February 28, 2022
Perhaps you’ve seen ads on TV warning about house stealing or title theft. Is it real? Yes, but fortunately quite rare. But there is another type of fraud that happens much more often. Let me walk you through both types so you know how to protect yourself.
How Title Theft Works
Say you hire someone to work on your house and they give you a contract to sign. Your eyes are bad and it’s not a big project so you don’t read it before signing. They insist on having it notarized as a “formality.” Unfortunately, it’s not a contract but a deed that puts your house in their name. As soon as it's recorded, they can sell the house or get a mortgage, pocket the money, and disappear. The technical name for hiding the true nature of a contract is fraud in the execution.
Alternatively, a stranger might forge your signature on a deed and take out a mortgage on your house.
If either of these scenarios happens to you, you probably will have to retain a lawyer to help convince a judge that you did not intend to give away your house or that your signature was forged.
That is why title theft is relatively rare: Most scammers don’t want to be questioned by a judge who has never heard of anyone giving their house away to a complete stranger.
Also, there is a better way to steal a house.
The Classic Con
“Con” is short for “confidence” and con artists work to gain the confidence of their victims so they go along willingly — even enthusiastically. The legal term for this kind of scam is “fraud in the inducement.” Because the victim’s real signature is on the contract, and because they knew what they were signing, it is a lot harder—perhaps impossible—to undo. Here’s how such a scam might work:
First, a scammer would look for a good victim — someone who lives alone and doesn’t have a lot of experience handling financial matters. In many cases, the scammer is already someone the victim trusts, like a relative or a lawyer.
Next, the scammer might send their victim foreclosure letters — supposedly from the IRS — and make threatening calls to get them in a panic. Finally, they will offer to buy their house for cash the same day. Otherwise, they say, the IRS will foreclose tomorrow and they will lose everything. The victim signs the papers and the scammer gets their house for a song. Scammers like this method for two reasons.
First, falling for a scam makes victims feel foolish and vulnerable. They might not tell their families or lawyers for a long time for fear of having a guardian appointed over them.
Second, it is much easier for a scammer to resell a fraudulent deed or mortgage if it contains the victim’s authentic signature. Under the law, an innocent party who purchases a home from a scammer who defrauded the victim into signing a contract can keep the home even if the victim can prove it was cheated by the scammer. The same goes for a mortgage: If the victim signed the note, the new owner can enforce it.
It sounds pretty bad and it is. Here’s how to protect yourself:
- Never sign a contract that concerns your home without having someone you trust look it over first. Pressure tactics to get you to sign quickly—“Rates are going up!” or “Our special offer ends today!”—are big red flags.
- Always use a lawyer when you deal with small lenders or investors. If someone tries to talk you out of using a lawyer—“What an expensive waste of money!”—you are being scammed.
- If you think you’ve been scammed, go to the police right away. Even lawyers and doctors get scammed—but they report it.
You don’t have to become more vulnerable as you grow older, but you do have to be more careful. SafetyDeed helps protect seniors from losing their homes to fraud even if they sign fraudulent contracts. You can learn more about us here.