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by Jordan Pandy and Katie Balevic
AI tools make it easier to fake deeds, enabling scammers to transfer ownership of homes to themselves or others.
Some real-estate scammers operate by transferring a home’s deed away from its rightful owners. The owner of a $137.5 million LA mansion claims to be a victim of deed fraud, preventing the sale of the property. The increasing prevalence of AI makes it easier to forge deeds and manipulate ownership records.
Spelling Manor — a 120-room mansion in Los Angeles, built by TV producer Aaron Spelling — is one of the largest properties on the market, listed at $137.5 million. When Eric Schmidt, former Google CEO, showed interest in purchasing it, the owner, operating through a limited liability company (LLC) called 594 Mapleton, found they couldn’t sell it. According to The Wall Street Journal, local agents speculate the owner is a Saudi billionaire.
The owner claims through legal representation that scammers filed a fraudulent deed with Los Angeles County earlier this year. Meanwhile, two individuals involved in a lawsuit assert that they are the rightful owners. The ongoing legal battle over ownership has stalled the sale.
Similar cases are emerging across the U.S. Fueled by AI and large pools of public data, scammers are growing bolder in their efforts to steal property, targeting everything from luxury mansions to modest homes. A May 2024 study by the American Land Title Association found that 28% of title insurance companies reported at least one case of seller impersonation fraud in 2023. In April 2024 alone, 19% of these companies experienced similar fraud attempts.
While the FBI’s Internet Crime Complaint Center does not specifically track deed fraud, it reported 9,521 real-estate-related complaints in 2023, amounting to more than $145 million in losses.
“Maybe this brings awareness, and people start to realize that if it can happen to them, it can happen to anybody,” said Tyler Adams, CEO of the wire-fraud protection company CertifID. “But I hope people don’t think, ‘They’ll only go after mansions and not my $200,000 home.’ The bigger issue is that smaller properties are easier targets.”
Victor Petrescu, an attorney at the Miami law firm LKLSG, said he handles two or three cases of title fraud annually. In one case, a scammer forged a homeowner’s identity to transfer sales proceeds to their own bank account.
Petrescu explained that in high-profile cases like Spelling Manor, the scam might not aim for the full sales price but to extort the owner for a smaller amount to restore the rightful ownership. Scammers might say, “If we disrupt the deed to the point the owner can’t sell, maybe they’ll send us crypto to undo it.”
Adams stressed the need for stronger identity verification during property transactions to prevent such fraud. “The root of these scams is an identity problem,” he said, adding that improving verification at county offices is essential.
Deed fraud also affects everyday property owners. In 2023, William Gordon’s vacant land in Arizona was sold without his knowledge. The title company alerted Gordon to the transfer when they sent a letter congratulating him on the sale. Scammers had filed a deed under Gordon’s name but listed his residence in Texas instead of Arizona. Legal efforts cost him $9,000 before he recovered the property through a quitclaim deed.
Gabriella Cázares-Kelly, the Pima County recorder, emphasized that her office only records documents, leaving verification to title companies and notaries. This lack of oversight can allow fraudulent transactions to slip through.
“With smaller transactions, closing agents often operate at high volumes,” Petrescu noted. “It’s easier for fraud to occur when agents are juggling multiple files and not being thorough.”
In 2022, a lot in Fairfield, Connecticut, was sold fraudulently by a scammer posing as the owner, Dr. Daniel Kenigsberg. He discovered the fraud when a friend noticed new construction on his land. Court documents revealed that the scammer, posing as “Daniel Kenigsberg” from Johannesburg, had signed the necessary documents to steal the property.
According to Adams, fraudsters frequently target average homeowners because they are less prepared to handle such scams. “The sad part is that these people are more vulnerable, having worked hard to save up for a home only to get scammed,” he said.
AI is increasingly used to carry out property scams, whether through phishing emails, fraudulent phone calls, or forged documents. Marty Kiar, a property appraiser in Broward County, Florida, said that his office has already encountered cases involving AI-generated scams.
One title company in Hallandale Beach uncovered a scam where the purported seller used a deepfake video to confirm their identity. The video turned out to be a loop of footage featuring a missing woman from another state.
“If they hadn’t insisted on a video call, the scammers could have easily succeeded,” Kiar said.
AI makes it easier to forge documents by analyzing vast amounts of public data, including transaction records and deed images. Fraudsters can also target vacant properties and homes without mortgages, which are more vulnerable to refinancing schemes.
“They’re using AI to sift through public records and manipulate data,” Adams explained. “This automation allows them to impersonate property owners more convincingly.”
Although AI-generated scams are still relatively new, Kiar fears they will become more common. “The criminals are smart and will always use the latest technology to scam people,” he warned.
Original article: https://www.businessinsider.com/scammers-use-ai-deed-fraud-title-theft-to-steal-homes-2024-10
