Even after 40 years of specializing in all things financial, I constantly learn new things, often from readers. My most recent teacher was Eugenia (Gene) Thornton, the Recorder of Deeds in Kent County, Delaware. She emailed me in response to an interview on identity theft I did with Larry Light in Forbes.
I’ve written before that home title theft is a phony “threat” promoted by frantic radio commercials warning that your home can be stolen. They claim thieves can deed your property to themselves and then mortgage or even sell it without your knowledge. They want you to spend around $180 a year to buy their “title fraud insurance.” This, they promise, will “shield” your title—which means only that they will monitor it and alert you if a new deed is filed transferring the property out of your name.
Gene informed me that scores of counties offer this monitoring service for free to taxpayers. She wrote, “Many counties across the nation use software to alert property owners who register for this free service. When changes are made to recorded property documents they receive an alert. (We make no claim that the ‘house’ has been ‘stolen;’ it is merely a tool to alert property owners of a change or transfer to their title.)”
According to Gene, the software to monitor and alert owners to title transfers would cost her county $3000 for setup and $1200 per year thereafter. The vendor, not county staff, handles monitoring and notifications. She notes, “That’s a pretty good deal for your taxpayer dollars.”
Private companies use similar means to search for property transfers and alert their customers. The difference is that they charge up to $20 a month per property. Based on the fact these companies can afford to run expensive adds designed to scare the bejeebers out of people, I am making up a story this business is reasonably profitable.
Still, providing an alert of a change in title is not insurance. Some companies get around the lack of substance in their “insurance” claim by actually offering $1,000,000 of title fraud insurance. This is more window dressing. It’s highly unlikely any such company will ever pay out a penny of insurance, as any fraudulent transfer is not valid and won’t ultimately result in you “losing” your property. Here is why.
A forged deed is not valid and conveys nothing, because fraudulent transfers are illegal and therefore void. Forgery is a felony in all fifty states, punishable by jail time and heavy fines. If someone buys a property from a fraudster, they lose their money. The legitimate owner does not lose their property.
Further, most property purchases or mortgages require title insurance, which protects you against any claim involving the validity of your ownership of the property. It’s a one-time purchase required by any lender, closing agent, real estate firm, or attorney. This makes it next to impossible for the thief to mortgage or sell the property to a knowledgeable lender or buyer.
If a buyer is naïve enough to pay cash for a property without obtaining title insurance, it is possible they could be conned. Even then, if the sale is fraudulent, it’s the buyer—not the owner—who is at risk of losing their money.
The biggest risk for owners is not losing their property, but the hassle and cost of dealing with attempted title fraud. This is reason enough to sign up for the free monitoring service if your county offers it.
Mine does—something I did not know until Gene provided the link to the “Land Notification (Property Alerts)” service offered by the Pennington County Register of Deeds. I immediately registered my house.
Related: Investing, Done Correctly, Has Risks but Is Not Gambling