How to Identify spotty Florida ownership during the prequal
As a real estate attorney or agent, the last thing you need is to abort your luxury closing because of fraudulent Florida property ownership. With its huge senior population, large migration of incoming home-seeking residents, and property wealth—the average sale price of a home in Palm Beach topped $20 million in the third quarter according to data from Douglas Elliman—Florida is especially vulnerable to illegal property transference activity and real estate fraud is rampant.
Bloomburg just reported “Florida overtakes New York as Second-Biggest US Housing Market.” Inman also recently reported that sellers misrepresenting information increased 22% where wire fraud and title fraud accounted for one half of the activity. House stealing takes the form of mortgage fraud, wire fraud and title fraud, and Florida is second only to New York in mortgage fraud.
“officials are warning land buyers and owners about a concerning increase in scams related to vacant lots and land parcels” -New York Times
House stealing: What is it and who’s doing it?
Strangers: Cybertheft of title fraud was so prevalent in the U.S. that the FBI created the new category of “house stealing”. It may begin with con artists looking for a vacant house—say, a vacation home or rental property, do a little research to find out who owns it, and download information from a county web site. With that data, the criminal assumes your identify and then switches property ownership into another person’s name.
Friends and Family: Today, fraud is not only specific to credit cards and social media accounts. Unfortunately, people, even family members, are increasingly stealing property via fraud. This type of house stealing occurs when someone within the family beneficiary group or a family trust administrator abuses his or her role as power of attorney or health care proxy to trick the homeowner into reassigning assets, or fraudulently signs off on assets to himself or an unintended beneficiary.
Red flags of fraudulent trusts
Forensic Strategic Solutions, a national financial investigation firm that specializes in financial records that deal with trusts and estates, says real estate professionals should be aware of these red flags:
- Shifting bank balances: Sudden changes in account balances, particularly larger-than-usual withdrawals may be indicative of inappropriate or illegal activity.
- Missing assets: Look for the unexplained or sudden disappearance of funds or valuable possessions such as fine art, furnishings, and antiques
- Odd transactions: Unusual transactions between a trust or estate and the trustee, executor, or attorney-in-fact or their associates is reason to further investigate.
- Questionable reporting: Watch for reports that lack substance and detail, or are late or missing. Fraudsters are often reluctant to provide updates on their activities, and may try to conceal their actions with murky details.
- Unpaid bills and credit card abuse: Past due notices can indicate an estate has been drained of money needed for bills. Abnormal credit account activity such as unusually high balances or having the limit reached or exceeded is another indicator.
How the real estate community can combat property fraud
Proof, a national notarization company says vigilance by the real estate community is the best way to beat fraudsters. Here are five ways we can combat rising property fraud:
- Homeowners: Whether you are the homeowner, or acting on behalf of the homeowner, you should know that phone and internet scams top the list of the most common types of fraud targeting the elderly. A typical scenario is a con artist pretends to be a qualified estate planner and creates unusable trust documents. Retired Florida homeowners need to practice the following protections. Never be pressured into quickly agreeing io creating a trust over the phone; do not believe to-good-to-be-true statements, such as such as trusts can save you 40% on estate taxes; ask direct questions regarding the costs, withdrawal penalties and other fees associated with the living trust; and never agree to immediately sign on without the opportunity to talk it over with your family or legal advisor. Another red flag is if the caller tries to upsell you to pricey asset liquidation services.
- County recorders: Since typical fraud includes forging documents, county recording officials need to be extra vigilant with the paperwork needed to transfer property such as matching the requiring ID checks before recording a transfer. In addition, during an in-person ID check, any government IDs should be scanned, and some agencies are now performing biometric comparisons such as such as facial recognition or voice verification and cross-checking the owner’s identity in authoritative databases.
- Listing agents: These telltale actions can be handwriting-on-the-wall when it comes to identifying property fraud. The seller wants to sell his property for less than it’s worth, refuses to meet in person and only messages via emails or texts, and does not live at the property claiming it’s vacant or a vacation or rental property. Listing agents need to require verification of the seller’s identity before agreeing to the listing.
Additional red flags include rushing the deal with: “Last minute” wiring instructions changing bank information, an addenda changing title or ownership, or moving the seller’s loan to a junior position in a seller carryback loan.
- Title agents: Title agencies need to be extra vigilant with verifying the seller’s identity during the standard practice of collecting buyer and seller information at the opening of a title or escrow transaction. When title agents reach out to collect and verify seller information and/or execute disclosures and authorizations, they should also require the seller to verify their identity.
- Buyers: The closing day, or point of purchase of a property sale is a critical time for buyers to safeguard against property fraud and it’s all about identify verification. In-person notarization requires a notary public to identify the signer using a photo ID or passport and the danger lies in forged signatures. Never let the seller get you to skip the requirement to have the signer personally appear before you.
Since Florida has adopted Remote Online Notarization (RON) which allows you to close on a property in Florida from any part of the United States where title transference occurs online, a reliable online notarization agency is a must. To check out the closing tool that will be used, make sure the company’s platform company offers multi-factor authentication (MFA) and identity verification technology, including knowledge-based authentication (KBA), and credential analysis.
If you’re concerned about property fraud, consult with your local county’s Registry of Deeds Office to see if they offer free property fraud alerts.
Florida Bar Board Certified in Real Estate Law, Attorneys David E. Klein and Guy Rabideau at Rabideauklein.com, have the expertise and experience you need to ensure that your interests are protected throughout your real estate transactions across the Palm Beaches and throughout Florida. Contact Rabideau Klein to discuss the legal implications of your next commercial or residential property transaction.