With the high dollar-amount of real estate transactions, and reduced number of sales over the past year, wire fraud attempts have become even more concentrated this year. The FBI recently reported cybercrime losses hit an astounding $12.5B in 2023, with a record number of complaints filed. Additionally, as title companies, real estate professionals, and property owners have become more aware of wire fraud, cybercriminals have resorted to some new tactics. One such tactic, seller impersonation fraud, also known as vacant land fraud, vacant lot fraud, owner fraud, or absentee seller fraud, has emerged as one of the swiftest-growing forms of wire fraud in real estate.
What is seller impersonation fraud?
Seller impersonation fraud involves fraudsters posing as the owners of vacant or unoccupied properties to transfer funds from the sale into a fraudulent account. Understanding the how this scam works, its warning signs, and how to protect against it is imperative for real estate professionals, Title Companies, and property owners alike.
How does seller impersonation fraud work?
Typically, scammers execute seller impersonation fraud by following these steps:
- Scouring public records: Fraudsters scour publicly available databases or tax records to identify "unimproved" or "vacant" properties, often free from creditor claims or mortgage liens, making them easier to exploit.
- Creating fake credentials: Upon identifying a suitable property, scammers gather information about the owner from publicly available data and fabricate usernames, email addresses, and state- or federally-issued credentials, often using a "money mule" to impersonate the owner.
- Contacting a real estate agent: Scammers reach out to real estate agents to list the property for sale, often using property feeder sites such as Redfin or Zillow, and weaving a tale with local details to establish credibility. They will typically only communicate with the real estate agent through text or email.
- Underpricing the property: The property is listed at or below market value to attract buyers swiftly, with a preference for cash sales to expedite the process.
- Swift acceptance of offers: Scammers promptly accept offers, particularly cash offers, with minimal negotiation to maximize closing speed.
- Requesting remote notarization: Scammers insist on remote notarization to avoid in-person encounters, signing documents using fake credentials or stealing notary credentials.
- Vanishing with the funds: Once the sale is closed, scammers disappear with the funds, often leaving the fraud undiscovered for weeks or months due to the property’s vacant nature.
8. On to the next: The scammer looks for more property and the process is repeated.
Who is at risk?
Owners of vacant or out-of-state properties and real estate agents are primary targets of seller impersonation fraud.
Preventing seller impersonation fraud:
Several measures can mitigate the risk of falling victim to seller impersonation fraud:
- Educating oneself about the tactics used by fraudsters and remaining vigilant.
- Trusting one's instincts and conducting due diligence, including seeking a second opinion from colleagues or transaction partners if suspicion arises.
- Utilizing technology platforms such as Tidal Money, which employs account and entity validation services (AVS/EVS), multi-factor authentication, and secure wire instructions to prevent fraudulent transactions. Look for a technology partner like Tidal Money, which has a strong Bank Secrecy Act and Anti-Money Laundering program (BSA/AML).
- Increasing awareness of seller impersonation fraud within the real estate community through newsletters, resources, and webinars.
Recognizing the signs of seller impersonation fraud:
Several indicators may signify a potential seller impersonation fraud attempt:
- The property listed is vacant land, which is less likely to attract the owner's immediate attention.
- The listing price is conspicuously below market value.
- The “seller” is difficult to reach by phone and only communicates by text, email, or refuses to meet via video call.
- The "seller" insists on remote notarization, avoiding in-person meetings.
- The "seller" is a new lead with no prior relationship with the real estate agent.
- The “seller” refuses or is unable to complete multi-factor authentication (MFA).
- Offers are accepted swiftly, often without negotiation, and with a preference for cash transactions, or demands proceeds be wired.
- The purported seller resides "out of town," providing a pretext for remote or virtual closings.
Seller impersonation fraud is a persistent threat in the real estate industry, and just the latest form of fraud used by scammers. However, with awareness, vigilance, and the adoption of robust security measures, real estate professionals and title companies can safeguard themselves and their clients against fraudulent schemes. Tidal Money provides a secure platform, with resources for all real estate professionals.
For more insights on seller impersonation fraud, consider attending webinars hosted by industry experts or accessing informational resources provided by platforms like Tidal Money.
