The real estate industry, while lucrative, comes with its pitfalls. One of the rising concerns in recent times is the surge in land sale scams. For real estate agents, it’s imperative to recognize these scams, grasp their tactics, and implement protective measures to safeguard both oneself and one’s clients.
The Scam Unveiled
Land sale scams typically involve fraudsters posing as property owners, attempting to sell land they don’t own to unsuspecting buyers. These criminals are adept at using public records to identify properties that are free of mortgages or other liens, especially targeting vacant lots, out-of-state ownerships, or rental properties where the owner doesn’t reside. Elderly property owners are particularly vulnerable.
The scam usually starts with the fraudster contacting a real estate agent to list the property, which is usually an unencumbered parcel of land or a vacant home. Typically, they are looking for a “quick sale” to a cash buyer and ask to list the property at a price below market value…The individual will be located out of state and may only communicate via email, text, or sometimes by phone call. Yet they are very sophisticated and have the knowledge to navigate the registry of deeds. This allows them to check ownership records and determine if there are any mortgages, liens, easements, etc. on record. With this knowledge, they will appear legitimate and attempt to induce a real estate agent to quickly list the property for sale and hope for a very quick closing. In the chance the transaction closes, proceeds are transferred to the criminal at closing, leaving the real buyer and the real owner in a complicated legal mess. Check out this article from Connecticut where not only did the sale go through but new construction began!
In other variations on this scam, the criminal may write a fraudulent deposit check on a sale but then ‘withdraw’ from the transaction and ask for a return of their deposit before contracts are signed or before the first check bounces. This may even be done in conjunction with the scam described above, where fraudulent buyers and sellers are working together.
Red Flags to Watch Out For
Communication Barriers: Scammers often avoid face-to-face interactions, preferring to communicate through emails or digital means. If a seller is reluctant to meet in person or speak over the phone, it’s a potential red flag.
Urgency: Fraudsters typically want to close deals quickly. If a seller is pushing for a rapid sale, especially if it’s a cash deal, be cautious.
Suspicious Documentation: Scammers might provide poor-quality copies of identification documents or might insist on notarizing the closing documents themselves.
Divergent Funds: Be wary if the seller directs the sales proceeds to be disbursed to someone other than the titleholder or to multiple accounts.
Due Diligence: Before signing contracts, especially with out-of-state clients, conduct thorough checks. This could include video meetings, verifying identification, and checking property records.
Investigate the Property: Early in the transaction process, find out the property’s status. If it’s vacant, it might be worth a visit. A preliminary title report can also reveal if the property is free of liens.
Verify Seller Identity: Try to independently verify the seller’s identity. This could involve internet searches or even contacting the owner-of-record directly.
Consult with Colleagues: If a deal seems too good to be true, consult with your broker or colleagues. Collective experience can often spot scams that might be missed individually.
Land sale scams are on the rise, and as real estate agents, it’s our responsibility to safeguard our interests and those of our clients. By being informed, vigilant, and proactive, we can ensure that our transactions are legitimate, and our industry’s integrity remains intact. Click to read this warning from the US Secret Service Cybercrime Investigations unit on exactly this topic.