Feature image above: Co-founders Brian Scott, left, and Mike Sage (Photo by Lori Sparkman)
Over the course of a real estate transaction, one of the seemingly more routine steps is that of title services. In fact, not only is the legal transfer of ownership from one party to another one of the more significant aspects of the process, title services are also an industry increasingly targeted by criminals and fraudsters.
Brian Scott, co-founder and managing member at Commerce Title & Closing Services at Little Rock, has spent 41 years in the business. He said the emphasis on data security has never been higher or had more at stake than at present.
“Fraud has become a huge problem. I know some people want to blame [artificial intelligence], but this all started before AI got involved,” he said. “The three biggest problems we see as an industry are wire fraud, seller impersonation fraud and just simple misrepresentation. We know of stories in which buyers received wiring instructions from what they thought was a title company, and they wired money to fraudsters. We know of situations where title companies received fraudulent wiring instructions for mortgage payoffs and wired mortgage payoffs to fraudsters.
“There have been situations where fraudsters have impersonated sellers and been able to illegally take title to a property. We were told of a case recently in northwest Arkansas where a person had inherited three acres of land. The person’s husband was driving by the property, and he saw a house was being built on it — discovered somebody had stolen their land, for lack of a better word. None of these happened through our company, but they are very real examples of what’s going on out there, and I fear it’s going to get worse.”
According to the Federal Trade Commission, consumers lost a total of $12.5 billion to mortgage fraud in 2024, a 25 percent increase over 2023. Of that, investment scams accounted for $5.7 billion, followed by imposter scams at $2.95 billion in losses.
The CoreLogic Mortgage Application Fraud Risk Index increased by 8.3 percent year over year in the second quarter of 2024, and 1 in 123 applications showed signs of fraud. The number of occupancy misrepresentation cases, in which perpetrators falsely claim investment properties as primary residences, has tripled since 2020.
States with the highest rates of mortgage fraud included New York, Florida, California, Connecticut and New Jersey. In three of the states, the problem is getting substantially worse, growing by double digits since mid-2023. Those states include California, up 14.6 percent; Connecticut, up 10.8 percent; and Florida, up 10.2 percent.
“The biggest change came in the mid-’90s with technology and the internet,” Scott said. “Up until then, all of the research we did and all the closings — everything — was done with typewriter and by hand. When the early to mid-’90s rolled around, we started converting over to different software programs, and in the late ʼ90s, software systems became web based. Basically, we could do more with fewer people, and we could do it quicker, and it cut out a lot of mistakes, but it also opened things up to fraud.
“Bottom line, when a transaction closes, whoever the seller is — or whoever is acting as the seller — is going to receive the proceeds. The Realtor’s going to get a commission. The surveyor may earn a fee, but we’re left holding the bag via title insurance at the end of the day.”
Scott said Commerce Title & Closing Services, which he co-founded with Mike Sage in 2009, has beefed up its security protocols accordingly in the name of protecting its clients. He said while some of those steps have lent a little extra time and effort to the process, it is a small price to pay compared to having one’s money or property snatched out from under them.
“The simple fact of it is if we don’t physically have sellers of real estate come into our office, we have a very strict protocol we follow before we close a transaction,” he said. “These protocols are in place for the client’s protection, and we don’t negotiate with these protocols.”
The current environment is just the latest chapter in Scott’s long career in the title business, one that started in high school more as a means of last resort than a conscious career move.
“My mom was a teacher at Joe T. Robinson [High School in Little Rock], and in August of 1984, she was prepping her classroom for the ’84-’85 school year. I’d been 16 for about three weeks, and she said, ‘You don’t have a job, so you’re going to come help me get my classroom ready.’
“The work-study director walked by, and I asked him if he had any friends in offices needing some help because I didn’t want to flip burgers. He gave me the name of a title company that had moved in four or five months earlier, and they needed somebody to come in and just do a bunch of grunt work, for lack of a better word. That turned into 41 years.”
Scott and Sage formed the company after years of working for other firms with the belief that the right people combined with the right system rooted in professionalism and customer service would produce a superior experience for clients. Time and time again over the years, they have been proven correct, growing to 15 employees, 11 of whom reside locally. Commerce Title & Closing Services now serves all of Arkansas and is also licensed in Mississippi. The company will soon begin servicing a third state, although Scott declined to elaborate on which one.
“The success of our company, it’s not me doing all this,” he said. “I couldn’t do this without Mike, and we couldn’t do this without being arm in arm with our employees. We’ve got some really good employees, some of whom have some really long tenure in this business. Collectively, we’ve probably got 250 or 260 years of experience.
“Mike and I feel like if we take good care of our employees, they will take care of us, and they have. It’s all about the team. It’s everybody all working together.”
As for what is still appealing to him personally about the industry after all of these years, Scott said that, too, comes down to people.
“I meet some really neat people every day doing real estate closings, some of the neatest people you can ever imagine,” he said. “One of the coolest things is when you see a young couple come in here, and they’re 30 years old, and they’re buying the first house, and they’re wide-eyed, and they’re giddy. Walking them through the process, it’s a real privilege to get to be a part of that life event, and every time I do a closing, I keep that in mind. I try to envision how things look from their side of the table, from their perspective.
“The other changes I have seen in this business, such as the changes in technology, force you think a lot to stay ahead of things. It’s a mental challenge, which I think is fun, but I’m telling you, it’s really all about the cool people I get to meet and get to work with. That is my favorite part of this job.”
CHOOSING A TITLE COMPANY
All title and closing companies are not the same, so be prepared to shop around and ask questions. The following are some tips offered by Brian Scott, co-founder at Commerce Title & Closing Services in Little Rock, about choosing a professional who is the right fit.
• Experience matters: Always ask about the experience of the employees at the company. I’ve got 41 years, my business partner has 28, and we have several employees with 19, 20, even 30 years. The experience of the staff in doing closings makes a big difference in the customer experience.
• Mine data locally: The heart of a title company is in the quality of the title research. Something people don’t usually think about asking is how a company is searching the public records to see what liens exist and things like that. Make sure this is being done in-house versus being farmed out to a third party.
• Listen to your gut: Don’t be afraid to ask around. Call somebody the company has closed for, and see what they think. Most people rely on their Realtor’s recommendation, but people do have a choice, and you should go with someone you feel good about.
• Substance over style: When choosing a company to work with, focus on what’s really important, like experience and expertise. We’re kind of a no-frills title company, for example. We’re not going to have the biggest office, we’re not going to have the most expensive furniture in the lobby, but we are going to give people a fair deal and take good care of them at a good price.
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