It’s Your House and You Own It…right?.......MAYBE NOT !

Written by Nigel G. Worrall

Did you know it was possible for someone to steal your house? Did you know that not having a mortgage on your property makes you a target?

Well, that’s the case for some concerned homeowners right now. Expected property tax bills never arrived and when the owners contacted Osceola County , they found out that they weren’t the legal owner on public record.

Upon investigation, it would appear that some unscrupulous people are using “Quit Claim” deeds to fraudulently deed property from one person to another in an attempt to then secure a mortgage on the property and make off with the proceeds. This then encumbers the property with a mortgage and the rightful owners with a mess that will take time and money to overcome.

So let’s begin by looking at what you can do to protect yourself and the steps you can take to help keep your property in your name. In order to do this, we need to get inside the head of the perpetrator….. the thief.

What is the thief looking for?

Well, essentially the thief is looking to make easy money and is targeting what they perceive as an easy market.

How are they doing this?

Currently they are targeting communities where there are large numbers of vacation or second homes. These homes are generally owned by more affluent people than the normal residential market and the chances of find homes “free and clear” (without a mortgage) is higher. They then search the public records looking for properties with no mortgage and then they go to work.

How do they change the ownership from one party to another?

Simple really, they use what is known as a “Quit Claim” deed. Effectively they fill in the document and forge the signatures of the original owners. A “Quit Claim” deed is then filed in public records for a nominal sum, it can be $10 plus filing fees making a total of $30 and the ownership of the property changes to the new owner.

What do they do next?

Usually they apply for a mortgage in the hope of securing large funds on the property but if they are unsuccessful they might apply for a home equity loan.

What should the mortgage company do?

Well, good question, but each mortgage company has their own procedures and some of them are less strict than others. They are in the business of loaning money and if they see a relatively straight forward deal they will do it. If, for example, someone asks for a loan of $150,000 on a $300,000 they will probably be less exhaustive in asking for information as their loan to value ratio is low.

Usually a mortgage company will use a title company to research the title to the property and if the property doesn’t throw up any red flags then the loan will proceed.

But surely a recent transaction on a “quit claim’ deed is a red flag?

I’d tend to agree but unfortunately we are dealing with underwriters at mortgage companies and they are under pressure to loan money. This means that if a title company gives a clear title then the underwriter will most likely approve the loan.

So, what about the title company?

Well, again you have to understand that they only investigate the title of a property. They will certainly uncover that a “quit claim” has been recorded and they will tell the underwriter but if no-one thinks there is anything suspicious then the loan will proceed.

Isn’t a Quit Claim suspicious?

Yes and No. Personally, I’d be suspicious of anyone applying for a loan very shortly after gaining title to a property by this method but this is an age old method of conveying property in Florida and not all underwriters are worried about the possibilities of fraud. They are more interested in getting as many loans approved as their target allows.

So what can I do to make sure my property stays mine?

Well, firstly if you have been a victim to this fraud, I want to reassure you that you are still the legal owner of the home. Unfortunately, you need to hire an attorney and contact the Police in order to start the process of recovering your property. Make sure you document everything and then let your attorney present your case to the Court. Providing there is clear evidence of fraud then you won’t have a problem.

If you are worried that this could happen to you then there are different thought processes that will help you make a decision. First of all, you have to accept that this can and might happen to you.

One thought process is to take out a small mortgage on your property. This will then encumber the property and will probably make the thief look for easier targets rather than mess with your property. This mortgage will be in first position and will be seen on public record. The would be thief would probably give up at that stage.

However, there are disadvantages in this approach but the main one is that a determined thief could still encumber your home with a second larger mortgage. Additionally, if you don’t have a use for the money raised from a small mortgage then why do it?

My own favoured approach to protect your property is through the use of a Land Trust.

Land Trust….the advantages

Well, before we get into that let me tell you a little about them and their use. The Land Trust, also commonly known as the Illinois or Illinois type Land Trust, is a type of Living Trust with one major distinction. It converts an interest in real property into a personal property interest. The Land Trust only has real estate as its only asset. It has a Trustee(s), Beneficiary(ies) and can have a third party Director if you choose. You can have anyone you choose act in these roles.

In today’s litigious society, financial privacy must be a primary goal for anyone who owns or invests in real estate. The first step to privacy is to get your name off public records as they reveal pretty much everything about that property and your involvement in it.

In the example of fraudulent Quit Claim Deeds then by owning your home in a Land Trust, you automatically hide who the beneficiaries of the property are. This makes it far more difficult to forge documents as the perpetrator isn’t going to know whose signature to try and use.

There are many other advantages of Land Trusts as well. Avoiding probate is certainly one important consideration and if you have a will and no Land Trust, you or your relatives will end up in Probate Court eventually. A Land Trust can deal with this issue for you as by holding a property this way you actually avoid probate altogether. This means that you can transfer assets immediately without probate and without them being open to perusal by the prying eye of the public.

Another advantage of a Land Trust is that it actually keeps liens and judgments off the property. Judgments and liens do not attach to the land in these circumstances and therefore, a beneficiary may freely sell his beneficial interest even if numerous certified judgments are recorded against his own name in the public records.

Land trusts also help you avoid litigation. Owners of real property are easy targets for lawsuits and if it looks like you have no assets then the chances of being sued become less. No attorney wants to sue someone who hasn’t the means to pay them! Think how the wealthy got rich for a moment, think of Trump, Rockefeller, etc and you’ll begin to understand that these people use land trusts everyday to control property but never to own it. All of them have fought legal battles but none of them have ever lost control of buildings they have protected by using a Land Trust.

So, all things considered, I think that the use of a Land Trust far outweighs taking a small mortgage on a property.

Where can I get more information on Land Trusts?

First of all, I can recommend a very good book for those of you who want more information on the subject. It’s by Mark Warda and is called “Land Trusts in Florida ”.

Next, you should employ a good attorney to set up the Land Trust for you. There are numerous attorneys’ out there but it is important you get an attorney who knows the ins and outs of Land Trusts to help you.

What should I do if I don’t want to put my property into a Land Trust?

If you don’t want to put your property into a Land Trust then you really need to check that your property is still owned by you. I would suggest doing this at least once per month at http://www.property-appraiser.org/