The WRA has been receiving calls from agents regarding a new listing scam, typically involving vacant land. In addition, a recent meeting with attorneys for other state REALTOR® associations revealed that this scam is nationwide and growing.
How does the scam work?
A criminal locates a piece of property, which is usually unencumbered vacant land, and will be free of mortgages and other liens. The criminal poses as the property owner and contacts a real estate agent to list it. Contact to the real estate agent will be by phone or email, but typically not in person. Often, the person posing as the seller will request the property be listed for less than its value in order to generate immediate interest. The “seller” may claim to have experienced a family emergency or may have some other excuse as to why they are willing to sell for less because the need for the funds is urgent. The “seller” will tell the real estate agent that they would prefer a cash offer with a quick closing.
Once closing approaches, the criminal will request a remote closing using a remote notary. The criminal or criminals may also impersonate the notary and provide falsified documents to the title company or closing attorney. The title company or closing attorney then transfers the sale proceeds to the criminal, and it is a done deal. As with wire transfer fraud, once that money is transferred, it is almost impossible to retrieve it.
By the way — wire transfer fraud remains a serious risk in real estate transactions. Always remind buyers to contact the lender to verify wire transfer instructions and not to rely on instructions emailed to the buyer. When contacting the lender, the buyer should use a phone number from a verified source, such as the lender’s website, and not use a phone number or link that was emailed to the buyer.
At the aforementioned meeting with attorneys from other state REALTOR® associations, an attorney in Idaho mentioned this scam was occurring in the resort area of Sun Valley where owners are often absent from their properties for stretches of time. An attorney from South Carolina indicated the same was true in Hilton Head. An attorney from Texas indicated it was happening in mostly rural areas. An attorney from Florida relayed a story where the “seller” was willing to meet the real estate agent in person at an airplane hangar next to a private plane to give the appearance of legitimacy. This person had a falsified passport showing the name of the actual owner of the property. Another attorney indicated they had seen properties owned in a trust or corporate ownership targeted with falsified trust documents or falsified corporate documents, seeming to give that individual the authority to sell the property.
In Wisconsin, agents have not reported a “trend” in where this is happening as much in resort areas, but the common denominator in the Wisconsin cases has been vacant land. In the cases the WRA has been made aware of, often the true owner of the property was notified that their land was listed for sale by a neighbor or friend who saw the listing or yard sign and reached out to the true owner to inquire about the sale. The true owner is often quite surprised by this contact and contacts the listing agent to remove the listing.
These are not low-level criminals but sophisticated criminals with the means to create real-looking passports and other identification and other documents that make it appear as though they are the actual owners of these properties.
How can real estate agents avoid this scam?
It takes a little homework to avoid this scam, but the extra homework is worth the effort to avoid getting involved in a fraudulent transaction. The United States Secret Service Cybercrime Investigations has the following tips to avoid this scam:
- Independently search for the identity and a recent picture of the seller
- Request an in-person or virtual meeting to see their government-issued identification.
- Be on alert when a seller accepts an offer below market value in exchange for receiving the payment in cash and/or closing quickly.
- Never allow the seller to arrange their own notary closing.
- Use trusted title companies and attorneys for the exchange of closing documents and funds.
In addition to the tips offered by the Secret Service, discussions with a former listing agent can be insightful if signs of the potential scam come to light. If a “seller” contacts an agent, and the agent can see the property was recently listed for a short time, the agent can contact the former listing agent and see if that listing was a scam. Even after seeing a “seller’s” identification, an agent can do a little social media sleuthing to see if the picture on the identification matches up with what the agent is seeing online. Remember, some agents have reported seeing photo identification that has been falsified to show the criminal’s photo and the real property owner’s information.
Another effective way for an agent to verify the agent is working with the real property owner is to send a confirmation or a thank you letter to the address on file for the tax bill. Certainly not all listings for vacant land where the seller wants a quick sale are going to be scams, but if an agent is taking a listing where there are any of these “red flags,” the agent can mail an old-fashioned letter via USPS — not email — to the address on file for the tax bill, thanking the seller for their business. The letter could include language informing the recipient that if they are not actually trying to sell their property, they should immediately contact the agent by phone or email. If it turns out that it was a scam listing, the real owner of the property should be encouraged to contact law enforcement to report the attempted crime. The Wisconsin Department of Justice maintains a website with contact information for consumers to report consumer complaints on a variety of topics including fraud. Contact for various types of complaints is available at www.doj.state.wi.us/dls/consumer-protection/how-file-consumer-complaint.
What can real estate agents do if they find themselves in a scam?
If a listing agent discovers that they have entered into a listing contract that turns out to be a scam, the listing agent should consult with the agent’s supervising broker as to what to do next. Ideally, the agent and the scam “seller” would enter into a WB-42 Amendment to the Listing Contract to expire it. If you just rolled your eyes at the preposterous suggestion of asking a criminal to contractually end a listing contract under which the criminal was trying to steal money, don’t worry, the author of this article did too. Realistically, a good practice is to remove the listing from the MLS per the MLS process, cease communication with the criminal, and document in the file what has occurred. The firm may want to consult with its errors & omission insurance to see if the insurance provider has other suggestions for documenting what occurred.
Be careful out there, and beware of scammers!