What Is Title Fraud? How Property Owners Can Protect Themselves

You've probably seen an advertisement warning homeowners that someone could steal their home by forging a deed.

The message can sound frightening:

A criminal obtains information about your property, impersonates you, records fraudulent documents, and suddenly your home belongs to somebody else.

But what exactly is title fraud, how does it happen, and what protection do homeowners already have?

Those are questions we've been hearing for years.

Let's break it down.

What Is Title Fraud?

Title fraud generally refers to fraudulent activity involving the ownership or title to real estate.

One example could involve someone impersonating a property owner and attempting to forge or fraudulently record a deed.

Another scheme might involve someone attempting to use fraudulent ownership documents to obtain money or complete a transaction involving property they don't actually own.

The details can vary, but the common element is the same:

Someone is attempting to use fraud to interfere with, transfer, or financially exploit another person's ownership of real estate.

Can Someone Really Record a Fraudulent Deed?

Fraudulent documents can potentially be submitted for recording.

That's one reason these scams get so much attention.

But it's important to understand something about the recording process.

A county recorder's office generally performs a different function from a title company.

The recording of a document does not necessarily mean that the county has investigated the entire transaction and determined that every underlying representation is legitimate.

That's one reason a properly conducted real estate transaction involves additional professionals and safeguards.

Recording a Document and Owning a Property Aren’t Necessarily the Same Thing

This distinction is important.

Someone fraudulently recording a document doesn't magically make the underlying fraud legitimate.

A fraudulent deed can create a very serious title problem that may need to be resolved, but the existence of a recorded document isn't the end of the legal analysis.

This is also why homeowners shouldn't panic simply because an advertisement makes it sound as though a criminal can fill out one piece of paper and instantly become the unquestioned legal owner of their house.

Real estate ownership and title can be more complicated than that.

What About Property-Title Monitoring Services?

You've probably seen companies advertise services that monitor public records and notify homeowners when documents involving their property are recorded.

A monitoring service can potentially provide an alert.

That can be useful.

But an alert and title insurance perform very different functions.

Monitoring generally attempts to tell you that something has happened.

Title insurance is an insurance product designed to protect against covered title risks, subject to the terms, conditions, exclusions, and exceptions of the particular policy.

The two shouldn't be confused.

What Does Title Insurance Do?

Title insurance is different from many types of insurance people encounter.

Homeowners insurance, for example, generally protects against certain future events involving the physical property.

Title insurance primarily addresses covered defects or problems affecting title, subject to the specific policy.

Before issuing a title insurance policy in connection with a transaction, the title company researches the property's title and identifies matters that may need to be addressed.

That process is one of the reasons title is such an important part of a real estate transaction.

Owner’s Title Insurance and Lender’s Title Insurance Are Different

This is another distinction homeowners should understand.

If you're financing a home, the lender may require a lender's title insurance policy.

That policy protects the lender's insured interest, subject to its terms.

An owner's title insurance policy, on the other hand, is designed to protect the insured homeowner's interest in the property against covered title risks.

They are not interchangeable.

A lender's policy doesn't simply become the homeowner's policy because both involve the same property.

When buying real estate, ask your title professional to explain exactly which policies are being issued and what they cover.

Why Title Fraud Can Be Difficult in a Normal Real Estate Transaction

A legitimate real estate sale usually involves multiple independent parties and processes.

There may be:

• Real estate agents

• Buyers and sellers

• Escrow professionals

• A title company

• A lender

• Notaries

• Identity-verification procedures

• Recorded documents

• Wiring and funding procedures

Those layers create opportunities to identify inconsistencies.

For example, if someone is impersonating a property owner, information provided during the transaction may not match information discovered during title research or identity verification.

That's why fraudsters often look for weaknesses and try to avoid normal safeguards.

Red Flags Still Matter

Technology has made it easier for criminals to obtain information and communicate remotely.

That makes awareness increasingly important.

Some circumstances that may justify additional scrutiny include:

• An owner who refuses normal identity-verification procedures

• Inconsistent contact information

• Unusual urgency

• A seller who will communicate only electronically

• Suspicious changes to wiring instructions

• Requests to bypass normal procedures

• Information that doesn't match property or ownership records

None of those circumstances automatically proves fraud.

But when something doesn't make sense, asking another question is usually better than ignoring it.

Wire Fraud Is Another Major Real Estate Risk

Title fraud isn't the only type of fraud homeowners and real estate professionals need to think about.

Real estate transactions can involve large wire transfers, making them attractive targets for criminals.

Fraudsters may attempt to impersonate real estate agents, escrow officers, title professionals, lenders, buyers, or sellers and send fraudulent wiring instructions.

That's why you should never rely solely on an unexpected email or text message containing new wiring instructions.

Verify sensitive financial instructions using a trusted method and contact information you independently know to be legitimate.

One phone call can prevent an extremely expensive mistake.

Vacant Land Owners Should Be Especially Alert

There's another related form of real estate fraud that deserves special attention: seller impersonation involving vacant land.

A criminal may pretend to be the owner of an unoccupied parcel, contact a real estate professional, and attempt to sell the property without the legitimate owner's knowledge.

Vacant land can be attractive to scammers because the real owner may live far away and rarely visit the property.

We've written separately about the warning signs associated with these transactions because they're different enough to deserve their own discussion.

If you own vacant land, particularly in the High Desert, pay attention to correspondence and activity involving your property.

Consider Property-Recording Alerts If Your County Offers Them

Some county recorder or government offices offer notification programs that can alert property owners when certain documents are recorded involving their name or property.

These services vary by location.

If one is available where your property is located, it may provide another useful layer of awareness.

Remember, however, that a notification service and title insurance aren't the same thing.

An alert tells you something may have happened. Insurance protection depends on the coverage provided by your particular policy.

Why Choosing an Experienced Title Company Matters

Real estate may be the largest financial asset many people ever own.

Who handles the title side of the transaction matters.

Chicago Title has been in the title insurance business for generations, and its professionals work with real estate agents, buyers, sellers, lenders, and escrow professionals to help transactions move toward successful closings.

Fraud techniques continue to evolve.

So do the procedures used to identify suspicious transactions.

No legitimate title company can promise that fraud will never be attempted.

But experienced professionals, established procedures, title research, identity verification, and fraud awareness provide important layers of protection.

What Should You Do If You’re Concerned About Your Property’s Title?

Don't rely solely on a frightening advertisement or social-media post.

Get information.

If you have a specific concern about the title to your property, talk with an appropriate title professional or, when legal advice is needed, a qualified real estate attorney.

Depending on the situation, you may want to review available property records, determine what title insurance coverage you have, and investigate any suspicious recorded documents.

The sooner a legitimate problem is identified, the sooner the appropriate professionals can determine what needs to happen next.

The Bottom Line

Title fraud is a legitimate issue, but homeowners should understand the difference between fraud prevention, property-record monitoring, title research, and title insurance.

They aren't all the same thing.

Be cautious with your personal information.

Pay attention to unusual activity involving your property.

Verify financial instructions.

Use reputable real estate, escrow, and title professionals.

And understand the title insurance coverage associated with your property.

Knowledge is a much better defense than fear.

Have a Title or Escrow Question?

We're Bobby Tarango and Mike Arias, sales representatives with Chicago Title, and we work with real estate professionals throughout the High Desert to support their title and escrow needs.

Through ChicagoTitlePro.com and TitlesEverything.com, we share real estate information and resources designed to help real estate professionals, buyers, sellers, and property owners better understand title, escrow, fraud prevention, and the many moving parts of a real estate transaction.

If you're concerned about a title issue, working on a real estate transaction, or simply have a question about the title and escrow process, reach out to Bobby or Mike.

Bobby Tarango & Mike Arias
Chicago Title
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