Broker Practice Advisory: Fraudulent Sellers
From time to time, the Division of Real Estate receives reports of scams or potential scams. Today, the Division would like to revisit an issue that can happen all across the state. While these scams can take place in single family homes and condominiums, they most commonly seem to take place on vacant, raw, or undeveloped land.
While this advisory will focus on scenarios where the fraudsters target real estate licensees, variations of the scam may omit a licensee, and behave like a For Sale By Owner seller. The essence of the scam is that a licensee is contacted about selling a property by a fraudster in an attempt to steal the proceeds from the sale. Most commonly, initial contact is made by telephone or even more often, by email. The fraudster is looking to sell the property, usually on an expedited basis because they need the proceeds for another project or other investment. In truth, the fraudster has selected this particular property, which they do not own, because it is undeveloped or overlooked by the actual owner.
Fraudsters can go to great lengths to appear legitimate in these schemes. Some possible steps might be:
- It is common for fraudsters to contact brokers via email or telephone to initiate the transaction. This might be due to the fact that the fraudster is attempting to cover up an accent or that they do not speak the preferred language of the actual property owner.
- In many cases, the fraudster will not make in-person appointments or will explain that they are currently working out of state or even out of the country.
- Commonly, fraudsters develop a series of excuses for (1) why they want to sell the property, (2) why time is of the essence, or (3) why they do not want other family members to know about the transaction (perhaps because they would ask for proceeds from the seller’s estate or will).
- Many brokers can identify that something might be off in transaction when a fraudster purports to be a representative of the seller for some reason. They may be the legal guardian, legal custodian, the attorney-in-fact, the translator, a family member, or the close family friend for the “actual owner.” In cases such as this, the fraudster may present documentation in support of this claim such as Letters from a Probate Court, an executed power of attorney, or appear to carbon copy (cc) the actual owner on email correspondence.
- It has been reported recently that copies, photographs, or scanned images of driver’s licenses or other government issued identification have been presented to real estate licensees which purport to show that the fraudster is who they are claiming to be. It is important to remember that when copies, photographs, or scanned images are digitized and delivered, the quality of the image is degraded and therefore, easier to doctor by a fraudster.
As a Colorado real estate licensee, you should be aware that you should conduct due diligence. Accordingly, actual, in person communications can help protect you and the actual owner from the potentially devastating harm that can come from perpetrating this type of scam. A few considerations to assist you in conducting due diligence:
- Schedule a meeting with the owner in-person, preferably at the property where you can meet the seller and ask questions. If your request for an in-person meeting is balked at, this might be a red flag.
- Ask questions about conditions on the property. Are there any improvements? What is the terrain like? Are the adjacent properties owner occupied or developed? If answers to these questions do not reflect reality, this also might be a red flag.
- When visiting the property, see if you can contact any neighbors for information about the owners. In these scams, a common thread is that neighbors are somewhat surprised to hear that the seller is interested in selling. Maybe this is because the neighbors know that the property has been in the seller’s family for generations or maybe because the actual seller said “I am never selling” or “if I ever want to sell, I will make you an offer before I list the property.” Speaking with neighbors might give you more information about the actual owner (profession, principal address, contact information).
- Using common internet searches and maybe even social media can be helpful resources to confirm the address or other contact information (telephone, email, etc.) for the seller. The internet might also provide you with pictures of the owner, which you can compare to any information provided by the fraudster.
- If the property is located in a Common Interest Community (planned community, condominium, homeowners’ association, property owners’ association, cooperative, or timeshare), contact the association’s board or Community Association Manager for information on the seller-note, you will have to contact the association even if the seller is legitimate to obtain governing documents for the association which would need to be disclosed to a buyer pursuant to the Contract to Buy and Sell.
When asking for any of the above, if the fraudster quickly withdraws or informs the broker that they have hired a different broker, this also might be a red flag.
If you believe that you have been the target of this suspicious activity, contact your local authorities and the Colorado Bureau of Investigations. For more information, please visit www.reportwirefraud.com.
This has been a Colorado Division of Real Estate Practice Advisory.
|
