Home Title Theft: A Hassle for Homeowners

by First American

Last updated on 6 Sept 2024 7 min read

A woman using her phone is concerned about home title theft. Luckily, she is following First American’s tips to protect herself.

Topics

What you’ll learn (TL;DR)

Home title theft, also known as deed theft, deed fraud, or mortgage fraud, is when a criminal impersonates an owner and sells or mortgages the property. The criminal forges the owner’s name on a deed or mortgage and steals the money from the sale or loan.
Unoccupied properties and those without a mortgage are the most common targets.
A forged deed or mortgage is void, but the true owner often must file a costly lawsuit to remove the forged deed or mortgage from their title.
To protect yourself from home title theft, sign up for property alerts, keep an eye on your credit and mail, and consider purchasing the First American Eagle Policy, which covers future forgeries.

What is home title theft?

Home title theft, also known as deed theft, deed fraud, or mortgage fraud, is when a criminal forges an owner’s name on a deed or mortgage. By impersonating the owner, the criminal sells the property to someone else and steals the money from the sale or mortgages the property and steals the money from the loan.

These types of scams were first announced by the FBI in 2008,^[1] and though home title theft has been on the rise in recent years, it is still uncommon. According to the FBI’s 2023 Internet Crime Report, there were 9,521 complaints for real estate fraud in 2023, with losses totaling $145,243,348. This is down from 11,727 complaints in 2022, with losses totaling $396,932,821. These statistics include all real estate fraud, not just home title theft. However, one study found that in 2023, 28% of title companies encountered at least one attempt at seller impersonation fraud.^[2]

How Home Title Theft Happens

The process is surprisingly simple due to advances in technology and the availability of tools and information online. A criminal finds a property they want to “steal” and searches the public land records to see who owns the property. Ownership info can be found online on most county websites. The criminal then either impersonates the owner and sells the property or gets a loan using the property as collateral, which results in a mortgage lien title insurance A lien is an interest in property for a debt that is owed. If the debt is not repaid, the creditor can force the sale of the property and apply the money from the sale to the debt. Mortgages, unpaid real estate taxes, and court judgments are examples of liens. being placed on the property.

Fraudulent Sale to Buyer

The criminal may list the property for sale to attract buyers, sometimes using a real estate agent. Since they want to complete the scam quickly before they are caught, they usually list the price for below market value. Once a buyer is found, the parties continue with the transaction as if it were a real sale. They sign a contract and retain a title company to handle the closing. The criminal forges the owner’s name on the deed and presents fake identification documents to the notary title insurance Some title documents must be notarized, which means that a notary verifies the identity of the person signing the document. This is often done by looking at a photo ID, like a driver’s license. or provides an already-signed deed with a fake notary stamp to the title company. The forged deed is then filed in the public records and the property is now seemingly in the buyer’s name. The criminal pockets the sale proceeds and disappears. Often, the criminal is overseas, and the entire transaction takes place remotely without the parties ever meeting in person.

Fraudulent Mortgage

Instead of selling the property, if a criminal has stolen an owner’s identity, they can use their personal information (like birth date and social security number) to create fake documents and take out a loan on the property. The criminal disappears with the money and when payments are not made on the loan, the lender may file a lawsuit against the property to foreclose.

Fraudulent Transfer to Criminal

Alternatively, the criminal may first transfer the property to themselves or a fake identity before selling the property to an unsuspecting buyer or getting a loan. In this scenario, the criminal creates a new deed for the property and forges the owner’s name. Since deeds must be notarized, title insurance Some title documents must be notarized, which means that a notary verifies the identity of the person signing the document. This is often done by looking at a photo ID, like a driver’s license. the criminal either uses a fake notary stamp or presents fake identification documents to a real notary. The criminal then files the forged deed in the public records to seemingly transfer the property to their name. County clerks typically do not verify the identity of the person filing a deed -- they generally only require that the deed be in the proper form, that recording title insurance “Recording" is the process of placing a document, like a deed, in the public records. Each county has its own system and requirements for recording documents. requirements are met, and that the recording fees and taxes are paid.

Types of Property at Risk for Home Title Theft

Unoccupied properties, such as investment property or second homes (like rental or vacation property), and vacant land are the most common targets for fraud because they are less likely to be monitored by the owner. However, occupied homes are also at risk since they can be sold online with a few photos (which could be of a completely different property). Often, these homes are listed at a price below market value to attract investors, who have less of a need to view a property in person.

Properties without a mortgage are also common targets. These are properties that were bought with cash or with a loan that has since been paid in full. When property is sold or refinanced, title insurance A refinance is when a current debt is replaced by a new loan with different terms. Property owners often refinance their mortgage loan for a lower interest rate, which reduces their monthly payments. the lender with a mortgage on the property must first be repaid. Properties without a mortgage are attractive because there is no lender to pay, and a criminal will be able to pocket all the sale or loan proceeds.

Victims of Home Title Theft

While a forged deed or mortgage is void, the true owner often must hire a lawyer and file a costly lawsuit to remove the forged deed or mortgage from their title. The First American Eagle Policy covers these legal fees. If the true owner is trying to sell their property or refinance, a forged deed or mortgage could delay their transaction, which may need to be postponed until after title has been corrected. Since a forged deed or mortgage is void, the defrauded buyer typically loses the property, and the defrauded lender loses their mortgage lien. title insurance A lien is an interest in property for a debt that is owed. If the debt is not repaid, the creditor can force the sale of the property and apply the money from the sale to the debt. Mortgages, unpaid real estate taxes, and court judgments are examples of liens. However, if they have title insurance, they will likely be reimbursed for the purchase price or loan amount they paid.

How You Can Protect Yourself from Home Title Theft

Sign Up for Property Alerts

Many counties offer a free notification service that will alert you if documents are filed against your property. You can also set up a Google alert with your property address that will notify you if your property is listed for sale online.

Monitor Your Credit & Mail

Regularly review your credit report for inquiries that could indicate your identity has been stolen. You may want to freeze your credit if you believe you are the victim of identity theft or subscribe to a credit monitoring service. Be on the lookout for unexpected mail or phone calls from lenders, which could indicate loans being taken out on your property. Mail related to your home ownership, like tax documents, that is addressed to someone else could indicate a fraudulent deed in their name.

Purchase Title Insurance

Not all title insurance policies cover deeds and mortgages that are forged after the policy was issued. However, the First American Eagle Policy does provide this coverage and is an excellent choice for homeowners who are concerned about becoming a victim of this fraud.

Title Insurance Guards against Home Title Theft

Though uncommon, the growing problem of home title theft is another reason that title insurance is essential. Title insurance protects buyers if the person they’re dealing with is an imposter instead of the true owner of the property. Also, the First American Eagle Policy protects homeowners if a criminal forges a deed or mortgage for their property in the future.