There are many benefits to owning real estate including appreciation and the opportunity to earn passive income. However, most property owners also don’t consider the risks that come with owning real estate.
While you may already have protection in place to hedge against a common hazard, such as a fire or busted pipe, there are less overt risks that also require consideration. In fact, one of the many risks that’s becoming increasingly prevalent is real estate title fraud.
Real estate title fraud occurs when a person illegally transfers ownership of or takes a loan out against a property without the real property owner’s permission. Most of the time the property owner isn’t even aware that fraud has occurred until it becomes a much more serious issue.
In the Greater Toronto Area (GTA), incidents of real estate and title insurance fraud have been on the rise, with at least 30 recent occurrences where properties have been sold or mortgaged illegally.1
For most of the cases, criminals were able to structure schemes using the stolen identification documentation in combination with stand-ins that impersonate either tenants or the property owner. Since the actual fraudsters are not front facing, it adds a layer of complexity to the scheme that it difficult for authorities to investigate and track.
As a property owner, its’s important to be vigilant of the risks associated with real estate title fraud and have proper protocols in place to help prevent personal loss. Here are a few steps you can take to fight back against real estate title fraud.
1. Protect Your Physical and Virtual Identity
The best way to protect yourself against real estate title fraud is to prevent it from occurring in the first place. A best practice that all property owners should follow is making sure to keep your physical personal identification documents (i.e., government licenses, passports, birth certificates, etc.) in safe and secure place.
Protecting your identity also extends to your online presences as well. According to Equifax, consumers can protect their virtual identity by never writing down and using strong passwords, frequently changing online credentials, being careful accessing social networks, not using public Wi-Fi, and not falling victim to phishing attempts on the internet.2
If you want to add another layer of protection for yourself and assets, consider purchasing identity theft protection. Identity theft protection is a cheap and accessible way to help protect yourself against a variety of fraudulent schemes but should be especially useful at helping prevent real estate title fraud.
2. Always Get a Title Insurance Policy
The best way to protect against real estate title fraud is by obtaining a title insurance policy. Title insurance offer property owners and lenders protection against losses related to improper or illegal conveyance of title.
Title insurance is not a catch all for every fraudulent scenario, however it can help mitigate the consequences if you fall prey to a real estate title fraud scheme.
In most cases, title insurance can help cover an owner’s legal expenses involved with restoring your rights as the property owner.3 It can also cover costs to help recoup loss and make owners whole who are victim of these fraudulent scams.3
3. Implement Tenant Screening Processes
Another way property owners can deter real estate title fraud is by implementing appropriate tenant screening processes. Tenant screening processes helps ensure you are renting your property to credible persons.
A few best practices include requiring proper identification before renting to prospective tenants. You can also require a background check as part of your property application.4 These steps can be the first line of defense that can help deter unscrupulous prospective renters.
Another component worth adding is requesting banking information for the purposes of processing rental payments. While it’s against the law to require tenants to pay rent via automatic payment, you can offer that as an option which would then add another layer of security that fraudsters would need to overcome when executing any fraudulent scheme.
4. Install Physical Security Measures
If you want to prevent nefarious activity, physical deterrents can help shore-up your defenses. As a property owner, installing cameras in common areas is a great way to create a sense of safety and deter criminals.
Another good practice to implement is having a forwarding mailing address on file. This helps ensure your mail stays with you and doesn’t end up in the hands of those seeking to commit fraud.
5. Complete Periodic Due Diligence
While real estate title fraud cases have recently been identified, its still easy for property owners to be lulled into a false sense of security. At the very least property owners should be completing periodic due diligence to help stave off possible fraudulent threats.
Property owners should conduct frequent property searches to ensure your property isn’t being listed for rent or sale without your consent.
You should also check public databases to verify your information as the legitimate property owner has not been modified. If systems have old contact information, make sure you update this to ensure receipt of current notices, updates, or information. You want to stay in the know of all correspondence related to your property.
Lastly, complete periodic spot checks on your personal (or business) bank accounts and credit reports to ensure all transactions are legitimate and to monitor for suspicious activity. Criminals may get your information and test its legitimacy on other platforms before pursuing a more complex real estate title fraud scheme.