Wealth Insights

The rise in real estate fraud: Vacation homes and rental properties may be vulnerable

How to help protect what is yours from title theft and rental fraud

Key takeaways

1. Title theft and rental fraud have been reported with increasing frequency, according to the National Association of REALTORS Research Group.
2. Certain properties (second home, rental properties and vacant homes) are considered to be more vulnerable.
3. The consequences may be serious ranging from financial loss, legal battles and unauthorized tenants or transactions.
4. Early detection is critical to deter additional losses. Learn the warning signs.
5. You may be able to significantly reduce your risk with a few steps.
6. Rental property owners face additional risks, including property damage, liability issues and fraudulent booking.

Imagine, if you will, a scenario that seemed unthinkable just a few years ago:

Discovering that someone else holds the title to your home – or has sold it or rented it without your knowledge.

This isn’t The Twilight Zone. It’s a growing real estate scam that often starts with identity theft.

It’s called title theft

By assuming your identity, a thief can attempt to claim your property deed – usually targeting second homes, rental properties, or vacant houses – using false identification and a fraudulent or unethical notary.

Once the title is transferred into the scammer’s name, they may take out loans against the property’s equity or even try to sell it. It’s not an easy crime to pull off, but once a scammer gains control of the deed, they can create significant problems by:

• Renting out the property for profit
• Opening a home equity loan
• Refinancing to extract equity
• Selling the home and keeping the profit

Steps to stay safe

1. Monitor or freeze your credit.

The major credit bureaus offer free credit reports that help you track changes. Freezing your credit can help prevent new accounts from being opened in your name if someone attempts suspicious activity. At the minimum, check your credit report regularly. Annual Credit Report is federally sponsored and free.

2. Check your property title regularly.

Property records are often available online, making it easy to verify ownership status.

3. Pay attention to your bills.

Changes in utility bills, mortgage statements or tax notices can signal a problem. Sometimes a bill “disappears” because scammers have changed the mailing address. This can especially impact seniors who may not notice small discrepancies.

4. Consider additional protection.

If you purchased your property with the assistance of a mortgage, you more than likely paid for a Lender’s Title insurance policy at closing, which protects the lender only. An owner’s title insurance policy or property monitoring services are relatively low-cost options that provide extra security. They may also shift some of the burden of resolving issues to the provider.

One step further

If you want to make it even harder for criminals to attempt title theft, you may want to consider placing your property in a trust.

This may add another layer of protection because scammers typically target individuals, not entities. Keeping your name off public records is intended to make your property less visible to bad actors.

And that may reduce vulnerability to deed or title fraud schemes.

Protecting your rental property

In addition to title fraud, rental property owners may face other risks. When you open your home to guests, not everyone will have good intentions. Consider these precautions:

1. Use strong rental agreements.

A well-written legal contract should outline terms, including cancellation policies, liability, and damage expectations. It sets clear expectations for guests.

2. Screen your guests.

Request identification and review their history, including online reviews. Repeated complaints or reports of property damage have proven to be red flags. When in doubt, don’t proceed with the booking.

3. Be wary of scams.

Common fraud schemes include fake bookings, phishing attempts, identity theft, and offers to pay in cash outside a platform. Using a single platform for bookings and communication helps maintain records and consistency.

4. Consider vacation rental insurance.

While keeping costs low is important, insurance could be a smart investment. Consider a comprehensive policy that protects against property damage, liability, and/or theft.

5. Use smart security features.

Smart locks may be used to allow you to control access remotely and update codes frequently, reducing the risk of unauthorized copies of standard keys. Security cameras can deter bad behavior and document incidents. Use them only in common areas (entrances, backyards, pools) and always disclose their presence to renters.

Finally, consider an alert

Some local government offices and online services offer property fraud alert systems that monitor activity related to your property for little or no cost. In many cases — such as services like propertyfraudalert.com. This monitoring website is not available everywhere, but it is free.

The goal is to detect and stop fraud before it happens.