REALTORS® Warned to Watch for New Scam

LEGAL UPDATE

Scott Peterson

General Counsel of the Colorado Association of REALTORS®

If you believe or are questioning if you were involved in a vacant land scam, FIRST contact the Colorado Burau of Investigations at reportwirefraud@ state.co.us or (303) 239-4201.

REALTORS® Warned to Watch for New Scam

One of the prevailing real estate scams over several years has been the emergence of “wire fraud” in Colorado. Classic wire fraud would target a buyer on the eve of a closing with fake wiring instructions seeming to come from the title company. The unsuspecting buyer would authorize the wire of their closing funds to the scammer’s account (rather than the title company’s account) and – in many cases – the funds would be gone for good. As an industry, we (REALTORS®, title, mortgage, etc.) did a great job of raising consumer awareness of the scam, which ultimately led to the scammers moving along to other states, etc. I still see BOLD-FACED wire fraud advisories on many email signatures…and that is a good thing!

Over the past several weeks, a new real estate scam has found its way into the Colorado real estate market. For lack of a better term, I will call it the “Vacant Property/Vacant Seller” (“VPVS”) scam. In comparison to the “wire fraud” scam, this is shockingly simple to perpetuate. As a result, I have been hearing about various attempts of this scam throughout the state in very high numbers.

VPVS Scam Basics

Most commonly, this scam requires a vacant property (typically vacant land) that is listed as a FSBO on a real estate syndication website. The scam “seller” will be out-of-state, and the list price will be reasonably low and attractive to a buyer. In order to perpetuate the scam, a few things are typically present: • Vacant land (no property access/ inspection issues) • No debt, loans, or financial encumbrances (clear title with no loan payoffs) • Out-of-state seller (mailout closing) • Cash or relatively quick close (good price/motivated buyer)

When the buyer or buyer’s REALTOR® identifies the FSBO listing and contacts the seller, they are told that the property is available and to present an offer. The scam seller is generally willing to work with and compensate the buyer’s REALTOR®. The seller poses as the property’s real owner. Both parties remotely contract to sell the property to the buyer and proceed to a quick, clean closing. The title company opens a file, issues a clean commitment with few requirements (specifically, no loans to pay off), and performs a “mail out”

closing with the out-of-state “fake” seller. The seller provides a fake ID with the real property owner’s actual name and information and obtains notarization (either by using the same fake ID or using a fraudulent notarization of closing documents) and the deed. The buyer closes, delivers funds, and accepts the fraudulent deed.

While all of this seems too easy to be possible, it is. And the simplicity of this scam is leading to an explosion of attempts throughout Colorado. As a buyer’s REALTOR®, it is something that you and your buyers need to be aware of and mitigate against. In some cases, the scammers have attempted to engage their own REALTORS® to list the property and provide more legitimacy to the “fake” seller throughout the process. As such, potential listing REALTORS® need to be aware as well!

In the event you are presented with buyer or seller client opportunities that match some of the factors listed above, I would encourage you to do some independent due diligence regarding the actual “owner” of the property. Information regarding the property owner is freely available on county websites, through an O&E report, and/or other information sources. Taking some extra time to research and unilaterally contact the actual property owner directly (outside of the phone number provided in the listing) is something that should be easily accomplished in the modern, Internet-accessible world. The extra few minutes of time spent on your independent owner verification and contact information may save you and/or your buyers significant time and frustration if the “seller” is nothing more than a scammer.

Please also take the time to watch a Legal Bites video on this subject.

Land Title Association of Colorado and the Colorado

Association of REALTORS® have become aware of a new fraudulent scam that has quickly become more prevalent in the last month. In most instances it includes VACANT LAND. A fraudster locates a property and impersonates the owner of the property. They list the property for sale (typically as a “FSBO”) on various real estate syndication websites, looking for a buyer who wants a quick close. The “seller” communicates primarily via text or email and usually requires a mail-out closing. The “seller” signs the deed and has it notarized; it is not clear whether the “seller” is using a fraudulent notary, or whether they are presenting false identification to a legitimate notary. The fraudster will sometimes use the listing to connect with a trusted buyer’s broker before going under contract, which gives the transaction an additional air of legitimacy.

As a reminder these scams involve:

• Vacant Land that is being sold by non-owners. The fraudsters are looking for vacant land that is free and clear • Fraudster typically wants a cash transaction and a quick close • The seller states they are out of state and had a notary in that state notarize the document • Seller Communicates by text or email

Colorado real estate licensees should be aware that these folks are difficult to identify. If you get a call to list vacant land, be sure to do due diligence and check into the address of the Seller LLC with public records. Similarly, if you or your buyer identify FSBO opportunities matching the foregoing profile, parties should take additional steps to identify ownership.

If you suspect that you are a victim or see suspicious activity, please contact your local authorities and the Colorado Bureau of Investigation at reportwirefraud@state.co.us