Can your home be stolen from right out underneath you? While your home can’t be stolen and driven away like a car, home title fraud is a real and serious crime that can have serious consequences for home owners who experience it.
Title insurance protects homeowners against ownership claims from a previous owner. Title insurance costs around 0.5% to 1% of the home price and depending on the policy can offer other protections.
Title fraud and fraud related to your home takes other forms as well such as fraudsters taking out loans on your home without your knowledge. Let’s take a closer look at title fraud as well as how you protect against it through the use of title insurance and other methods.
What Is Home Title Fraud Protection?
Home title fraud protection can take the form of title insurance which protects homeowners against the costs and headache in the instance where a person fraudulently takes out a mortgage or loan in your name by stealing your identity. Depending on where you live, you may be held liable for the mortgage and will need to fight to prove that you are a victim of fraud when the bank demands their money back.
You can also look at protection through a service like a title lock but you need to understand what is being offered and what you are being protected from.
You can also do a number of things on your own at little or no cost to yourself to protect against title fraud by keeping an eye on your own ID and ownership records.
Let’s take a closer look at how property fraud occurs and the options to prevent it from happening to you.
What Is Home Title Fraud?
Home title fraud is a crime that barely existed a generation ago and certainly didn’t get much press until relatively recently. Essentially it occurs when a fraud artist forges the signature and otherwise steals the identity of a homeowner and takes out mortgages or loans against the house in that person’s name. They then take the money and run and the homeowner may not even be aware of the crime until they get a letter in the mail from the bank stating that they are foreclosure.
In some cases, the fraud artist forges the signature and assumes the identity of the home owner and sells the home from underneath the owner without them knowing to a buyer who also doesn’t know about the phony sale. The fraudster pockets the proceeds from the house sale and disappears and two people are left figuring out what happened and fighting over one house.
How does this happen?
Who Is At Risk For Home Title Fraud?
Home title fraud happens regularly to a wide variety of victims. Who are potential victims and why are they targeted?
Paid off homes: A house that is paid off and is free and clear of debt is very desirable. It may attract a fraudster thinking they can more easily get a loan in your name because there is equity that can be used to convince a bank that they should lend them money, albeit in your name.
Homes with equity: People who have significant equity in their homes are potential victims. A house that has a large mortgage on it already may not qualify for a further loan and thus may not be targeted. A home that has a smaller mortgage with equity that can be used as leverage may not be as desirable as a fully paid off home, but is still very desirable to a fraud artist.
Rented homes: One popular way that fraudsters target a home to commit title fraud is to rent it from the owner. By occupying the home physically as a renter, they can literally assume the identity of the homeowner after stealing their identity and sell the home to an unsuspecting person right from underneath the owner. While more difficult than simply taking out a fake loan in someone else’s name, it has happened many times in the US, Canada and other countries. If you own a second property (rental unit, winter residence) it could be a target. Be careful for renters who are actually scammers and learn how to properly vet and reference check tenants.
Elderly: Elderly are often targeted by caregivers or people who know them because of their age and vulnerability. Many have homes that are paid off in full and thus a fraudster may easily secure a fraudulent mortgage under the elderly owner’s name. Elderly parents or other relatives or friends who live alone may be more open to talking with strangers and allowing them into their house. They need protection from this sort of scam.
Vacant property: Do you have a home that is empty for long spells? Maybe it’s empty in the winter when you go south. Perhaps you travel for work for weeks on end. Maybe it’s a rental unit and you can’t find a new tenant. While vacant property is a concern when it comes to the type of insurance you hold, an empty house can cause other problems such as a squatter. Moreover, a fraudster who knows you’re away could bet that you won’t notice them taking a loan out in your name illegally if you’re away from home and don’t have access to your mail or your home phone that could alert you to fraudulent activity.
How Prevalent Is Home Title Fraud?
In 2017, the FBI reported that 9,600 people lost a total of $56 million in real estate scams in general although that includes other real estate crimes. That same year the total amount of wire fraud was $1.7 billion.
How big is the problem north of the US border? In Canada
, it’s estimated that the average title fraud scam costs $300,000 to the tune of $100 million total per year in total. Canada only has 1/9 the population of the US and yet has had many high profile cases of title insurance involving people having their homes sold right out from underneath them.
In the UK, it’s estimated that 71% of total discovered fraud is property fraud. It was noted from from 2013 to 2017, property fraud sales grew from £7m to £25m as the prevalence of email and other IT frauds became more widespread and easier to commit.
Do I Need Title Insurance?
Title insurance requires a one-time payment at the time of property purchase to protect you from past and future events. Title insurance typically costs around 0.5% to 1% of the home price so you can expect to pay around $1,400 on average depending on the price of your home.
Title insurance is a good idea for homeowners especially ones who fall into the categories above and who might be targets for title fraud. It is indemnity insurance that protects you in the instance that you are a victim of title fraud on your home.
Shop around as what you are offered may differ depending on where you live. Don’t be impressed by shiny tv ads because the good providers tend not to advertise like that and these ads are probably referring to something different, title lock, which we’ll talk about below.
Understand what you are being offered. A good title insurance policy will protect against:
- Liens, encumbrances or defects in the title or actual ownership of a property that you own. If a mistake is made in your original title, your title insurance should protect you since it wasn’t your mistake.
- Things that you unknowingly inherited from the person you bought the home from such as back taxes, liens, property easements, lines of credit or other loans on the property that weren’t discovered when you purchased the property.
- The possibility that you have purchased a home from someone who isn’t the actual owner or in the case where a will or final testament suddenly causes an ownership dispute.
- Forgery, fraud, and other criminal activities you were unaware of.
Title insurance protects you in a way most insurance policies don’t: It protects you against events from the past that you had nothing to do with and also protects you in the future in the event of title fraud.
Is A Home Title Lock Necessary?
A home title lock is a service offered by companies often through tv advertisements that may make you mistakenly believe you are getting title insurance. A home title lock is basically a monitoring service that has the ability to check your credit and monitor it from time to time to look for anomalies or red flags.
You can check your own credit records yourself so this is a service you can do on your own. And if you fear that you don’t have the knowledge or skills to do this yourself, what proof do you have that a title lock company’s staff does?
Your best bet? Get a quality title insurance when you purchase your home and monitor your own credit checks.
How To Prevent Home Title Fraud
Title fraud protection helps to cover the cost of such a scam befalling you but avoiding the scam in the first place is even better. Here’s how:
- Purchase title insurance on your property but ensure you know what you are covered for. Look for title insurance or home title insurance and not just a title lock which is not insurance.
- Regularly check your credit rating and reports for any anomalies. Report them immediately to your financial institutions.
- If you get a bank statement, letter or legitimate email from a lender regarding setting up a new account, online portal or new loan that you are not responsible for, contact your bank immediately. Consult a lawyer if needed for initial advice.
- Keep an eye out if you suddenly stop getting bills and other pieces of mail that may suggest someone has redirected them to another address, suggesting they are stealing your ID. Same goes if you suddenly get bills for credit cards or other things you didn’t sign up for.
Summary
- Title fraud is a growing concern in many countries and each may treat it differently depending on where the property is located and how big the problem is in that area.
- Property that is fully paid off and clear of debt, rental homes, vacant property and second homes (ie. winter homes) are often targeted for title fraud.
- Elderly people are often targeted as they are assumed to have high equity in their home but are also seen as being easy targets particularly if they live alone.
- Title insurance is a one-time charge that you purchase to protect yourself and your property against title theft and other illegal activities or errors that may have occurred in the past or in the future.