Do You Know a Real Estate Fraudster?

You may be surprised to learn that Alaska is one of the top four states susceptible to real estate fraud. One of the most common frauds occurs on vacant property with an absentee out of state owner. According to the Alaska MLS, as of February 9^th, there are 18,345 acres of land for sale, most of which are vacant. Fraudsters pretend to be the owner of the parcel and hire a licensee to sell the property. If asked, the fraudster provides a false driver’s license and identification as the owner. A buyer makes an offer and deposits an earnest money check and the transaction proceeds towards closing. This recently occurred to the real owner of a lot. It just happened that the listing licensee was familiar with the property and during a walk about discovered the true owner. Otherwise, the fraudster could have walked away with the buyer’s purchase money.

As a broker, we had a buyer make a full price offer on a vacant parcel of land which had been on the market for almost a year.  He sent us a $20,000 check from a savings account accompanied by verification of funds.  He had a due diligence period and during that time requested a refund of his check. When we informed him that his check had not cleared, he became irate but eventually went away after numerous phone calls demanding we refund his check, but the check never cleared. It is the responsibility of a broker to not disburse earnest money until it has cleared the state required escrow account.

Buyer licensees in today’s market with limited inventory are susceptible to out of state buyers calling for information about a property. Relationships get established through online communication and phone calls. And during these conversations the fraudster builds a personal relationship and before an offer is made on a home encourages the licensee to consider other financial opportunities that appear more lucrative, such as cryptocurrencies, guaranteeing a significant doubling of return when compared to real estate appreciation over a period of time. Finally, after several contributions by the licensee, when the licensee requests a draw, excuses are provided and money is never returned. The lesson learned is to always verify a buyer’s true identity.

Another example of fraud is the theft of checks which are white-washed. White-washing a check is when someone alters or removes the original writing (like the payee or amount) so the check can be rewritten and fraudulently cashed or deposited. Checks have a numbered sequence.  Your local banker most likely has fraud protection programs in place. Postal inspectors also recover over one billion in counterfeit checks and money orders each year, according to their website. These white-washed checks are sometimes used as earnest money or security deposits for leases.

Finally, for those of us in the business of helping buyers and sellers, slow down and do your due diligence. Your buyer or seller may not be who you think they are.