Deed fraud is a form of identity theft that allows crooks to steal your home. And it usually targets the most vulnerable.
A version of this article first appeared at The Ethical Investigator blog.
The longer you investigate people, the more bad behavior you’ll be able to talk about. But there’s little I have encountered in my work that sickens me more than deed fraud — the subject of a recent case we had.
Deed fraud is a form of identity theft that allows the crooks to take not just cash out of your bank account but to seize your entire home. It’s rampant and preys on the weak: A New York Grand Jury empaneled to investigate the issue said this in 2018:
“The victims of residential real estate fraud are largely from the most vulnerable segments of our society – the elderly, the financially disadvantaged, the medically infirm, the uneducated, and the unsophisticated.”
It turns your stomach. It’s been around a long time, but now in cities with rapidly gentrifying neighborhoods, crooks appear to be moving in on older people in greater numbers.
What I found in my case is that there are people who do it repeatedly but seldom face criminal charges. If someone catches them at it and sues to get the property back, the perpetrator simply skips out on court and moves on to scam someone else.
New York, Philadelphia and Miami have charged a few people in recent years, but based on what we saw in our investigation, it’s a tiny portion of the cases out there.
The New York City Sheriff got 2,000 complaints of deed fraud in the four years up to 2014, with a combined fair market value of $112 million for the properties concerned. Multiply that by 2, 3 or 4 and then multiply that figure by a number of other cities, and you’ve got theft in the billions.
An FBI report on elder fraud from its Internet Crime Complaint Center said identity theft of all types cost $39 billion in just 2020.
The Basic Pattern
Front men identify a property that appears run down or is behind on its property taxes. Often these are homes in gentrifying neighborhoods, occupied by people who may have paid under $100,000 for them decades ago and are sitting on big capital gains but can’t afford the upkeep.
The front men either make a bogus claim that they will buy the home and satisfy the mortgage (in order to induce the owner to leave so they can put in tenants) or more commonly, they will just forge a deed and sell it to an LLC that is either theirs or connected to the people running the scam.
The new bogus owner then borrows money from the company of an associate, maybe to renovate or demolish the place with an eye to flipping it. Sometimes, the mortgage gets assigned to a reputable bank. The crooks bet that they can move fast and flip the place before the rightful owner can get to court and have the sale reversed. In some cases, people thrown out of their own homes have turned to living on the streets.
What Can Be Done
The main problem appears to be the use of unreliable or plainly criminal notaries. All transfers of real property need to be notarized, but if a notary is happy to have a dodgy ID card put in front of him before attesting that the actual owner of the house appeared before him, the sale will go through in most every case.
The New York Grand Jury and the National Notary Association recommend that other states adopt California’s longstanding requirement that the seller provide a thumbprint as well as a signature. That could help catch perpetrators more easily. In several cases we saw in our investigation (and in one famous case in Philadelphia), the fraudsters are ex-convicts whose prints would be on file with the police.
Another helpful suggestion is to delete the signature image from online records of property transactions, so that crooks can’t practice imitating the signature of the rightful owner.
Perhaps the best hope is a pilot project being evaluated in New York to put the property registry on blockchain. This could help because each rightful owner of a property would have a private key and only use of that key would allow the land registry to transfer the property. That would at least prevent forgers from pulling a property out from under the owner without ever contacting them.
In the meantime, the New York Sheriff has good tips for anyone to follow for themselves or on behalf of elderly relatives who can’t:
- Check your property’s deed at the registry at least once a year. This is often online depending on your county. Make sure the county has the right mailing address for you.
- If your county offers it, sign up for notification in the event anyone files anything relating to your property with the county clerk.
- Contact the government if you stop receiving tax bills.
- If the property is vacant, drive by or hire someone to do so to make sure it isn’t occupied.
- If you don’t have title insurance, look into it.
These steps won’t stop all of the thievery out there, but it’s like having a second lock on your door or a home alarm system. Whatever makes it harder for the criminals to steal from you is a good thing and worth the extra effort.
About the author:
As a former financial journalist who became an attorney, Philip Segal has found private investigations to be an ideal mixture of the inquisitive digging a reporter does with the ethical, discreet, client-based service provided by lawyers. His firm, Charles Griffin Intelligence, can trace assets, conduct due diligence, and locate and profile witnesses or other key individuals in the context of litigation, takeover battles, crisis management, and many other scenarios. Read more about how he works in his book, The Art of Fact Investigation (Ignaz Press, 2016).