Types of Real Estate Fraud
Real estate fraud encompasses a wide range of deceptive conduct in property transactions. Common forms include: seller misrepresentation (concealing defects, inflating property features); mortgage fraud (inflated appraisals, straw buyers, income misrepresentation to lenders); deed fraud (forging deeds to steal title from homeowners, often targeting elderly homeowners or vacant properties); wire fraud (phishing emails impersonating title companies to redirect closing funds to fraudster accounts); and real estate investment scams (Ponzi schemes disguised as real estate funds).
Wire Fraud: The Fastest-Growing Real Estate Crime
Wire fraud in real estate transactions has cost consumers hundreds of millions of dollars in recent years. The scheme: hackers compromise a real estate agent's, title company's, or lender's email; send convincing fake emails redirecting closing funds to fraudster accounts; and receive the wired funds before anyone realizes the instructions were fraudulent. Once funds are wired to a fraudster's account, recovery is extremely difficult and depends on rapid bank-to-bank communication.
Prevention: always call the title company or closing attorney on a known good phone number (not one from the email) to confirm wiring instructions verbally before transferring any funds. Never wire money based solely on emailed instructions, even if the email looks legitimate.
Deed Fraud: Protecting Your Property from Title Theft
Deed fraud involves recording a forged deed conveying your property to a fraudster, who may then mortgage the property or sell it to an innocent third party. Homeowners often don't discover the fraud until they try to sell or refinance. The remedy—a quiet title action to void the fraudulent deed—can take months and requires a lawsuit even if the outcome is not in doubt.
Many counties now offer property fraud alert services that notify you by email or text when any document is recorded under your name. These are free or low-cost and are strongly recommended for homeowners, especially those who own vacant lots, rental properties, or property in an estate.
Legal Claims and Recovery
Real estate fraud victims can pursue: civil fraud claims against the perpetrator; rescission of the fraudulent transaction; negligence claims against title companies, agents, or lenders who should have detected the fraud; and criminal restitution if the perpetrator is convicted. Title insurance may cover losses from deed fraud and certain other fraudulent conveyances. Recovery against individual fraudsters can be difficult if they are judgment-proof; third-party professional liability claims are often more practically collectible.
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Frequently asked questions
I wired closing funds to a fraudster. Is there any chance of recovery?
Time is critical. Call your bank immediately and ask them to initiate a SWIFT recall or wire recall. Contact the FBI Internet Crime Complaint Center (IC3) and local law enforcement. Banks can sometimes freeze the receiving account if they move within hours of the transfer. Recovery rates are low but not zero—especially if the funds haven't yet been disbursed from the fraudster's account. Your title insurer and financial institution's cyber fraud coverage are also avenues to explore.
What is "title fraud" and does my title insurance cover it?
Title fraud involves recording a false deed or other document that purports to convey your property without your consent. Owner's title insurance typically covers losses from forged instruments in the chain of title. Check your policy's covered risks—ALTA homeowner's policies have broader fraud coverage than basic policies. If you discover someone forged a deed affecting your property, contact your title insurer immediately.
Can I report real estate fraud to a state agency?
Yes. Real estate fraud involving licensed agents or brokers should be reported to your state's real estate licensing commission. Mortgage fraud should be reported to HUD's Office of Inspector General, the Consumer Financial Protection Bureau, and the FBI. Wire fraud should be reported to IC3.gov. State attorney general offices also investigate real estate fraud patterns. Regulatory complaints rarely produce direct compensation but contribute to prosecution of serial fraudsters.