For many years flipping real estate was deemed a negative term. Many thought flipping properties was illegal. The negative reputation was well earned, since most mortgage fraud cases involved someone who flipped real estate to a straw buyer who would obtain a new loan to purchase the property. The straw buyer would never make a payment leaving the lender the last one standing with an unpaid loan, which was never worth the loan amount. Clearly, that kind of flipping is illegal.

In recent years, television networks have helped highlight positive investors flipping real estate through television shows featuring real estate investors who find homes in need of rehabilitation. These investors fix the properties up and then sell or flip them to legitimate, qualified homebuyers. This all happens in a few months or less – hopefully for a profit.

Unfortunately, some people want to be real estate investors, but do not want to put in the real work. They look for short cuts and have less than honest intentions. Continue on to the next part of this article “FLIP or fraud?” for details about how one man attempted to build his investment portfolio by flipping real estate.

A real estate investor entered into several purchase agreements to purchase different properties from a limited liability company in which Mr. A was the sole member. The Escrow Officer (EO) began examining title for the first property and noticed an uninsured quit claim deed in the chain of title. Upon closer review, she realized there were two recent quit claim deeds recorded in the chain of title, both notarized by the same person.

The first one was prepared and notarized by Mrs. T in December 2018. Then in January 2019, Mrs. T notarized another quit claim deed transferring title to the LLC in which Mr. A was the only member. She pulled a copy of the deeds and reviewed them carefully against the chain of title.

Back in 1997, Mr. and Mrs. S held title as co–trustees of their family trust. Their attorney prepared and notarized a deed transferring title from their trust to them individually. There was no other activity found in the chain of title until 2018, when Mrs. S, a widow, granted the property to a brother and sister who shared her last name.

The brother and sister granted the property to Mr. A’s LLC in January of 2019. Mrs. T notarized both deeds but only prepared the first one. The second deed was prepared by someone the EO could not find nor identify as a notary licensee in her state.

Then EO noticed the widow, Mrs. S, did not sign her name properly on the deed she signed in 2018. The EO did not like any of this. She turned to the internet and searched for more information about Mrs. S.

She discovered that Mrs. S died in 2001, which meant she could not possibly have signed the 2018 deed. In addition, her obituary stated she predeceased her husband. She was not a widow at all. Last, there was no mention of a brother or a sister in her obituary.

The county property appraiser also showed a tax lien for homestead recorded against the property reflecting the ownership as the estate of Mr. S who had since passed away.

The EO called Mr. A to investigate further. He explained he owned 19 properties and gave her the addresses for seven more properties for which he would require title reports. He said, “Don’t worry, no one can make a claim to them,” and indicated if they did, he would just pay them off.

He justified his actions by explaining these properties were nothing but problems for the county; he was doing them a favor by taking them over and he stated there was no one who can contest the transfers.

Mr. A explained he has an eRecording account so he can record his own
documents. He said he could bring her a lot of business if she would just do what he said and handle the closings.

Mr. A also stated he does his research and knows there are no death certificates filed for Mr. or Mrs. S. The EO was shocked. She asked him what he was referring to and he quickly hung up.

The EO decided to check to see if the notary, Mrs. T, was a real commissioned notary and discovered someone with her name is commissioned. After digging further, she noted it appeared the signatures of the notary on the notarial certificates were eSigned — but not eNotarized. It is possible the notary was not involved at all and Mr. A forged her name and affixed her notary seal to the forged deeds and then eRecorded them.

The EO notified the underwriting department of all of her findings. She also reached out to the Federal Bureau of Investigation (FBI) and county Sherriff’s Department. Her company resigned from all 19 transactions since it appeared Mr. A’s LLC was in title because he fraudulently deeded all the properties into his name.

All the lots were vacant and scheduled to close within 10 days of acceptance. Every chain of title revealed forged documents, including the satisfactions of mortgage.

The EO and her management were so relieved she took the time to investigate the red flags that appeared in the chain of title. The underwriters were thrilled too since these could have all resulted in claims. It is experienced and cautious title examiners who help to protect the integrity of the public records system.

As the largest title company in the nation and a Fortune 500 company, Chicago Title is committed to protecting you and providing resources to do just that!

Happy Investing!

Guest Author: Diana Hoffman/FNTG Corporate Escrow Administrator