  A “For Sale” sign?  Does your key still work in the door?  Sometimes it really is that simple.  If you live too far away from the property to visit yourself, have someone check on it for you regularly. 
  • Watch for bills: One potential sign of trouble is that bills for things like your property’s water, sewage, electricity and property taxes stop showing up.  If someone else is now the “on-paper” owner of the property, they’ll be getting those bills. 
  • Check the registry regularly: Land title records are public information, so you can visit the county or municipal recorder’s or auditor’s website any time to verify that the registered owner of a given property is still you.  Some jurisdictions may even offer the option of getting email alerts if any actions are taken on one of your properties. 
  • Use Spokeo’s Reverse Address Search: As an additional measure to reviewing government sites, use a simple Spokeo search to learn more.  It pulls together property details from public sources into one report.  If the report shows a “red flag,” such as current residents you’re unaware of, you’ll need to take a closer look. 
  • Scrutinize your credit reports: Fraudulent activity often shows up on your credit reports.  Many sources offer you a chance to see your credit report for free on a regular basis, so use them.  If any mortgage-related activity or equity loans appear, investigate them immediately. 

The Bottom Line

Although property title theft and fraud are widespread and rising, they still affect a relatively small percentage of all property owners. Simple luck often decides whether a scammer selects a property of yours to target. Even careful, hands-on owners can be affected.

Paying close attention to any properties you own and taking sensible precautions to recognize and act on any danger signals aren’t a complete solution, but they do mean you’re more likely to recognize the problem before it gets any worse. Reporting the fraud to local authorities, your mortgage-holder, credit-reporting agencies and even the FBI’s fraud hotline – all can help minimize the fraudster’s opportunities to take a profit and may encourage them to skip town. 

Ideally, it results in criminal charges, putting them out of business and saving others from the potentially ruinous impact of a successful fraud. That’s not just good for you; it’s good for everyone. 

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