Title Fraud – The “Ultimate Real Estate Nightmare”

REALTORS® can help homeowners avoid the ‘ultimate real estate nightmare’. Following industry best practices including the consideration of title insurance can provide protection against someone fraudulently assuming ownership of a home by forging documents or impersonating the true owner.

And while it may seem far-fetched, it has happened in Canada. Earlier this year, a home in the Greater Toronto Area was nearly sold by a renter claiming to be the owner, while a second home in the area was sold without the knowledge of the homeowner. And in 2008, a Richmond man’s home was sold without his knowledge by an alleged fraudster assuming his identity using stolen mail.

The financial and emotional toll of title fraud is significant. Homeowners can lose their property and incur significant legal expense in an effort to get their homes back or for compensation. You can help them safeguard against the risk of title fraud and help ensure their investment is protected.

10 Tips to Help Protect You and Your Clients

  1. Verify the identity of as many parties involved in the transaction as possible, including the borrower, the seller, the real estate agent, the lawyer, Powers of Attorneys, and any others.  Ask for legitimate and valid identification and documents to ensure that the people you’re dealing with are who they say they are.
  2. Get to know your clients. Ask them questions and create conversation. Be cautious of individuals who are willing to accept less than market value. Be wary of unsolicited offers to buy a property, especially when the buyer offers cash.
  3. Use secure communication methods to protect sensitive information, such as email encryption or secure messaging apps. Document all communications and transactions related to the sale to protect against potential disputes or claims. Be sure to monitor recent activity on the title.
  4. Encourage clients to regularly check their credit report to ensure that there are no unauthorized transactions or accounts issued in their name.
  5. Both you and your client should never sign blank documents. Do not leave any blank spaces on forms that can be filled in later.
  6. Choose to work with reputable partners, such as lenders, lawyers, and appraisers, who are licensed to operate in your province.
  7. Learn about the different types of mortgages and how they relate to title fraud. A financial or legal advisor may be good sources for this.
  8. In BC, purchasing a Duplicate Indefeasible Title Certificate is said to be an option to protect property against fraud.  Once the certificate is issued by the Land Title Office, the title to a home is frozen.  However, an outstanding duplicate certificate also means the home cannot be sold, transferred, or mortgaged until the certificate is returned to the LTO.  Keeping this in mind, consider suggesting to your clients to seek legal advice to determine if this is the right option for them.
  9. Stay up to date on the latest fraud trends and scams that are targeting the real estate industry by subscribing to alerts from your local police department or the Canadian Anti-Fraud Centre.
  10. Report any suspicious activity to the appropriate authorities, such as the police or the Canadian Anti-Fraud Centre.

The bottom line is that it is the responsibility of a REALTOR® to verify the identity of a client under FINTRAC requirements. Please ensure that you have reviewed and are familiar with these requirements.  In addition, we recommend that you review BCFSA’s Anti-Money Laundering Guidelines.

This article includes information obtained from the March 29, 2023, BCREA Managing Broker Webinar Title fraud: What is it and how can you protect yourself and your clients.

Source: Professional Standards