The Signature Shortcut
As a REALTOR®, I partner with Notaries on a daily basis. In fact, no real estate deal can go through without that familiar seal in place. Until recently, I imagined that this was one piece of the real estate fraud puzzle that was unwavering—a sentry in the fight against unscrupulous identity thieves and other fraudsters. But last month a set of closing documents arrived on my desk with the Notary's stamp already in place, sans my own signature. It was an affront to the very core of the Notary's key function, to "require the presence of each signer and oath-taker in order to carefully screen each for identity and willingness." Clearly this is a serious breach of ethics, and a significant potential for fraud.
Many real estate agents, loan officers, and other industry players have developed good relationships—or even friendships—with their primary Notaries. As relationships build, so too does trust. In a case like the one I experienced, it is likely that the Notary looked at the documents, recognized the names as people she works with on a regular basis, and trusted that we would ensure an accurate identity. After all, the Notary knows us well enough to believe we would never allow a document to go out without the proper identity checks. She may have even thought she was doing us a favor. Perhaps saving someone a trip, or a little time.
While it may be a time-saver, receiving a stamped, unsigned document poses substantial risk to everyone involved in the real estate transaction. The buyer or seller may notice the stamp and conclude that the real estate agent and/or loan officer is running a shoddy business. The real estate agent's assistant may sign the document thinking she's helping out, when in reality the document has a flaw, or the sale has been reneged. And that's assuming the documents never "fall into the wrong hands." It may sound dramatic, but a set of closing documents that have been pre-notarized could be signed by anyone. For example, imagine a couple who decide not to sell their home at the last minute. The closing documents arrive with a notarization, an empty signature line, and a set of angry buyers whose deal just fell through. It's conceivable that the buyers could sign on the seller's behalf and send the deal through, unbeknownst to the sellers. Who would have a more difficult time proving their case in court? After all, the seller's signature is notarized.
It is hard to say how often pre-notarized real estate documents go out. The majority of cases are probably never reported. Even if only one percent of all notarizations are done without the signature in place, that equates to over 11,500 potential instances of fraud per year (in addition to approximately 22,000 cases of real estate fraud already reported by the FBI, which is a low estimation my professional opinion.)
If you receive a request to send a document that has been pre-notarized, immediately notify that person that while you appreciate their trust, you cannot in good conscience allow a pre-notarized document to leave your office. Educate them on the potential problems this can cause. In an escalated situation (they become very rude or threaten not to use your services) you might even choose to report them to their superiors.
The notarization system is in place for a reason. In the real estate industry, we depend on Notaries to guarantee the identities of our customers, our business partners, and ourselves. Identity fraud is already one of the most prevalent deceptions in real estate today—without the extra precaution of a Notary's seal, fraud in this sector could increase exponentially. A pre-notarization isn't doing anyone a favor, and no documents should ever bear the Notary seal without proper identification and witnessing of the appropriate signatures. That's one time-saver that just isn't worth taking a chance on.
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