5 things to know about the fake seller scam

Seller impersonation fraud continues to be a troubling issue in the real estate market in Tennessee and across the country. Despite advances in technology, tighter security measures and lots of conversations on the topic (including from Birthright Title), this form of fraud continues to pose a significant risk to both buyers and sellers. Here’s why and what we can all do to combat it.

First, we must understand why the scam works.

• What it is: Seller impersonation fraud occurs when a scammer poses as the legitimate property owner, often using forged documents or stolen identities, to sell or refinance the property without the real owner’s knowledge. They usually contact several real estate agents in the property’s marketing, hoping one will list it, often at below asking price because the goal is a quick sale.
• The impact: The consequences can be devastating, leading to financial loss for buyers who may unknowingly purchase a property from a fraudulent seller and legal battles for the true owners who must reclaim their property.

Two reasons it’s still a problem (Besides it keeps working)

1. Technological loopholes: While technology has made real estate transactions more efficient, it’s also opened new avenues for fraudsters to exploit. Digital transactions, online document signing and virtual communication have opened doors for identity theft and document forgery.
2. Lack of awareness: Many buyers and sellers are unaware of the risks associated with seller impersonation fraud. Without proper knowledge and vigilance, they can easily fall victim to scams. In addition, while the industry has been talking about this scam since it spiked in popularity last year, it’s still a relatively new scheme for the real estate profession.

Three consequences for buyers and sellers

1. Financial loss: Buyers can lose their down payment or purchase price if they unknowingly buy from a fraudulent seller. The rightful owner can face legal and financial hurdles to reclaim their property.
2. Legal battles: The true owner of the property may face a lengthy legal process to prove ownership and reverse any fraudulent transactions, which can be costly.
3. Reputation damage: Real estate professionals involved in a fraudulent transaction, even unknowingly, can damage their reputation and face legal repercussions.

Four common tactics used by these cyber criminals

1. Forged documents: Fraudsters create fake identification and property ownership documents to pose as the rightful owner. This can include fake deeds, IDs and even counterfeit notary stamps.
2. Social engineering: Scammers often use social engineering tactics to gain trust. They might impersonate a seller in communication with real estate agents, title companies or even buyers, convincing them of their legitimacy.
3. Title theft: In some cases, fraudsters take out loans or sell the property without the owner’s knowledge, leading to complicated legal battles and financial losses for all parties involved. This is what happened in the Graceland incident earlier this year
4. Fake websites. This is a new, alarming tactic. Some of our industry colleagues have reported that these fraudsters have started spoofing legitimate title company websites in order to bypass the scrutiny of title professionals like us all together. Double check URLs, and remember you can always call us directly if something seems off.

Five steps to protect against seller impersonation fraud for Realtors

1. Verify identities: Always verify the identity of the supposed property owner before proceeding with the transaction. This includes checking IDs, cross-referencing with public records and confirming ownership. Even if they’re a seller who insists on only meeting over the phone or virtually, make sure you know exactly who they are.
2. Make sure your communication channels are secure: Avoid sharing sensitive information through unprotected email or other platforms that fraudsters can easily hack. Instead, utilize encrypted email services and secure document-sharing platforms.
3. Work with trusted professionals: Engage reputable real estate agents, title companies and attorneys who are vigilant about fraud and have systems in place to detect and prevent it.
4. Be wary of red flags: Be cautious of sellers who are overly eager to close quickly, avoid in-person meetings, provide inconsistent information or insist on using their own notary. These can be signs of potential fraud.
5. Tell someone your suspicions. You know when something feels off. If you still doubt your seller is who they say they are at the closing table, let the Birthright Title team know. We’d be happy to tap into our expertise, tools and resources to make sure everything with your closing is good to go. Reach out to our team anytime!