Can Someone Steal Your Title – An Update

I wrote an article last year after being bombarded by commercials on radio and TV, advertising a service to help prevent property title theft.  That article was found by someone who almost had his property stolen and called me to get some advice.  The story shocked me as to how brazen the criminals are getting.  I shared that story yesterday with a top real estate agent in the state and she told me this particular scam has been in the islands for the last 3 years.

The commercials on TV are correct.  Anyone can forge a deed and submit it to the Bureau of Conveyances and get it recorded.  It is not the job of the Bureau to review the document to determine its legitimacy.  The only review they do is to make sure the document contains the necessary information required and that the document conforms to the required spacing and layout.

As I pointed out last year, the bad guys could file a bogus deed and transfer the property into their name, but they will run into issues if you have any liens recorded against the property.  If they tried to sell that property, any liens like a mortgage must be paid off.  Your mortgage document also contains language that gives the mortgagor the right to approve a title change.  That’s some additional protection for you.

But Paul’s situation was different.  Paul owns a vacant lot on the Big Island that’s worth about $300,000.  He owns it free and clear with no liens.  What the scammer did was truly amazing.  They created false identification, claiming to be Paul with new address and contact information.  They then called around and solicited real estate agents to inquire about selling the property.  They found an agent, and that agent listed and successfully found a buyer for the lot.  It was through a little bit of luck and some due diligence on the parties involved that Paul found out about the sale before the transaction concluded.  The scammer was exposed, and the transaction was stopped in time.

Had the scammer been successful, they would have signed the deed to the new owner through the regular escrow/title process, and funds would have been exchanged.  The buyer would have a forged deed and escrow would have wired funds never to be seen again.

Just imagine if Paul hadn’t found out.  A couple of years down the road, the new buyer of Paul’s lot could have built a house on that lot.  What a mess.  I’m not an attorney, but I have no idea how or if things could get unwound.

Other than sharing his story, Paul called me to ask if I knew any way he could protect his lot from this happening again before he’s ready to build.  I explained to him that the scammers knew exactly what to look for – properties with free and clear titles.  If your property has a mortgage recorded against it, the scammers will most likely move onto another property.

Paul wasn’t ready to get a mortgage to build, but I explained to him that he could put a lien on the property himself.  I suggested Paul create an entity such as a family LLC.  That same attorney could draw up a mortgage for the entire value of Paul’s vacant land and have that document recorded.  Now if a scammer tried the same ruse, escrow would have to obtain a lien release from Paul’s LLC in order to convey clear title to the new owner.  That lien release would prevent Pauls’ property from being stolen.  In the future if Paul legitimately wants to sell the lot, that recorded lien won’t be an issue at all.  All Paul will do is sign a lien release on behalf of the LLC.  The title company will use that document to remove the recorded mortgage and convey the lot to the new owner free and clear.

There’s no way you can 100% safely protect anything you own.  Just like your home, you can remove those old jalousie windows and install more secure ones.  But if the burglars want to get in, they’ll find a way.  The best way you can protect yourself and your property is to get educated on what the criminals are looking for and make it as hard as possible for them to succeed.  Scammers will always look for the easiest target.  Don’t be that person.