The real estate sector is full of opportunities, but like every other industry, it's not immune to fraudulent activities.
A recent case from Fairfield, Connecticut demonstrates just how elaborate and damaging these schemes can be.
The Case of 51 Sky Top Terrace
At 51 Sky Top Terrace in Fairfield, a half-constructed house stands as a testament to a devastating real estate scam. Gina Leto and Greg Bugaj, the developers and partners of a real estate venture, found themselves embroiled in a fraud case when it emerged that they had purchased the lot from a fake seller.
Daniel Kenigsberg, the legitimate owner of the land, had no knowledge of the sale. His family had owned the property for seven decades, and to his surprise, upon returning to the place of his childhood, he discovered a $1.5 million house being built on his land.
Leto and Bugaj, who had no direct contact with the impersonator, were blindsided. They had paid $350,000 for the lot, trusting the real estate professionals involved in the transaction, who had also been duped. As the realization set in, they were confronted with potential losses of hundreds of thousands of dollars and possible damage to their reputations.
How to Avoid Falling Prey to Such Frauds:
The Connecticut scam serves as a wake-up call for real estate professionals everywhere. To shield oneself from such scams, understanding the S.I.M.P.L.E. framework that was formulated by Investor's Title is paramount. It stands for "Seller Identity Must Precede Literally Everything." This tenet emphasizes the importance of verifying the seller's identity as the foremost step in any real estate transaction. Here are steps, based on guidelines provided by Investor's Title, to prevent such frauds:
1. Verify Seller Identity:
Direct Contact: Always contact the seller directly using an independently verified phone number.
Documentation: Request government-issued identification and scrutinize it for signs of tampering.
Validation: Use identity verification platforms like CertifID.
Physical Mail: Mail the owner at the property address and see if they respond.
Engage Neighbors: They can often provide insights into the property owner's identity.
Signature Verification: Compare the seller's signature on various documents.
Virtual Meetings: Use platforms like Zoom to visually confirm the seller's identity.
Broker Verification: If a real estate broker is involved, ascertain their relationship with the seller.
2. Verify or Select Notary:
Credentials: Always verify the notary's credentials.
Direct Contact: Establish direct contact with the notary using verified contact details.
Use Known Notaries: Opt for notaries known to your organization or those vetted and approved by authorities.
Physical Verification: Encourage sellers to execute deeds at known places like an attorney's office or bank.
3. Investigate Property:
Online Research: Search the property online to see if it's listed for sale elsewhere.
Physical Inspection: Visit the property, talk to neighbors or tenants. This provides firsthand insights.
Property-Related Questions: Pose detailed questions to the seller that only the real owner would know.
Additional Tips Based on the S.I.M.P.L.E. Framework:
Watch out for:
REMOTE SELLER: Be wary if the seller is always unavailable for physical meetings.
EXTERNAL EXECUTION: If property transactions are being executed externally or abroad, exercise caution.
UNKNOWN NOTARY: Always verify the notary’s legitimacy.
VACANT LAND OR NON-OWNER-OCCUPIED PROPERTY: These can be prime targets for fraud.
The Sky Top Terrace scam is a potent reminder of the importance of due diligence in real estate. Leto and Bugaj's unfortunate experience underscores the need to approach transactions with vigilance. While technology and globalization have made real estate transactions faster and more convenient, they've also opened the door to sophisticated fraud. Adopting a S.I.M.P.L.E. approach to transactions, emphasizing verification, and being continually vigilant can help professionals safeguard their clients and their own reputations.
Has a fraudulent seller ever attempted to work with you? Share your experience in the comments below or with a colleague in an upcoming CE Class!
Haar, Dan. (2023, August 2). Connecticut developers of $1.5M house on contested Fairfield lot say they’re victims of scam. CT Insider.
Investor's Title. (2023, April). S.I.M.P.L.E.: Know Your Client & Know the Signs. Investor's Title Brochures.