Gina Leto
Appearances
Planet Money
Title Pirates
So they do all the paperwork, use their real estate agent and attorney. They close the deal the way they always do, totally virtually. They paid $350,000 and got to work building a very nice house.
Planet Money
Title Pirates
This guy Anthony had been talking to all along, as you might have guessed, was not our Daniel. He wasn't Apple Tree Daniel. This guy was a fake Daniel.
Planet Money
Title Pirates
And this kind of theft is increasingly common. The FBI says they've seen more than a thousand of these cases all over the country in the past few years, as more real estate transactions happen online. Someone owns a piece of land that they're not keeping close tabs on, someone else impersonates them, and no one involved in the sale even notices.
Planet Money
Title Pirates
But he didn't. And neither did the realtor who made the listing. They kind of left all that responsibility to the title insurance company, the one that Gina paid $1,398 to check the title. But was fake Daniel their responsibility? We called the title insurance company, and they said no. They were looking for defects in the title. Identity fraud? That wasn't something they were scanning for.
Planet Money
Title Pirates
The title system is clearly messy. And wherever there is mess, and a lot at stake, that creates opportunities for fraudsters.
Planet Money
Title Pirates
And there's actually an economics concept here. It's the idea of moral hazard. Basically, if you're buying title insurance, then you get to be lazy, right? The nitty gritty research on the title, that's not on you. You maybe don't need to worry so much about why a random South African dude is selling you a patch of land in Connecticut. Because title insurance will take care of all of that.
Planet Money
Title Pirates
And side note, something you should really know about title insurance is that almost never happens. Title insurance only pays out about 3% of all the money they bring in from title insurance policies because it's rare for things to go wrong. Compare that to, say, car insurance. They pay out 70% of what they bring in. Or health insurance, that's like 80%.
Planet Money
Title Pirates
Obviously, that would not be a great situation for Gina, to have that million-dollar house get torn down. Her idea was to figure out a way to keep the land.
Planet Money
Title Pirates
These days, when Gina buys property from someone, she's doing a little bit more than just a cursory Google search.
Planet Money
Title Pirates
Today's episode was produced by Sam Yellow Horse Kessler. It was edited by Liza Yeager and fact-checked by Sarah McClure. Engineering by Valentina Rodriguez-Sanchez. Planet Money's executive producer is Alex Goldmark. I'm Jeff Guo.
Planet Money
Title Pirates
Okay, the house had not burned down. It was actually something that was maybe worse.
Planet Money
Title Pirates
And I'm Jeff Guo. How we buy it, how we sell it seems so secure. All that money, all that paperwork, all the dotted lines to sign, and so many people checking to make sure that it is all airtight.
Planet Money
Title Pirates
And we're just going to pause Gina's story here because we need to tell you a story about the same parcel of land. From another perspective.
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Title Pirates
Daniel's dad also bought a half-acre lot next door to their home. It was full of grasses and critters and some straggler trees from when this new suburb had once been a fruit orchard.
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Title Pirates
Gina and her business partner have bought eight properties in Connecticut, where they live. And then, two years ago, she found her ninth.
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Title Pirates
Daniel grew up in this lovely house with this huge yard next door and that apple tree. Eventually, he moved to New York, started to practice as a doctor. And then, around 15 years ago, after his parents and brothers had died, he inherited the family home. Eventually, he sold the home, but he kept the vacant lot next door, paid taxes on it, and he regularly fielded offers.
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Title Pirates
It just looked like this patch of woods in the middle of a neighborhood. And then, one day, two years ago, he was on the phone with a childhood friend.
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Title Pirates
Yeah. How did this happen? How did Gina seemingly buy a property that Daniel seemingly still owned?
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Title Pirates
He goes by... Stu, Stuart, whatever you want. It's fine. Stu teaches at Cardozo Law School. His specialty is property and land use. Our first question was, before poor Gina with her half-finished house bought that property, couldn't she have just looked at some kind of big map of the United States to see who owns what?
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Title Pirates
In fact, that's what a deed really is. Having a deed to a piece of land doesn't prove that you own it. It just proves that you got the land from somebody else at some point in time.
Planet Money
Title Pirates
And, you know, technically, a regular person could piece together all this information themselves.
Planet Money
Title Pirates
So, essentially, in the United States... The only way to know who really owns what is to piece together a bunch of receipts. And all of those receipts are held in different places that are organizing them differently. And if you don't have complete information about the property you're buying, there can be huge consequences.
Planet Money
Title Pirates
This is a very American problem. A bunch of decentralized systems that are kind of messy. And it creates a bunch of risk for anyone trying to buy a property. But there's also a very American fix for this problem. A market solution. Title insurance.
Planet Money
Title Pirates
And it's in the company's best interest to do a good job. Because if something goes wrong, they are on the hook. When Gina Lito and her business partner purchased that overgrown lot in Connecticut, they paid for title insurance. And when she learned that it had been a fraudulent sale, her lawyer had the answer.
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Title Pirates
Anthony actually does hundreds of real estate transactions a year. And he regularly works with overseas clients.
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Title Pirates
So Anthony starts talking to his new client, a guy who calls himself Daniel, Daniel Kenigsberg, but who apparently lives in South Africa.
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Title Pirates
He says they had all the typical conversations. He got a scanned copy of Daniel's passport, emailed back and forth with him. Daniel filled out all the paperwork Anthony asked for.
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Title Pirates
It didn't really raise a hair. And before the closing, the title insurance company did its thing.