Strategies for Protecting Yourself from Fake Seller Scams

QUESTION: A few weeks ago, I received a phone call from an individual who told me he was interested in listing a piece of vacant land for sale. He said that he acquired the property several years ago with the intention of building on it, but has now changed his mind. When I suggested that we meet at the property, he told me that he lives on the west coast and was not planning on coming east any time soon. Our conversation caused me to wonder if the prospect was the actual property owner. What steps can and should I take to protect myself from being the victim of seller impersonation fraud?

ANSWER: One step listing agents should take when contacted about any potential listing is to verify that the prospective client is the same person who is identified in the most recently recorded deed to the property and the online records of their county’s tax office. Listing agents should ask all prospective clients to send them a government-issued photo ID. Agents should then verify that the ID is current, that the name on the ID matches the name on the deed, and that the address on the ID matches the address in the tax records. The need to follow these steps is only heightened when there are circumstances which cause the agent to be suspicious.

What are those circumstances? First, most cases of seller impersonation fraud involve listings of vacant land or vacation homes that are not currently occupied by the property owner. Second, most cases involve “sellers” who claim to live out of the area, who claim an inability to meet in person, and who insist on communicating solely via text message or email. Many cases involve “sellers” who claim a need to sell quickly, ask agents to list the property at a below-market price, and only want offers from cash buyers. Finally, if a listing agreement is signed and a contract follows, agents should be suspicious if the “seller” requests that the Due Diligence Fee be made payable to a name other than the seller identified in the contract.

If an agent remains suspicious after receiving what appears to be a legitimate photo ID, there are several additional steps that we recommend. First, the agent can send a confirmation letter to the property owner at both the property address and the mailing address for the tax bill. The letter can explain that the agent has been asked to list the property and is sending the letter as a fraud-prevention measure. The letter should ask the property owner to contact the agent and confirm their intent to sell the property.

A second measure listing agents can take is setting up a video call with the seller. If the seller refuses to participate in such a call, or is unable to answer questions about the property that any legitimate property would know, those are red flags that strongly suggest the possibility of fraud.

A third measure that agents should consider is speaking with the neighboring property owners. If a photo ID has been received, the agent can show that ID to the neighbors and seek confirmation that the ID depicts the actual property owner.

Finally, we suggest that listing agents ask any suspicious seller for documents that only the actual property owner would have. Examples include the settlement statement and title insurance policy from when they purchased the property, and a property survey. If the “seller” claims an inability to provide any of these documents, the agent should refuse to enter into a listing agreement, or speak to their BIC about terminating any agreement that has already been signed.

Release Date: 06/13/2024