For property owners, real estate fraud is a very real risk. Unfortunately, there are many ways that fraud can occur, and it sometimes happens when you least expect it. Public notaries and other professional groups can be corrupt, so it’s important to be aware of all the opportunities when fraud can occur.
Real estate fraud refers to someone attempting to fraudulently obtain the title of your property, in order to steal your equity. Examples of title fraud can include forged grant or quitclaim deeds, fraudulent sales, undue influence, unlawful foreclosures, or recording fake deeds of trust for loans you haven’t received.
There can be multiple parties involved in a title fraud scheme. Most often, real estate fraud occurs when a group takes advantage of a vulnerable property owner, such as an elderly individual or one who is behind on their mortgage. That being said, anyone can be a victim of real estate fraud, so it’s important to know how to prevent it and what to do if it happens to you.
You should always file a criminal complaint with the district or city attorney if you’re the victim of loan fraud or title fraud. However, government agencies often can’t fix your damaged title chain with a criminal prosecution. Your title will remain unmarketable unless it is restored.
There are many companies out there that offer title monitoring services. Be aware that while these companies will monitor the state of your title and notify you of any changes, they can’t take any further action to help you restore chain of title. They won’t be able to take any legal action or practice law.
Even title insurance companies may not accept your claim depending on the time it occurred. Some insurance policies have fraud loophole exceptions that will exempt your insurance from helping you in certain cases of title fraud. Having a title insurance policy that helps you in the event of title fraud is one of the best ways to protect yourself in these situations.
So, what can I do?
In an event where many companies and agencies may not be able to help you, you need to file a civil action. Firstly, you should review the state of the title and prepare as much information as possible. Contact a title company that is reputable and get a title report to get county recording numbers. Make sure you have the answers to questions like these:
- What’s in a preliminary title report for your property?
- Has a fraudulent deed of trust been recorded?
- Has a fraudulent instrument been recorded in the property’s county?
- Did someone forge your signature?
- Who was involved in the fraud, or who will be named as the defendant?
- Is there a wild deed in the chain of title that you didn’t sign?
After having this information, review your title insurance policy. It’s usually a good idea to file a claim with your insurance and have them investigate the situation. If they accept the claim, they might appoint a real estate attorney who can help you clear the title through a civil lawsuit.
Lis Pendens
When a lawsuit is filed, a lis pendens should also be recorded and served. A list pendens (Latin for “action pending”) is a legal notice that indicates that a lawsuit is pending. The lis pendens notice will go in the chain of title with a county recording number, so that anyone involved in affairs related to the title will be aware of the ongoing lawsuit. Lenders, assignees, grantees, or purchasers of the title are subject to lawsuit claims. This can help prevent further loans or sales that unlawfully involve your title.
When it comes to real estate fraud, the bottom line is that appointing a knowledgable real estate attorney is the best way to restore your title and protect your financial assets. The California civil law provides remedies for victims of title fraud, and an educated lawyer will know how to use these protections to restore your chain of title. A criminal lawsuit is important for prosecuting the perpetrators, but keep in mind that it won’t help you restore a clear title or prevent future transfers.