STEVE INSKEEP, HOST:
Homebuyers have to ask, does the person selling the house actually own it? Erika Beras from our Planet Money podcast has the story.
ERIKA BERAS, BYLINE: Gina Leto is a real estate developer in Connecticut. With her business partner, she buys properties, builds houses on them, sells them. She's pretty hands-off about the paperwork.
GINA LETO: The lawyer comes, I give him the money, and he will close and he will call me and say, it's closed, it's yours.
BERAS: So impersonal (laughter).
LETO: Yeah, it is. I've never met any of the sellers of the properties we have bought.
BERAS: A couple years ago, Gina found a new property. They looked at zoning, boundaries, and she looked up the owner.
LETO: When I Googled, I found the name on the documents. He seemed like a normal man and everything seemed fine, and that was it.
BERAS: They closed the deal the way they always do, totally virtually. They paid a lawyer representing the buyer $350,000 and got to work building a very nice house. They had buyers lined up - all going according to plan.
LETO: I think we were already over $800,000 or something like that into the house.
BERAS: OK, that's a lot of money. And then Gina got a devastating phone call.
LETO: Our lawyer told us that the person that sold the property to us was not the owner. This was a fraudulent sale. The real owner never sold this property and was unaware that the property was sold. You know, right away, you think, well, how can this happen?
BERAS: They stopped construction. Technically, they were trespassing. So, then, who did own this land? Well, there was this guy named Daniel Kenigsberg who owned a wooded lot next door to the house where he grew up.
DANIEL KENIGSBERG: A couple times a year, somebody would call me up about this land, usually wanting to buy it.
BERAS: And what did you say?
KENIGSBERG: No (laughter). You know, sometimes I would ask how much, but if I had wanted to sell the land, I would have put the land on the market.
BERAS: The property was 25 miles from where Daniel lives now. Two years ago, he was on the phone with a childhood friend.
KENIGSBERG: In the course of this phone call, he said, by the way, I notice that they're building a house next to your old house, finally, after all these years. And I said, well, that's, like, pretty crazy 'cause I own that land and I never sold it to anybody.
BERAS: Gina and Daniel were both flummoxed.
LETO: There was just so many questions that just couldn't even be answered at that point.
KENIGSBERG: How could this happen? That's my land. How did we get to this reality?
BERAS: Clearly, this should not have happened. What did happen was fraud. One reason is because America doesn't have a centralized system of property ownership. What we have is this kind of hodgepodge system of registries in towns and cities of when titles have been passed to other people. It's hard to know who owns what, so property buyers, like Gina, get something called title insurance. These companies check the many local registries and confirm the property they're buying doesn't have other owners or money owed on it. Title insurance companies absorb the cost of the risk, even if it's something that they aren't looking for, like fraud.
In this case, someone created a fake Daniel Kenigsberg identity and hired a real estate agent, a lawyer. He told him he was an expat looking to sell his land, and then made off with the money months before Gina and real Daniel realized what had happened. He was what we call a title pirate, someone who steals a title to someone else's land. This kind of theft is rare, but has been happening more often as more real estate transactions happen online. Gina's lawyer told her, no matter what, title insurance would cover what they paid.
LETO: However, we had a house on that land, and while the land clearly belonged to the man who owned the property, who did not sell the property, who did the house belong to?
BERAS: Everyone ended up in court - the real estate agent, the lawyer who did the deal, Daniel, Gina and her business partner. In the end, all parties ended up settling. The real Daniel lost his connection to his hometown. He ended up selling the land to Gina and her partner for $965,000. And the fake Daniel, he still has his money, and he's still out there.
I'm Erika Beras for NPR News. Transcript provided by NPR, Copyright NPR.
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