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Alabama Law for You

  • Writer's pictureGregory Stanley

Real Estate Fraud - The Deed Con

Updated: May 1

Real estate fraud is at an all-time high in Alabama and across the country ranging from wire fraud to creative ways of selling property they don't own. Watch The Attorney's program dedicated to this topic here: Real Estate Scams Growing in Alabama (April 14, 2024): The Attorneys

Some quick legal background

In Alabama there is no requirement to intend to defraud--an innocent mistake can be fraud. If a person claims they were tricked into committing the fraud, the court will not know who to believe, and the real fraudster can get away with it.

In Alabama drafting deeds is a legal task and can only be done by attorneys. The exception is if you are drafting a deed for yourself (not your company.) To ensure this is followed, deeds must show who drafted them or they can't be recorded. This is to help make real property sales safer and to ensure the person drafting a deed is held responsible when there are errors or disputes.

How they get away with Deed Fraud

Let's say some scammer offers to sell a property cheap. The seller may claim to be out of state, or to have inherited the property, to be a flipper, they are going through a divorce, or they may claim any other pretext for selling fast and cheap so they "do not want to pay a realtor or a lawyer."

In our made up case, the property was apparently assessed to the seller or a company he claims to own -- but remember, assessment and street addresses do not mean very much when it comes to selling real property.

The scammer tells the newby investor that they have a "deed we use all the time," or "a deed from the internet," and in small letters at the top the deed reflects it was drafted by the investor. The scammer may say this way they deed don't need a lawyer, they don't want to make it complicated, they are selling it at a big discount, or it will be cheaper if we "just do it ourselves," or easier to record, or "that's how it's done," or some other made up thing.

Let's say they exchange money for deed but the deed doesn't have Alabama's required verbiage, it has a slight difference in the legal description, or its the wrong type of deed, or the notary attestation didn't use the correct words, so the deed is worthless. The real owner (who never met either of the parties) sues the buyer for slander of title and fraud on the deed. If the buyer tries to get her money back on the bad deed from the seller, she won't likely win because she fraudulently took responsibility for the deed. If she sues to get her money back from the scammer seller based on the seller's fraud, she would have to admit she was in on the deed fraud. Ye olde legale terme for this is "In pari delecto."

Both the buyer and seller were apparent fraudsters to the court, so why should one of them be held liable to the other? The remedy between the fraudsters is to leave it where the court found it .

How to Protect Yourself from R.E Fraud (even as a seller)

  • Always use a licensed realtor (get their broker's name and call if you have any suspicion) and use a closing agent to draft all legal documents (that's an attorney in Alabama.)

  • Never give money directly to a seller. Always put it in escrow with a closing agent.

  • Never let the seller touch the deed after you pay for it. If they offer to record it, grab it and run.

  • Confirm wiring instructions with the closing agent in person or by phone number you independently confirmed.

  • Get title insurance. Deed fraud (a scam seller records a fake deed and sells the house) is rampant in other states and is growing in Alabama.

  • Don't pay for ANYTHING up front apart from an inspection.

  • Don't ever draft your own contract or allow the other party to provide the contract--Use a standard, free, Alabama real estate purchase and sale contract and read it.

  • If you are owner financing, buying or selling commercial, sub-2, wrap, or other investor deal, get your contracts from an Alabama attorney. Out of state gurus provide forms that are not enforceable in Alabama. (This applies to leases and notices of default on a lease as well.)


    • If they approached you be wary. They may be hoping you don;t know the value of your property.

    • Always insist on using your own realtor.

    • Insist on a standard real estate contract, not the buyer's contract.

    • If the buyer set the inspection period to end on a saturday, change it to a weekday

    • If the buyer insists on a reduction in price the day the inspection period closes, assume its a scam.

    • Don't sign a contract that gives the buyer more than 45 days to close.

    • Make sure any earnest money is deposited with an escrow agent. If this doesn't happen, your contract is likely voidable.

    • Be wary of information from any social media source

    • If the other party can't meet in person be suspicious.

    • If you suspect a problem engage a realtor or an attorney.

    • Don't pay for ANYTHING up front apart from an inspection.

    • Confirm wiring instructions with the closing agent in person or by phone number to ensure no one changed them to divert your money.

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