Picture this–you’ve just bought a piece of land for your next commercial project. All your papers are in order and construction is underway. Suddenly, someone shows up claiming they’re the actual owners of the land and they even have the documents to prove it!
You then spend time, money, and effort digging into this, only to find out that you’ve fallen victim to commercial real estate fraud. The land was fraudulently sold by an imposter.
Why Is Arizona’s Vacant Land Fraud On the Rise?
You don’t have to imagine it. Real estate agents have reported that vacant land fraud is on the rise, even in areas like Arizona.
Why?
There are two key reasons:
1 – Arizona’s CRE sector is booming and the future looks bright with multiple projects on the horizon.
2 – At the same time, Arizona has large stretches of vacant land making it ripe for land sale scams.
With years of experience in Arizona’s commercial real estate, Arizona Escrow & Financial is committed to educating investors on land sale scams like vacant land fraud—helping you better protect yourself.
What is Vacant Land Fraud?
Vacant land fraud is a type of real estate scam where scammers pose as legitimate property owners of vacant lots of land and sell it to unsuspecting buyers. These criminals forge ownership documents, create fake IDs, and use shady sales tactics to trap their victims.
Since vacant land often lacks activity, structures, or regular oversight, it becomes an easy target for scammers.
While vacant land fraud may seem like its own scheme, it’s actually a form of title fraud. Title fraud is a broader crime where scammers use seller impersonation to steal or sell properties they don’t own. It can involve both developed and undeveloped properties
How Commercial Real Estate Fraud Works
Finding the Land
Scammers scour online listings, property databases, and tax records for vacant plots with no recent activity. Some drive around or use satellite images to find neglected lots. Rural areas are especially vulnerable due to sparse populations, and absentee owners are prime targets since they struggle to monitor their land.
At the Land Title Association of Arizona (LTAA) conference, Annette Anderson, President of Arizona Escrow & Financial, highlighted a growing concern.
Scammers are increasingly targeting vacant land owned by seniors, especially in areas like Arizona, where many properties are owned outright with no outstanding debt. With no activity or oversight, these plots become prime targets for fraud.
Forging Ownership Documents
Seller impersonation is a critical step in vacant land scams. Once they’ve zeroed in on a target property, it’s time for scammers to create fake documents.
As Joe Cardosi, a special agent in the FBI Newark field office, points out, “It boils down to property owner impersonation.”
This includes altering or forging deeds to transfer ownership to themselves or some fake persona. Fraudsters also create fake identification documents like passports with their photos but the real property owners’ names.
Using Deceptive Sales Techniques
To avoid scrutiny, fraudsters use multiple tactics, including:
- Using less regulated platforms and off-market deals.
- Insist on remote closings and make excuses to avoid calls or video chats, making it difficult to verify their identity.
- Employ fake or complicit notaries and agents to create a false sense of legitimacy.
How to Spot the Red Flags of Vacant Land Fraud
Did you know that in the early 1900s, a con man sold the Brooklyn Bridge dozens of times to gullible buyers? It seems ridiculous in hindsight, but it proves how easy it is to fall for a commercial real estate fraud. So, how do you sniff out a potential real estate scam when dealing with a seller? We’ve rounded up a few red flags that’ll help you spot trouble before it strikes!
Suspiciously Low Prices
If a seller promises a good deal and is willing to sell the land at below-market value, you need to proceed with caution. Scammers will lower prices to lure in more victims and to speed up the sale. As always, if something is too good to be true, it probably is.
Avoiding In-Person Meetings
FBI special agent Joe Sullivan notes, “They want to do everything online.”
If a seller is always pushing back against meeting in person or appearing on video, something could be suspicious about them. They may say that they’re out of town and provide an emotional story as to why they were called away.
You have to be able to verify the owner’s identity before moving ahead with the transaction.
As Annette points out, “If you’re taking listings over the internet and never meet your seller in person or have a Zoom call with them, that’s a problem.”
Pushy Sellers
If the seller is trying to get you to close the deal quickly and rush into decisions, you need to be wary. By pushing buyers to make hasty decisions, scammers are hoping that you’ll overlook anomalies.
Here’s a tip: A genuine seller would give you the time you need to conduct due diligence.
Owner Without Representation
In commercial real estate transactions, sellers usually hire an agent to handle the process for them. If you’re unable to figure out why a seller hasn’t appointed a representative, you should be ready to conduct independent verifications.
Here’s a tip: a great way to verify ownership is by sending a notice to the address listed on the tax record and not the lot itself. If the real owner hasn’t initiated the sale, they will be incited to raise the alarm when they get the notice.
Beware of Avoidance of Escrow Services
Legitimate commercial real estate sellers and buyers would want to use escrow services to streamline the entire transaction, add an extra layer of verification, and involve a neutral third party.
If a seller is unusually resistant to using escrow services or insists on handling everything independently, it could be a major red flag.
These are just a few of the red flags to watch for. Spotting one or more of these warning signs doesn’t guarantee the seller is a scammer, but it should prompt you to be more careful.
How to Protect Yourself from Land Sale Scams
When it comes to protecting yourself from land sale scams, knowledge is your best defense. With years of experience handling commercial real estate transactions, we offer the unique perspective of escrow service providers to help you protect yourself from vacant land scams.
Set Up Title Alerts
Solution: Sign up for title alerts with your county recorder’s office as soon as you purchase the land. You’ll get alerted as soon as any document, related to your property, is recorded with the county.
Maricopa County in Arizona started offering free title alert services in 2023. You need to check with your county if they offer title alert services.
Put a Deed of Trust on the Property
Placing a deed of trust on your property creates a public record with the county, making it harder for scammers to sell or transfer it.
Solution: While it’s common for homes with mortgages, vacant landowners should also add a deed of trust to make the property less attractive to fraudsters.
Conduct Rigorous Identity Verification
As a buyer, your priority should be verifying the seller’s identity. To do this, you need to use reputable title companies and real estate attorneys.
Solution: Hire professionals who have the tools to confirm ownership records, verify IDs, helping you avoid fraudulent land sale scams.
Insist on Your Own Notary
Scammers often push to use their own notary because they may have bribed or manipulated them into authenticating false documents.
Solution: To protect yourself, hire a trusted, independent notary as this makes the signing process more secure and properly verified, reducing the risk of fraudulent transactions.
Meet the Seller or Their Representative
Solution: If possible, meet the seller or their authorized agent in person. Scammers often avoid face-to-face interactions, so this step can reveal red flags.
With decades of experience, we’ve put together a fraud prevention guide to help you spot scams. Check it out!
Expert Support for Smooth CRE Transactions
Since 1976, Arizona Escrow & Financial (AEF) has been a trusted partner in commercial real estate transactions, providing expert escrow services that make the process more efficient and less stressful.
Many companies treat escrow as an add-on, but at Arizona Escrow & Financial, it’s the core of what we do.
With unmatched individual attention, we’re here to support you through any commercial real estate transaction. Reach out today to learn how we can support your next deal with trusted escrow services.
Disclaimer: Arizona Escrow & Financial Services makes no express or implied warranty regarding the accuracy, completeness, or reliability of the information provided and assumes no responsibility for errors or omissions. The information presented is for general informational purposes only and should not be considered legal, financial, or professional advice.
Arizona Escrow & Financial Services, the Arizona Escrow logo, and www.arizonaescrow.com are trademarks or registered trademarks of Arizona Escrow & Financial Services and/or its affiliates. Unauthorized use of these trademarks is strictly prohibited.
For more information, please visit www.arizonaescrow.com or contact us directly.
Disclaimer: Arizona Escrow & Financial Services makes no express or implied warranty regarding the accuracy, completeness, or reliability of the information provided and assumes no responsibility for errors or omissions. The information presented is for general informational purposes only and should not be considered legal, financial, or professional advice.
Arizona Escrow & Financial Services, the Arizona Escrow logo, and www.arizonaescrow.com are trademarks or registered trademarks of Arizona Escrow & Financial Services and/or its affiliates. Unauthorized use of these trademarks is strictly prohibited.
For more information, please visit www.arizonaescrow.com or contact us directly.