Quitclaim deeds show up commonly in fraudulent real estate transactions. This type of deed fraud can impact elderly people, buyers purchasing real estate from strangers without warranty, renters who are paying someone who is not a legitimate owner, and anyone involved who might buy, sell, or own property.
Here, we examine how it happens and how to detect it.
The Quitclaim Deed: Its Legitimate Purpose
A quitclaim deed transfers one party’s interest in a property to another party. Quitclaims are common in transfers of homes from parents to children, from sibling to sibling, or between divorcing spouses. These are the simplest scenarios for the quitclaim deed—occasions for giving property, not selling it.
Yet sometimes quitclaim deeds arise in tax sales. The taxing entity sells a property to recover the value of its unpaid taxes. The government then conveys to a buyer the interest it gained through foreclosure—nothing more.
Any buyer accepting a quitclaim deed without warranty should understand that the title could have defects.
Conversely, the quitclaim is a “deed of release” if there are ambiguities to clear up. A party who potentially could have a claim can use the deed to resolve the possible cloud on title, leaving the property free and clear to its concerned owner.
The Use of Quitclaim Deeds in Scams
Unlike the warranty deed, the quitclaim requires no title examination process. There is no guarantee of clear title. Thus, scammers are drawn to quitclaim deeds to carry out transactions with assets that belong to other people.
Scammers may exploit the simplicity of quitclaim deeds. They may use these instruments to fraudulently convey property into their names or aliases. Some pose as personal representatives of estates to carry out the schemes.
Having recorded a fraudulent document, a scammer can sell the property without a warranty, rent it out to unsuspecting tenants, or obtain a loan on its value.
Today, online sources offer scammers ample information about properties and their owners’ identities to facilitate such activity. Moreover, it is not difficult for a fraudster to go into a county courthouse and file a quitclaim deed behind the rightful owner’s back.
Typically, under state law, a recorder of deeds lacks authority to review or deny recordation—even if something looks suspicious.
Thus, a fraudster with a quitclaim deed can quietly take away a rightful owner’s property. Often, the victim’s loss only becomes apparent much later, when an effort to sell the property hits a wall during the title examination. An innocent person then faces a lengthy, expensive legal action to set the ill-gotten deed aside and reestablish ownership of the property.
Elderly Targets
The elderly are often targets. Sometimes, the perpetrator is someone they know.
Caregivers, financial advisors, or family members could persuade the owner that signing over a deed makes financial sense. Sometimes, coercion or threats are used.
In other cases, someone fakes the elderly homeowner’s signature and has the document notarized.
Sometimes the fraud is more complex. Fraudsters may ascertain that an elderly person failed to make tax payments. The scheme involves paying part of the tax debt to stop the home from foreclosing, then filing a lien on the property. Some use quitclaim deeds to transfer the title.
Other fraudulent practices involve locating elderly people’s vacant homes or beach homes, exploiting the owners’ long absences to get away with using quitclaim deeds to transfer titles.
New Systems
Some county court officials are developing new systems intended to prevent deed fraud schemes and to protect or warn victims.
For example, Cook County, Illinois has been working on a pilot blockchain title plan. Blockchain is an electronic ledger that can record an accurate title, and from there on etch into the block every subsequent transaction in real time, so that fraud is flagged immediately. Should this experiment lead to a widespread practice, a process once vulnerable to scams will become fraud-proof.
Meanwhile, counties are taking steps to address the rise in fraud.
- The Register of Deeds of Tennessee’s Rutherford County now offers a free notification service for owners whenever any transaction is recorded on their real property.
- A similar offering is available in Pinellas County, Florida, which invites property owners to sign onto a free notification service when any interest in their property is transferred.
- The recorder’s office in Los Angeles County mails a copy of any newly recorded document to the current/prior record title holder with some tips on what to do if the recording is fraudulent.
What You Can Do
Homeowners should take care to detect transactions involving their property, and address any issues promptly.
- Check on second homes and look for bills or other activity related to any property left unoccupied for substantial periods.
- Monitor your credit. Typically, a bank or credit union allows you to see your quarterly scores online for free. Any significant departure from your normal score could flag an issue.
- Identity theft monitoring services also exist/ They can bring a range of potential issues to your attention.
- Look for your county deed register online. If it is available, keep tabs on any activity that may affect your deed.
- As noted above, some counties notify homeowners of any new deed activity for free. Sign up for a notification service if you have access to one.
- Become familiar with your title insurance terms. A title insurance policy may offer substantial protections. It may also provide coverage for legal action to set aside fraudulent transactions.
- Share this information with people in your circle—especially with those who have second homes, who spend long periods away from home, or who take responsibility for elder care.
If you have been targeted, report the activity to the police. Additionally, an attorney who deals with real estate law can advise you.
Do notify the county recorder of deeds where the property is located. You may be directed to state and federal offices, including the FBI, which investigates mortgage and deed fraud as federal white-collar crime. Know the signs, and stay alert.
Resources:
https://www.realtor.com/advice/finance/quitclaim-deed-fraud/
https://www.freep.com/story/money/business/michigan/2015/04/04/oakland-scam-pegross/25261099/
https://www.deeds.com/articles/category/deed-fraud/
http://www.seniorhousingnet.com/senioradvice/turnover-senior-housing-caregivers/