In 2019, Eric Serrano filed a warranty deed with the Tarrant County clerk’s office for a home on Haynes Avenue in Fort Worth. The deed allowed Serrano to sell the property and affirmed that he was the rightful owner.
In reality, though, he had no rights of ownership for the property. He was committing property fraud – attempting to steal the property and falsify his ownership. Nonetheless, after the fraudulent deed was filed with the clerk, Serrano was technically the new owner of a property he never paid for or lived in.
He attempted to file for a title on the property with Sendera Title in Fort Worth, where Blanca Kelly is a branch manager and escrow officer.
“Everybody loses something at the end of the day… except for the person who commits the fraud,” Kelly said.
Three to five cases of attempted property fraud come across Kelly’s desk every month. But most schemes operate under the radar of title companies, through cash transactions to unsuspecting buyers. One of the places officials can catch these fraudsters is when they file the fraudulent documents in the first place — at the county clerk’s office.
To track and identify such fraud, the Texas Legislature delivered county clerks a new tool that might seem obvious: Now, clerks can collect the IDs of people filing documents to identify who might be repeatedly filing fraudulent documents. Gov. Abbott signed the bill into law Tuesday.
Previously, the law simply didn’t allow the clerk to ask for a photo ID. Those in the clerk’s office speculate the legal loophole occurred because, when the law was written decades ago, asking for identification in any scenario wasn’t common.
“We are making a difference because a lot of your taxpayers and our citizens are being taken advantage of — and we just want it to stop,” County Clerk Mary Lousie Nicholson told the Tarrant commissioners’ court during a recent presentation.
“So now, we take your ID, and, if we see a pattern, then hopefully we’re going to prosecute and get that out of our county.”
Serrano, the Fort Worth resident who is now 22, was eventually arrested and sentenced to 30 months in prison.
Meanwhile, the Haynes Avenue house sits vacant. A neighbor, Jesus Cruz, has lived next to the house for two years. The house is owned by a real estate company that, he said, never answers his calls.
“I’ve had to kick homeless people out all the time,” Cruz said.
How property fraud is carried out has changed over time. When she first took office, Nicholson said, it took the form of squatters who would move into a vacant property. They used the rule of adverse possession, which has legitimate roots in Texas law to settle land disputes, but was distorted by squatters.
“Squatters attempted to lay illegitimate claim to property twisting its purpose to their own misdeeds,” Nicholson said in a statement.
Former District Attorney Joe Shannon criminally prosecuted some of these adverse possession cases. To bolster the DA’s effort, State Sen. Jane Nelson, R-Flower Mound, attempted to pass a bill allowing prosecutors to seek burglary charges in fraudulent adverse possession cases. The bill failed.
Now, in 2021 fake warranty deeds are in fashion with fraudsters. The deeds are being used to “claim another person’s property without their knowledge or consent,” according to Nicholson.
Farah has been working with deed fraud cases for 10 years on the civil side. Often, criminals will find an abandoned property, file a fraudulent deed for the property and then transfer that deed to two or three other names — who may or may not be real people. From there, the fraudster tries to sell the property for cash — often to immigrant populations who aren’t as familiar with the homebuying process.
“It is very costly to get these things resolved, and potentially if the property is not very valuable or if the folks don’t have the money, it makes it really hard to go after,” Farah said.
Nationally, the FBI reported that victims of real estate and rental fraud lost over $213 million in 2020. That was slightly less than the losses in 2019, which saw over $221 million in losses. But both were starkly higher compared to 2018 when losses totaled $149 million.
The number of victims of real estate fraud increased by about 2,000 in 2020 compared with 2019. Farah said technology has made fraud easier for criminals. Dann Barbakoff is general counsel for ET Investments, the parent company for title companies around the Metroplex.
“The vast amount of money they still get is crazy… and often it’s not from the title company, it’s from buyers and sellers,” Barbakoff said. “The computer schemes have been very successful.”
How to protect yourself from fraud:
There are two ways you can be hurt as a result of property fraud: as a buyer and as an owner.
As a buyer, experts urge you to always get title insurance. That way, if there is a property ownership dispute, the title company will be responsible for the cost. If possible, always use a real estate professional and never purchase a house because you can close the deal quickly.
If sellers want to use their own notary, or a deal seems too good to be true, Kelly said, that could be a red flag. Also, if there is pressure to close the deal with cash, that could mean there is fraud involved.
As an owner, if you have a property you’re not actively living in or a property that is complicated — with multiple heirs or lots of back taxes — you could be at risk of having your property stolen.
You can sign up for Property Fraud Alerts through the county government. This service will let you know if a property is filed in your name or on your property in Tarrant County.
“This notification is often the first step in which legitimate property owners become aware of potential fraud involving their property,” Nicholson said.
If you receive a notification from that service, the county urges you to reach out to the Tarrant County White Collar Crimes division.
If you wait too long to file suit against someone trying to steal your property, the statute of limitations could run out, Farah said. In three to four years, you could lose the rights to your property, so early detection is important.
There are two types of legal recourse once you’ve been defrauded: criminal and civil. The criminal side could result in jail time or a fine for the fraudster, but won’t get you your property back. Instead, once a fraudulent document is filed, you have to sue to get a court order, which you would then file with the county clerk to get your property back.
Before this legislative session, only counties with a population greater than 3.3 million could require a photo ID when a person files a property document. That meant only Harris County, the state’s most populous county, could require photo identification.
The Tarrant County clerk worked with other clerks around the state and State Sen. Kelly Hancock, R-North Richland Hills, and Rep. Craig Goldman, R-Fort Worth, to pass a bill extending that law to all the counties.
The new law allows all county clerk offices in Texas to request a photo ID of a person filing a property record.
The measure will reduce fraud on two fronts, by obligating filers to make sure their information is accurate and creating a record to track one person filing multiple fraudulent documents, Farah said.
“So I personally like it,” he said.
Since 2016, Harris County has been able to ask for the ID of people filing property documents with the clerk.
In Harris County, they haven’t conducted a study that indicates whether scanning IDs has or hasn’t deterred property fraud, according to Harris County Clerk Teneshia Hudspeth.
“However, by implementing this policy with the parties who submit documents in person, we are documenting a resource that can aid the district attorney’s office in the prosecution of land thefts,” she said in a statement.
Still, fraud comes at the real estate industry in many forms, and Barbakoff, the ET Investments attorney, said it continues to be an uphill battle.
“I applaud anything we do to make this better,” he said, “but the reality is we will always be behind.”
Branch Manager Kelly said she needs help from the county to combat the fraud she sees coming through her office.
“I’m disappointed in the fact that anyone can go to the county and file any document whether it’s correct or not,” she said
She cited a particular scheme where fraudsters pay someone experiencing homelessness to go into the county clerk’s office and file a deed on their behalf. After they file their deed, they deliver paperwork to the person actually committing the fraud, who is waiting on the courthouse steps.
“Title companies are aware,” Kelly said. “County staff should be aware, too,”
Rachel Behrndt is a reporting fellow for the Fort Worth Report. Contact her at firstname.lastname@example.org or via Twitter.