Real Estate Fraud: Are Notaries the Cause of the Problem?

Despite advancements in technology, property fraud is a growing concern in the United States, affecting homeowners, real estate professionals, notaries, and financial institutions. This type of fraud occurs when criminals manipulate property records, forge documents, or illegally transfer ownership of real estate without the owner's knowledge. Scammers often target vacant homes or elderly property owners by forging deeds, using fraudulent notary seals, and falsifying signatures to claim ownership of properties. The consequences can be devastating: legal battles, financial losses, and even the unlawful sale of homes.

Due to this growing concern, states across the U.S. are taking steps to combat the problem, including imposing increased penalties for offenders, launching public awareness campaigns, and implementing electronic document recording systems to enhance security in real estate transactions.

A few months ago, there was an illegal attempt to transfer Graceland, a property once owned by Elvis Presley. The scammer notarized the document using a notary stamp with a Florida notary's information and nearly succeeded in transferring the property. The notary, whose signature and seal were forged, became a victim and was forced to defend herself while dealing with the legal complications caused by the fraud.

Some suggest solving the problem of real estate fraud by requiring notaries to take additional training or imposing stricter penalties on them for failing to verify a signer’s identity. However, these measures won't solve the core issue. Education is important, but it will not deter fraudsters intent on committing crimes.

Notaries are not the root cause of real estate fraud. In fact, notary public commissioning authorities receive fewer complaints about notaries than other professionals. For example, over the last ten years, the average number of complaints received by the Texas Secretary of State against the 450,000 Texas notaries is fewer than 750 per year.

To reduce real estate fraud, propose to your state representatives implementing the recommendations listed below:

1- Create a Property Notification Service

Some counties in Pennsylvania and Texas have implemented services to keep property owners informed of changes to their property records. Homeowners can sign up with their email and tax ID number to receive alerts when any activity is registered on their account. While this measure may not prevent a fraudulent transfer, it can give the homeowner time to respond quickly. However, homeowners may still need to pursue legal channels to regain their property, which can be time-consuming and costly.

2- Allow Homeowners to Freeze Property Transfers

Just as individuals can freeze their credit files with major credit bureaus, homeowners should have the ability to freeze the transfer of their property. This measure could significantly reduce the risk of fraudulent property transfers.

3- Require County Clerk’s Offices to Conduct More Thorough Vetting

Reducing property fraud depends largely on county clerk recording offices, where a lack of resources often prevents thorough verification of property transfers and adequate vetting of the individuals involved. An extra level of scrutiny by county clerks would deter scammers from attempting fraudulent transfers, as the increased risk of getting caught and prosecuted would make such crimes less appealing.

4- Penalize Notary Stamp Vendors for Lax Verification

The ease of obtaining notary stamps online without proper verification is a major concern. Some vendors do not confirm whether the buyer is a legitimate notary, allowing scammers to fraudulently acquire notary seals under someone else’s name. States should enact laws and regulations requiring notary stamp vendors to obtain proof of a notary commission certificate before shipping a notary stamp and impose strict penalties on those vendors who do not comply. 

How Can Notaries Help Deter Real Estate Fraud?

1- Require the Physical Presence of Signers

Notaries must avoid doing favors for employers, friends, or relatives by notarizing documents when the signer is not physically present. Such actions violate notarial laws and open the door to potential fraud. Signers must always appear before the notary so that their identities and willingness to sign can be properly verified.

2- Verify the Identity of Each Signer

By confirming the identity of each signer using a valid government-issued identification, notaries help prevent impostors from fraudulently transferring property or signing documents under false pretenses. This identity verification serves as a crucial safeguard against common real estate fraud schemes, such as forged deeds and unauthorized transfers. When notarizing documents pertaining to real property, never depend on a spouse to identify the other spouse.

3- Buy Notary Stamps from Vendors Who Vet Notaries

Notaries should avoid purchasing stamps from vendors who fail to vet notaries properly. By sanctioning these vendors, notaries can help spread awareness and discourage such practices.

4- Maintain Accurate and Detailed Records

Moreover, notaries should maintain detailed records of each act performed, creating an audit trail for real estate transactions. These records can be instrumental in legal proceedings if fraud is suspected. They can provide clear evidence of who signed the documents, when, and under what circumstances.

5- Maintain Exclusive Control of your Notary Stamp

The notary stamp is your exclusive property, and you should not surrender it to your employer upon termination of employment, regardless of whether the employer paid for the notary stamp or the notary application/filing fee. Do not permit anyone else to use your notary stamp. Store your physical notary stamp in a secure place where no one else can access it. A locked drawer or safe are good options. Leaving your stamp on top of your desk increases the risk of misuse and fraud.

6- Refuse to Notarize Fraudulent Transactions

Notaries have a duty to safeguard the public from fraudulent transactions. Notaries should refuse to notarize any document if signs of fraud, coercion, or falsified information are detected. By fulfilling this responsibility, notaries maintain a trustworthy and valid notarial process and protect themselves from potential legal risks.  

Through these diligent practices, notaries help protect the integrity of real estate transactions, ensuring transparency and deterring fraudulent activities that compromise property ownership.

Conclusion

The current system is flawed, allowing real estate fraud to persist. Effective solutions include strengthening filing processes, implementing stronger ID verification protocols at the county recorder offices, and applying the additional recommendations outlined in this article.