Ask Your Underwriter

Fraud and the Holiday Season

Presented by Kay M. Creasman, VP & Virginia State Counsel

First, let me say, “Happy Holidays.” Peace to all and may the joy of the season be yours, however you celebrate. Don’t let someone intent on committing fraud spoil your holidays.

All of us in the title and settlement industry are tired of hearing about fraud, but it’s more of an issue than ever. This fall has been particularly busy for people trying to commit fraud, specifically in trying to impersonate the seller. But that’s not all. Fraudsters are getting more sophisticated. We read of lender and title agent websites being spoofed, business emails being compromised, buyers being tricked into sending their funds to a fraudster rather than to the settlement agent, etc. The list is endless.

What can we do?

1. Slow down. Okay, in this industry that’s a difficult statement to make. EVERYONE wants the deal to have closed yesterday. But, make sure to have systems in place to double check everything, and, to the extent possible make sure everyone is reminded to follow the systems in place, especially anything related to funds being transferred and how conveying wire that information is conveyed to the buyer and receiving that information from the seller.

2. Confirm the person signing as seller actually owns the real estate. The most practical suggestion we have is to determine who is listed on the real estate tax bills as the seller. Be careful to double check whether this has been changed within the last year (it’s easy to get the tax office to change the address for a seller). Send a letter (yes, regular mail) to the seller at the property address AND at the address shown in the tax office.

Ask the seller to contact you to confirm they are selling. Alternatively, make sure the RE agent knows the seller and can confirm that the seller owns that particular property. If the listing agent has been in the home multiple times, they should be aware of whether they're dealing with the owner and not a tenant in possession. If there are still questions, you can always ask the seller for their tax returns (if there is a mortgage, they are undoubtedly deducting the interest on their federal income tax return) or their property tax payments (if there is no mortgage they would be paying the taxes themselves).

3. Communicate with the purchaser as to how they will be notified of the funds due at settlement. Make sure they know you will not change your wiring instructions. Establish the procedure by which they can confirm they are talking to your office. Do you have a code word for each file, or another way to identify the purchaser? Can the purchaser identify your office and with whom they are speaking? Lots of people are on vacation during December. Make sure you have procedures to keep the purchaser informed of any changes in the timing of the closing.

4. Only accept wiring instructions for seller's proceeds in the same package as the deed is delivered to your office. If the seller changes how proceeds are to be paid, that's a red flag. Usually the best solution in those cases is to issue a check. Remember that ClosingLock provides a secure way to share wire information and CertifID provides a way to verify wire instructions. Other similar services may be available but these are commonly used by agents to help make sure wires are properly coded.

5. Don’t close unless you have signed seller documents--especially the deed--in your hand prior to settlement. By statute, you do not have settlement until you have all the money and all signed original documents in your possession.

Happy Holidays 2024!