Fifty-nine percent of title professionals said at least one seller impersonation attempt crossed their desk in the prior calendar year. That’s according to an American Land Title Association survey released in September, and it was more than double the 28 percent who said the same a year earlier.
For John Rowan, founder and CEO of Arizona-based Home Fraud Defense, the bigger worry is how the industry has responded.
“I get a lot of comments online because I’m out talking and teaching. Agents or companies will say, ‘This is the industry. I had three last week. We just have to get used to it.’ And I say, ‘No, we don’t,'” Rowan said during the opening remarks of the first annual Real Estate Fraud Briefing on Oct. 30 in Chandler, Arizona.
John Rowan
“No industry in the world accepts a higher level of crime,” Rowan continued. “Instead, an industry looks internally and asks what it can do to stop this from happening. We want to make the real estate industry toxic to the fraud community so they stop targeting it. That starts with conversations like this, and with looking at the way we do things at a much deeper level instead of doing it because that’s how we’ve always done it.”
Hosted by Rowan’s company, Home Fraud Defense, the two-hour briefing in Arizona shared best practices for recognizing and responding to fraud targeting real estate transactions.
During the briefing, attendees heard from the commissioner of the Arizona Department of Real Estate, a criminal investigator from the Office of the Arizona Attorney General, a special agent at the U.S. Secret Service, general counsel for the Arizona Realtors Association and a representative from HomeSmart.
In-person attendance was sold out, though the event was also streamed via Zoom.
During the briefing, Arizona officials said seller impersonation scams follow a predictable script, and agents who ignore it may not get the benefit of the doubt. From pre-closing alerts and money mule accounts to a $500,000 same-day wire recovery, here’s how the state is fighting back, and what agents in every state can learn.
‘Somebody took their generational wealth’
Arizona Department of Real Estate Commissioner Susan Nicolson, whose last day in office is Dec. 18, built Arizona’s pre-closing alert system. It responded to what she called a reactive status quo: county alerts that arrive only after a fraudulent deed is recorded and ownership has already changed hands.
Susan Nicolson
At the Department of Real Estate, Nicolson was regularly seeing victims of deed fraud come in.
“If anything’s going to motivate you, it’s watching grown men and women come into your conference room and fall apart because somebody stole their American dream,” she said. “Somebody took their generational wealth. Everything they had worked for, saved for and planned for was gone.”
Many of the victims asked Nicolson what they did wrong and what they should have done.
“I had no answers for them,” Nicolson said. “The best thing I had when I started was, ‘Well, you could maybe set up a Google search and see if anybody’s trying to sell your property.’ How lame and weak is that? No harm to Google, but the government should do better. We’re there to protect people.”
Under the system, property owners register voluntarily with the Arizona Department of Real Estate. When escrow opens on a registered property, the owner is notified before closing. The catch is that it isn’t automatic. The real estate agent, property owner and escrow officer must all sign a form instructing the title company to check the registry.
Rowan noted that it’s an early alert system that other states can replicate. While several states require counties to alert owners after a deed is recorded, Arizona’s system is among the first to flag a sale while it’s still in escrow.
Nicolson said that’s not what she wanted initially. Her legislation to trigger the check automatically on every escrow, via API, failed to get a hearing in the Rules Committee last session. As a result, the system relies on licensees to bring it up, and it misses wholesale deals entirely unless the buyer seeks out the form.
‘You’re not that lucky’
Nicolson was blunt about agents who ignore fraud warning signs. She noted that Arizona law doesn’t require licensees to verify a seller’s identity. Arizona isn’t an outlier. Few states require agents to verify who they’re working with, though Alabama began requiring licensees this year to collect ID and proof of ownership from sellers they’ve never met in person.
Arizona’s Consumer Fraud Act, however, reaches anyone who “knew or should have known.” And Nicolson mandated red-flag training for license renewal two years ago.
“So you cannot blatantly ignore red flags,” she said. “You can’t proceed anyway because you have commission breath and you need that payment for your rent or house payment next month, so you put blinders on and close that deal come hell or high water.”
If there are known red flags and an Arizona agent has been trained on them, Nicolson said she would take severe disciplinary action if an agent is found guilty of violating the Arizona Consumer Fraud Act.
“Would I do that simply because a licensee didn’t ask a seller for identification? No, you’re not required to by law,” she said. “But if you went through the checks and balances of our justice system and were found guilty of violating the Consumer Fraud Act, I would definitely take action against that license.”
Her description of the classic red flag: an unsolicited out-of-state owner wants to sell vacant land fast, won’t meet and doesn’t care about price.
“Who is that lucky? Play the lottery. Win the Powerball instead,” Nicolson said. “I practiced real estate for 30 years. If you think you’re that lucky, you’re not. That’s not how you earn business.”
‘It shouldn’t have to be on real estate licensees’
Nicolson said Arizona’s early alert system has a blind spot: wholesale deals.
“The early alert system is a wonderful system, but it doesn’t cover wholesale transactions, because there’s no licensee involved,” she said. “Unless a wholesale buyer is savvy enough to go to our consumer pages, download the transaction form and use it on every house they buy, they don’t have this protection.”
The fix, Nicolson argued, is to take agents out of the equation entirely and trigger the alert on every deal that runs through title and escrow.
“It shouldn’t have to be on real estate licensees,” she said. “We have a legislature. If the sides could all come together and say stopping deed fraud is more important than selling an endorsement to a title insurance policy — that it’s a priority in Arizona — we can make that happen.”
Nicolson also called for consolidating the state’s overlapping fraud-protection programs into a single registration.
“Let’s use technology and be smart. Give us your information one time, and you’re registered for every kind of protection we have for real property,” she said. “That’s smart, common-sense legislation neither political party should fight over.”
Nicolson said that push would be the priority in another legislative session. “Hopefully whoever the torch passes to next will pick up the fight,” she said.
Follow the money mules
Don Carroll, a certified fraud examiner with the Arizona Attorney General’s Office, said most owner-impersonation cases he sees share a profile: vacant property, out-of-state owners and no mortgage.
Don Carroll
“Almost all of those are being run out of Nigeria,” he said. “It’s a Nigerian scheme.”
Carroll said the warning signs tend to repeat. The email address is a variation on the owner’s name, the phone number carries the owner’s home-state area code but doesn’t trace back to them, the ID has the owner’s real details and someone else’s photo, and the “seller” avoids phone calls.
“If you don’t have a person in front of you, be suspicious and do a little checking. If it’s someone out of state, the main thing is whether the phone number comes back to them,” Carroll said. “If you call and never get an answer, that’s because it’s VoIP, and Nigeria is eight hours ahead of us. If you’re dealing only with text messages and emails, that’s the first thing to be suspicious of.”
If agents suspect fraud, Carroll asks them to preserve the phone number, the email address, a copy of the ID and DocuSign IP data. If the deal gets further along, he wants to know where proceeds are being routed, since those accounts usually belong to U.S.-based “money mules.”
“I don’t think anybody in the United States — any real estate agent — is dumb enough to send money to Nigeria,” Carroll continued. “So they have people cooperating inside the U.S. Some think they have a boyfriend or girlfriend working for, say, the Egyptian government doing gemology, or think they’re working for some business and are just transferring funds.”
The money mules do it for a cut.
According to the FBI, criminals often recruit money mules to launder proceeds from online scams, fraud and crimes such as human and drug trafficking. Each mule adds a layer of distance between victims and the people who targeted them, making the money harder for law enforcement to trace. Mules can move funds through bank accounts, cashier’s checks, cryptocurrency, prepaid debit cards or money service businesses.
“I want to know where the bank account is, because we’re going to shut down those accounts,” Carroll said. “That hurts them more than anything else: shutting down the accounts they use to get their funds.”
Don’t be ashamed if something goes wrong
A U.S. Secret Service special agent from the Phoenix field office also spoke at the briefing and described how he works on real estate fraud cases.
“Many people don’t know the United States Secret Service has a dual mission,” said the agent, whose name was withheld due to the sensitivity and confidentiality of his work. “We protect the president, the vice president and various protectees. Our secondary mission is ensuring the United States’ financial infrastructure isn’t under attack or compromised. When we’re not in the field protecting, we’re home in downtown Phoenix handling cases like this.”
On wire fraud, the special agent described recovering $500,000 for a local real estate investor.
The investor had wired funds after fraudsters spoofed a landscaping vendor’s domain by adding a single letter. The money landed in the account of a Wyoming senior the agent believes was a romance-scam victim. Once the agent called the receiving bank, the funds were returned the same afternoon.
His playbook for agents whose clients have been hit:
- Stop using the compromised email account.
- File a police report.
- File at ic3.gov.
- Call the Secret Service field office, which takes calls 24/7.
For overseas wires, the agency can send what’s known as a kill chain request through a desk that works with the Financial Crimes Enforcement Network (FinCEN), part of the Treasury Department.
“They’ll call or email the right partners to make sure the wire can’t go any further,” the agent said. “That’s only for international wires. Domestically, the process looks different: you call in, explain what happened, we take a moment to verify it and check the factors, and then we call that financial institution.”
In closing, Rowan asked what the real estate industry can do better to help prevent wire fraud. The Secret Service agent gave a surprising answer.
“I wish real estate agents wouldn’t be ashamed of something bad happening on the job,” the agent said. “Shame is a very powerful force in psychology. Don’t let the shame of making a mistake stop you from making a good decision.”
