The U.S. Secret Service has seen a sharp increase across the country in reports of fraud involving vacant land. A common scheme playing out in the current real estate market involves scammers posing as owners of vacant land, wanting to sell quickly for cash at below market prices who then disappear without a trace. An unknowing buyer winds up with no land and the loss of a lot of money with little to no chance of recouping those funds. This can occur with both residential and commercial land.
The recent tactics the scammers have implemented begins with scammers researching local land records to find vacant land with no liens or encumbrances. Once they have identified the owner of the land, they pose as that owner and contact a realtor to list the property for sale. It is common that they will list the property at below market value for a quick sale and indicate a preference for a cash sale. They typically communicate only by email or text. They will arrange for their own notary signing of documents and claim to be in another state or another country. The purported notary is likely to be one of the fraudsters using the identity of an actual notary. They may even be signing by power of attorney and the attorney-in-fact is not local. At the time of closing, the closing attorney or title company transfers the proceeds to the scammer. The fraud is typically not discovered until after the sale has been consummated.
We’ve heard that these frauds are happening in New England. In one such incident that was shared with us, the seller claimed to be in South Africa and obtained the identity of a notarial officer in the embassy consulate and produced a deed that appeared to be officially notarized. The fraud, in this case, was discovered after the deed was accepted by the local recording office and funds disbursed. Although unconfirmed, we have reason to believe someone at the local recording office, handling the deed as part of the office’s administrative tasks, recognized the name of the seller as a friend and contacted the true owner and asked if they had sold their property. This led to the discovery that true owner had no knowledge and had not put the property up for sale.
Another scammer claimed to be in California and was planning to sign the deed with a power of attorney. This was a near miss as the buyer had a question about a zoning issue and called the seller who knew nothing about the proposed sale.
The Rhode Island Association of Realtors recently published an article on this type of fraud. The article identifies several cases of vacant land fraud schemes attempted in Rhode Island and lists several actions a real estate broker or sales person can take to avoid becoming an unwitting facilitator in the schemes. To read the article, follow this link:
Here are some tips on how to prevent a loss from a vacant land scam:
1. Be on alert when your transaction is for vacant land.
2. Send an introductory letter to the seller at their address as it appears in the Tax Assessor’s database, confirming that they are selling their property. Stewart Title has a template for a seller letter available in this bulletin by clicking the “form” link: https://www.virtualunderwriter.com/en/bulletins/2022-4/sls2022004.html
3. Independently do an online search for the identity of the seller.
4. Require the seller to show ID over a virtual meeting.
5. Verify the notarial officer in the state or country they are from and contact that officer to confirm they notarized the document in question and reviewed the seller’s ID.
6. Subscribe to a service that can confirm wire instructions for your seller.
7. Pay attention to a feeling that all is not right with this transaction.
8. Make sure your staff is aware of this type of risk.
This list is not exhaustive, and awareness is key. Scammers are always looking for the next best way to part people from their money and this particular type of fraud is incredibly costly. In a challenging real estate environment, we are all at risk. Our diligence is the best tool for us to avoid this type of scam.
Stewart Title has a recent Bulletin regarding this topic that you should find helpful and, as always, please reach out to your local underwriter if you encounter any red flag or have questions.
https://www.virtualunderwriter.com/en/bulletins/2023-1/sls2023003.html