Until recently, the most familiar version of “real estate fraud” was probably those awful stories you sometimes hear on the news.
You know, the ones where some menacing bad actor has rummaged through an unsuspecting homeowner’s trash, successfully found personal documents, and then managed to dupe a bank into advancing a mortgage on the property.
This is one of the reasons we need to be extra careful with our personal information, we’re told.
Over the past several weeks, it’s another type of real estate fraud that has been making headlines. This time, it’s fraudsters quite literally selling someone else’s home out from under them without their knowledge, and making off with the proceeds before anyone’s the wiser.
In some cases, the fraud is intercepted before title is ever transferred, while in others you hear of homeowners literally coming home from a lengthy trip abroad to find a new family living in their house. Someone has impersonated them, engaged an agent to list and sell their property, and somehow made it past all of the built-in verification checks and fail-safes along the way.
As someone who recently had to provide no fewer than three separate pieces of ID just to register my four-year-old for kindergarten in the fall, it’s completely baffling.
In such cases, provided the real owner and the new buyer have title insurance, an insurance policy typically obtained at the time of purchase and title transfer, the losses are covered. Who actually can claim the home, however, is a little more unclear — presumably that would have to be settled in court.
With more and more stories like this coming to light in recent days and feeling very much like a sudden epidemic, it’s been surprising to learn that, while unusual, this isn’t a completely rare occurrence. It sounds like we just don’t hear about it much.
In fact, by some accounts, these cases fly so far under the radar that it’s now the title insurance companies themselves who are ringing the alarm, citing a sharp increase in claims over the last two-and-a-half years with losses now in the hundreds of millions of dollars.
It’s hard not to connect the dots and notice that such fraud seems to have flourished during COVID.
Eli Antel, a real estate lawyer who practices in Toronto, says that vendor fraud as described above, while still quite uncommon and shocking, has certainly been exacerbated by the move to virtual through the pandemic.
“The safeguards haven’t been as firm as they once were. Historically you would meet a client in person and verify their ID. You could look them in the eye and touch and feel their documents. Even following all of the protocols to the letter, it’s a lot easier for a fraudster to pass off forged documents on a video call; things can slip though. Luckily the vast majority of us haven’t had that experience but you can certainly see how it might happen.”
For those left wondering how to protect themselves from title fraud, it’s a good idea to check and make sure that you have title insurance.
For homeowners who may have obtained title insurance many years ago at the time of purchase, it may still be a good idea to check and see how much you are covered for as policies will typically only cover up to double what you paid. In markets where property values have soared over the past decade, you will likely find yourself undercovered.
And for those most vulnerable to such fraud, older homeowners who now live mortgage-free and thus have one less hoop to jump through for a crook looking to fraudulently transfer a clear title, opening up a line of credit on the property, even one you have no intention of tapping into can be a valuable line of defense.
But the message is clear: in today’s modern digital age of convenience, identity theft is easier than ever.