What is Real Estate Fraud?
Real estate fraud occurs when a fraud artist poses as the rightful owner of property and either sells the property or obtains a mortgage on the property. It usually involves the theft of the owner’s identity. The homeowner often finds out when he or she receives a notice that the fraudulent mortgage is in default. By that time, the fraud artist has disappeared and the homeowner is left fighting with the mortgage company over the property.
How Can You Protect Yourself?
First, check to ensure that title to your property is clear; that there are no unexpected mortgages registered against title and the property has not been transferred without your knowledge.
Second, consider taking the following steps to protect title to your property:
- register a caution on title to preclude registration of fraudulent mortgages or transfer of your property without your consent;
- purchase a title insurance policy that provides coverage for title theft or fraud; and
- register an “empty” mortgage on title to deter fraudsters.
Registering a Notice on Title
Registering a Notice on title is an effective way to ensure that your property will not be transferred or mortgaged without your consent. The Notice will interfere with any attempt to improperly encumber or transfer your property but can be lifted if you wish to register a mortgage or sell your home.
Title Insurance
Most lawyers now recommend that title insurance be purchased as a part of every real estate transaction to protect against real estate fraud. The premium is paid once (when the policy is purchased) and the policy remains in effect for as long as you own your home.
Title insurance provides coverage against losses arising from fraud, forgery, duress, incapacity, impersonation such as when a stranger claims an interest in or fraudulently places a mortgage on title.
An Existing Homeowner Policy is for homeowners who already own their home and did not obtain the protection of title insurance when they first purchased their home. The policy date for the Existing Homeowner Policy is the date when the home was purchased, not the date that the policy is purchased.
Registering an “Empty” Mortgage
For obvious reasons, fraud artists choose properties that are mortgage free or show significant equity. Some homeowners therefore choose to register an empty mortage on title so that their property will appear to be heavily mortgaged and will not be a target of real estate fraud.