thePrivateMarket.com

My Interview with a Special Investigator

I was having a pretty normal day at the office, comping properties, checking on email etc.  Until a pleasant looking woman arrived unannounced just after lunch and handed me her card:  Special Investigator for the Denver District Attorney. Ouch.  She asked me if I had a few minutes?  What else could I say, but “c’mon in…”

I asked what it was about, and learned that a certain property that we purchased and then resold last year was under a fraud investigation.  A fraud, apparently, that is becoming more and more prevalent in today’s real estate market and investors need to be aware:  people selling property that does not belong to them.   She asked me to pull the file for the property and then asked for copies of several of the documents.   Lots of weird questions ensued:  Please describe the seller’s, height, weight, distinguishing features?  She then showed me some pictures.  What do you remember about the ex-wife?  Excuse me?  What ex-wife?  I remember the son and the mom from closing, that’s it.  And they did not look anything like the people in the pictures!

Interesting thing was that we DID receive a call to the office earlier in the year from a person who complained that someone had sold her house without her permission.  But she sounded kind of crazy and we get calls from weirdos a lot in this business, so none of us really thought much about it.  But remembering that call, all of a sudden I felt like I was starring on the TV show Law and Order, so I had to ask:  “Should I be calling my attorney?” She sweetly replied that is was not necessary at this point (right), and informed me she is “a cop, not an attorney.”  (whew?)

So the story goes, apparently the “seller’s” of this particular house may not have had the right to sell the property.  This was a mild case compared to the blatant fraud that is happening with other deals, according to the investigator.  In this instance the husband “allegedly” removed the ex-wife from the deed with a Quit Claim deed without her permission and then sold the property and kept all the proceeds.  In my head the question kept coming up:  Am I in any way responsible for this?

After a pretty long cop-like conversation, I’m pretty sure I convinced her that our office and business had nothing to do with the Quit Claim deed and alleged fraud.  Although she admitted there were some red flags.  The organized groups that commit this type of fraud use a team of investors and agents, have in-house notary and use small private title companies to close the transactions.  We have that in common with the criminals.  Thankfully, we do keep impeccable records of our transactions and we were able to provide all documents she requested.  And the dates confirmed that our affiliated people or companies were not involved with the forged signature on the deed.  She also made phone calls to the title company and all the employees who were involved in the transaction and all our “stories matched.”

The investigator suggested that we make some procedural changes to our buying system which I would like to pass them along to other investors:  Ask for and get a copy of the driver’s license of the person who is signing the purchase contract at the time of signing. Make sure the driver’s license matches the title work, and be watchful of strange title occurances (like Quit Claim deed, power of attorney, etc).  We have previously left this type of identity checking to the title closer and never paid much attention during escrow if the title work came back clean.  In all my years of investing, this has never happened to me before, and hopefull will never happen again based on the new procedure.  Investors, keep a sharp eye out for this type of fraud!