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Title Litigation: How to Avoid a Fraudulent Real Estate Transaction

| Jul 10, 2015 | Commercial Real Estate, Real Estate Law |

Title litigation as a result of fraudulent real estate transactions accounts for millions of dollars worth of claims every year. The most interesting aspect of title litigation is that the majority of claims could have been easily avoided. It pays to be aware of what to look for and what to avoid.

How to Avoid a Fraudulent Real Estate Transaction:

  1. Don’t let anyone pressure you into closing before the necessary documents have been completed and submitted.
  2. If there is any part of the structure of the transaction that you do not understand, do not participate in the transaction. When your experience and knowledge are not providing you with enough of an edge to actually understand the transaction, question whether or not you should be involved. Over complication of matters often leads to problems.
  3. Stick to company procedures. Do not make exceptions for promises of repeat business.
  4. Know the customer. Some developers will have a history or a reputation in the industry. It pays to be aware of this information.
  5. Avoid presenting or verifying “facts” regarding the transaction that are outside your specific area of expertise.
  6. Indulge in skepticism towards absentee buyer/borrowers. Never underestimate how creative the fraudulent mind can be; some fraudulent schemes have been perpetrated under the name of non-existent individuals.
  7. Use caution when you have multiple transactions in quick succession involving the same property. The “quick flip” can be perfectly legitimate, but many fraudulent schemes begin with a series of sales between real and fictional individuals.
  8. Accommodation recordings refer to a recording of a notarized document that doesn’t relate to an open escrow. Avoid them; they expose the escrow company to claims of aiding and abetting fraudulent activities.
  9. When something seems too good to be true; it usually is. If a buyer receives money (instead of paying money into escrow), watch out. This is indicative of fraudulent schemes involving double escrows.
  10. Be wary if requests are made for reports that don’t actually reflect the true state of affairs.

There’s no bulletproof method of avoiding being involved a fraudulent real estate transaction or even title litigation. But sticking to the rules and being aware of “new” fraudulent activities in the industry can help you keep your chances for trouble minimal.

For help in determining whether or not you have been involved in a fraudulent real estate transaction or for title litigation assistance, please contact the California real estate attorneysat The Law Office of Retz & Aldover LLP.