AIME KOSOFSKY had just spent a full day attending a cybersecurity conference hosted by Premier One. After eight hours of hearing about all the stuff that could go wrong, a founding partner of the North Carolina-based law firm Brady & Kosofsky, spent the night changing passwords, making adjustments and implementing new ideas to better protect his company.
But when Kosofsky got to the office the next morning, he didn’t have to address a potential wire fraud scam. His firm was handling a transaction that had an alarming fact pattern similar to one being dealt with by other title and settlement companies across the country. The transaction involved vacant land, was free and clear of any mortgages or liens, had a cash buyer, used a local listing agent and an out-of-state seller.
Real estate transactions have been a prime target of cybercrime over the past decade. There is little sign of change in this focus—even as the housing market slows. Instead, fraudsters continue to improve their scams and money laundering tactics to avoid detection. This latest trend involves vacant lots or unencumbered properties. These scams involve bad actors posing as owners of these vacant lots or properties. This trend began to emerge before the winter holidays.
According to the National Association of Realtors (NAR), home sales continued to fall throughout the last several months of 2022. As a result, cybercrime rings have turned to new tactics to make up for the lower housing market transaction volume.
“This recent trend involving seller impersonation is particularly concerning, as the real property owner is typically not aware nor in a position to prevent the fraud, until it is too late,” said Tom Cronkright II, co-founder of CertifID. “Unfortunately, it’s just the latest evolution of wire fraud that affects title companies, law firms, lenders, Realtors and homebuyers and sellers. Our company has received hundreds of cases and helped recover over $52 million for victims in the last two years alone, by partnering with the U.S. Secret Service.”
In Kosofsky’s situation, his office hit the brakes on the transaction. They asked for picture IDs and reviewed old and new documents to compare signatures.
“The signatures weren’t even close,” he said.
The seller said he was in New York. His driver’s license was from Texas. The documents were signed in Florida by a duly licensed notary public from that state.
Then, Kosofsky’s team called the seller. What they learned proved something was awry.
“We told the seller that he needed to come to our office to sign and he responded that has been unable to travel for months,” Kosofsky said.
At that point, the law firm called and asked the Florida-based notary public if they had performed notarial acts for anyone by the name appearing on the documents.
“Surprise, surprise, the notary had no record of it in the journal,” Kosofsky said.
Cronkright said CertifID has worked recently with federal law enforcement on numerous cases like this one. In one such situation, a title agency reported to CertifID a loss of $33,000 from a vacant lot transaction. The title agency and the real estate agent were scammed by an imposter seller. Luckily, it was reported quickly. CertifID worked with the U.S. Secret Service to freeze and return the funds.
Here’s how these new vacant property scams work:
- Scammers search public records to identify real estate that is free of mortgage or other liens. These often include vacant lots or rental properties. The identity of the landowner is also obtained through these public records searches.
- Posing as the property owner, the scammer contacts a real estate agent to list the property for sale. All communications are through email and digital means and not in person.
- The listing price of the property is typically set below the current market value to generate immediate interest in the property.
- When an offer comes in, the scammer quickly accepts it, with a preference for cash sales.
- At the time of closing, the scammer refuses to sign documents in person and requests a remote notary signing. The scammer impersonates the notary and returns falsified documents to the title company or closing attorney involved in the transaction.
- The title company or closing attorney transfers the closing proceeds to the scammer. The fraud is typically not discovered until the time of recording of transferring documents with the applicable county.