Quick Action by Client and FBFK Stops Real Estate Fraud

by J. Beverly, Attorney/Shareholder

Think that your real property is safe from identity theft swindlers? Think again.  After receiving a packet of closing documents in the mail from San Antonio-based My Title Company of Texas, LLC., a FBFK client contacted shareholder/attorney J. Beverly with serious concerns. Why? The documents were for the sale of a vacant lot in Houston owned by the client; however, the client had not sold the property to anyone but had been receiving multiple unsolicited offers to buy the property.

The chain of events began when Holy Land, LLC entered into a contract to purchase the client’s property.  Holy Land then assigned the contract to Wafi Global Investment, LLC, a property “wholesaler” who then apparently contacted a buyer offering to assign the contract at a price that included a hefty fee. Given the hot market for vacant lots in Houston, the buyer bit on the deal despite the fact that the “assignment fees” paid to the wholesaler and Holy Land amounted to more than half of the purchase price. Unknown to the buyer, neither the wholesaler nor Holy Land were dealing with the actual owner of the property – but with a person who had stolen the client’s identity.

Using a forged Texas driver’s license but with the client’s real social security number, the fake seller executed the closing documents in California before a mobile notary. The fake client’s California address turned out to be a Starbucks. After the buyer deposited funds with the title company, money was wired to Holy Land, to the wholesaler and to the fake seller who had opened a bank account in the client’s name.  The client received the closing documents seven days after the closing and immediately contacted Mr. Beverly.

Experience + Quick Action Paid Off

After meeting with the client, FBFK took quick action contacting the title company and advising them of the scam and sending notice letters to all parties involved. Because the forged deed executed by the fake seller had already been filed, FBFK also cleaned up the real property records by filing a notice of fraudulent deed.  The client filed reports with local police and federal authorities and a fraud report with the bank who had opened the account for the fake seller.

The rapid response kept the defrauded buyer from expending any more money on the property, avoided the need for the client to sue to clear title, and has resulted in the return of the wholesaler’s fees to the buyer. Unfortunately, because the title company sent the closing documents by regular mail to the client, the seven-day delay enabled the fake seller to make off with her share of the money – at least so far. The defrauded buyer has made demand on the title company for the remainder of the purchase price and the outcome there has yet to be determined.  For now, the investigation continues.

Lessons Learned

If you are buying real property, make sure you know who your seller really is.  Don’t trust anyone especially if dealing with a property “wholesaler.” Red flags include purchases involving multiple assignments of the contract to buy the property or an out-of-state owner.  If in doubt, seek the advice of a real estate attorney. The best practice for title companies is to take additional steps to ensure that the parties to the transaction are who they purport to be. Here, a simple phone call to the real owner of the property could have avoided this whole situation. And if the seller does not attend the closing in person as is now common, the executed closing documents should be sent for next day delivery to the seller at an independently verified address.   Owners who are receiving unsolicited offers to buy their property should also regularly check to see if there is any suspicious activity.  In this case for example, the owner later discovered that pink survey flags had been placed on the vacant lot even though she had not ordered a survey – an actual “red flag.”