The world of residential real estate can be a fast-paced business, where deals are struck, fortunes made … and danger potentially lurks just below the surface.
The emergence of creatively sophisticated cybercriminals armed with cutting-edge technology like artificial intelligence (AI) is making life difficult for the real estate industry and its customers. It’s not exactly new: Hackers have been targeting American consumers as well as real estate professionals for many years in an attempt to steal money.
Now, however, fraudsters are upping the ante. They are taking advantage of free AI programs while the technology is still in its infancy and many of us are potentially unaware of the possible dangers.
One scheme growing in popularity involves “title pirates,” fake sellers who convince a buyer, real estate agent and/or title company that the “sellers” own a property and want to get rid of it quickly. The scam is being refined by criminals using new AI apps to create a range of communications. (The illustration of a sinister-looking man, above, was produced by generative AI only seconds after I shared an overview of this blog post. Without my prompting, the illustration portrays a fraudster with papers stacked on his desk like high-rises with folded-paper roofs.)
The title pirate scam starts with an email or text message from the so-called property owner seeking to sell a piece of vacant land or possibly an empty home. The “owners” want to urgently sell the property – often below the true market value – simply to move the sale along quickly and reap the financial reward.
The fraudsters are getting more and more creative, including showing a seemingly real ID of the true property owner, masking their phone number on Caller ID with one that could be connected to the real property owner and possessing an email address that appears similar to the actual owner’s email.
Behaviors can also include the use of deepfakes – highly realistic false images and videos of people, objects and land (known as deepfake geography) – to advertise properties for sale or lease. Deepfake technology can even impersonate real estate agents, landlords, lenders or consumers.
AI writing tools can quickly and easily draft fake emails and correspondence, for example, with instructions to divert a victim’s down payment to the scammer’s account. These tools have helped fraudsters based in other countries to eliminate poorly written messages, which was a reliable way to identify a scammer.
Fraud is running rampant in the U.S. The FBI reported that in 2022 a staggering 11,727 individuals fell victim to real estate fraud, resulting in a total loss of $397M in diverted funds. That’s a 13% increase in financial losses in a year, as fraudsters extend their level of creativity by falsely claiming ownership of land.
Title pirates sometimes use a forged driver’s license or Social Security card to claim themselves as the owner. If the property is owned by a limited liability company or corporation, the title pirate may use a forged signature or falsified documents to hold themselves out as a party authorized to execute documents on the company’s behalf to carry out the transfer of title.
Greater measures are being taken to prevent the illegal sale of properties. Title insurers are at the forefront by confirming the owners’ true identity, even contacting them directly through U.S. mail and other means. No response equals no sale. In addition to the correspondence, title companies will examine the sellers’ passports and driver’s licenses or hire a notary to do it in person, or a U.S. Embassy/Consulate official will review IDs when the seller is staying abroad. (Sellers sometimes demand they choose the person notarizing documents – a big warning sign to title companies.)
Instead of selling the property, title pirates can also benefit by securing a loan on the property, renting the space out or temporarily living there.
The impersonation of a property owner is only the latest attempt to upset the real estate industry. Fraudsters are still focusing on buyer cash-to-close payments, such as switching wire-transfer directions at the last minute. They are also creative at diverting mortgage payoffs.
While our industry’s vigilance in identifying diversion endeavors is growing, the ever-evolving nature of fraud tactics presents a constant challenge. Undoubtedly, even a single instance of a buyer or homeowner potentially losing their dream home to a fraudster is an unacceptable outcome.
Sellers should understand that the deep scrutiny over their identity is justified. The actions are for the good of the real owner, the potential buyer and those working in the real estate industry who can be held liable for mistakenly participating in the fraud.
The benefits of AI are many but consumers and the real estate industry must be on guard every day against becoming ensnared by a fraudster with an eye on your valuables.