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Gina Lido is a real estate developer.
She buys properties, builds houses on them, sells them.
And she's pretty hands -off about all the paperwork.
She has her lawyer handle that stuff.
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. So impersonal.
Yeah, it is. I've never met any of the sellers of the properties we have bought.
Gina and her business partner have bought eight properties in Connecticut, where they live.
And then two years ago, she found her ninth.
Realtor came to us and said, there is a piece of land for sale.
It's been in the same family for many years.
Did you go see the property?
So I drove by, but it was just an overgrown lot at the time.
An overgrown lot. Now, even though she's pretty hands -off, every time Gina buys property, she does her due diligence.
Like, is the land flat?
Are there any wetlands?
She and her partner look at zoning, boundaries, that kind of thing.
And, of course, with this new property, she checked out the owner.
She wanted to have an idea of who she was doing business with.
It's more out of curiosity than anything.
But obviously, if you found out, you know, the person was, I don't know, a gangster or something, I don't know if I'd want to buy a property from them.
So silly things like that.
And when I Googled, I found the name on the documents.
The correct address was there.
He seemed like a normal man.
And everything seemed fine.
And that was it. 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.
What kind of investment are we talking about?
I think we were already over $800 ,000 or something like that into the house.
Okay, that's a lot of money.
We just had put the windows in, all the mechanicals, meaning electric, plumbing, was all done and the house was insulated.
Oh, wow. They already had buyers lined up, this nice young couple.
And Gina, as the work was getting done, went on vacation to Turkey where she got a phone call from her lawyer.
And by the tone of his voice, I knew something happened with the house.
And my first fear was I thought the house burned down.
Okay, the house had not burned down.
It was actually something that was maybe worse.
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 could this happen?
Hello and welcome to Planet Money, I'm Erica Barris.
And I'm Jeff Guo. The property, 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.
But there's this one part of that system that is a bit more hodgepodge than you'd really want it to be.
The way we track who owns a property, who has a title to it.
And there's a whole new kind of villain trying to exploit that system.
Today on the show, the wild world of title insurance.
Weird proprietary land ownership maps, disconnected registry systems, the tragic loss of historic apple trees and title pirates.
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So, G and Alito had paid $350 ,000 for a piece of land.
Then she spent nearly a million dollars constructing a brand new house on that piece of land.
And now she had gotten a phone call that the person she had bought that lot from was not actually the owner.
She and her business partner had to stop construction of the house.
Technically, they were trespassing.
I was very nervous, I was scared.
I had a very sick feeling in my stomach.
I just kept saying, so what happens now?
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.
Now, this other story is about a guy named Daniel Kennigsberg.
Nowadays, he's a super successful doctor, but way back in 1953, he was just a baby.
And in those post World War II suburban boom years, his dad built a house in a Connecticut suburb where Daniel and his brothers grew up.
We were all kind of running in and out of each other's houses across the lawns, the dogs were running free.
We were playing baseball on the street and so forth.
Very idyllic. It was very idyllic.
That's really what it was like.
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.
There was an apple tree on this land, which still had, you know, was still producing apples and we had our tree for it in this apple tree.
So they had a tree for it, but that's pretty much all they ever did with that lot.
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.
Couple of times a year, somebody would call me up about this land, usually wanting to buy it.
And what did you say?
No. You know, sometimes I would ask how much.
But if I'd wanted to sell the land, I would have put the land on the market.
Even though the property was 25 miles from where Daniel lived on Long Island, it was a tie to his hometown and an asset he figured he'd leave to his kids.
Plus, by then, he says the lot was like this mini forest, a whole ecosystem had grown.
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.
In the course of this phone call, he said, by the way, I noticed that they're building a house next to your old house, finally, after all these years.
A house on Daniel's lot.
And I said, well, that's pretty crazy because I own that land and I never sold it to anybody.
Daniel had to go see for himself.
I just took a five o 'clock ferry or whatever it was to connect.
Oh, yeah. That very day.
Oh, OK. So I just hopped on the ferry and drove through the old neighborhood and saw this house.
So there was a house there.
There was a house that was almost completely built in the land that it was on, which, you know, the last time I'd seen it, it had been a dense forest was completely like scorched earth.
That dense forest Daniel described that was now scorched earth.
That's the property Gina Lito had purchased, the quote unquote overgrown lot.
Gina and Daniel may have different ways of describing the property, but they were both flummoxed.
There was just so many questions that just couldn't even be answered at that point.
How could this happen?
That's my land. How did we get to this reality?
How did this happen?
How did Gina seemingly buy a property that Daniel seemingly still owned?
To answer some of Gina and Daniel's questions, I called Stuart Stark.
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?
The answer to that is no.
We in the in the United States don't have a system where you can go up and look at an official owner of a particular property.
Instead, we just have a registry, a recording system in which any time there's a transfer, the transfer is recorded.
So instead of a national master list that says this plot of land is owned by Jeff, that plot of land is owned by Erika and so on and so on, all the records that actually exist are just records of real estate transactions.
That plot A was sold in 1984 to someone named Judy.
And before that, it was sold in 1970 to Darlene and Bob who inherited it from Harry.
And before that, it was sold to someone else.
You get the idea. Every township or borough or county might have their own registry of those types of transactions.
But those registries are not any certification of ownership.
There is just an ability to look at deeds to particular parcels of land.
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.
And all towns and counties keep track of these transactions differently.
In one town, you physically go to a building and look through a big stack of papers.
Somewhere else, you might be able to search the records online on your phone.
And all those different systems of registering land transactions, they're not really communicating with each other.
There's no cohesive system.
And, you know, technically, a regular person could piece together all this information themselves.
Like, can any of us do it?
It's not as easy as it sounds.
It's not as if you look up your parcel of land and see who owns it.
What you have to do is look to see, all right, when did my seller acquire title?
From whom? Did that person acquire title from somebody else?
Maybe there was a death and you'd have to look at probate records.
You have to make sure that there are no outstanding mortgages.
And that's a lot of searching.
It's a lot of work for an ordinary person to do.
And all this stuff is really high stakes.
Like, if there's a partial owner to the property, that person may come knocking on your door and they're going to have rights.
Or if a seller actually took a loan out on that property they sold you and then never paid it off, that bank is going to come find you.
Or the lot you purchased for your community garden actually has years of unpaid taxes on it.
Oops. That's on you now.
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.
This seems like a little bit of a, for lack of a better word, a janky system, what you just described.
Well, it is to some extent, but it's a system that we've had for a couple hundred years.
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.
Title insurance. It's called insurance, but it operates more like a warranty.
It's a fee you pay to a company when you close on a property.
They're supposed to guarantee that the title to the property you just bought is clean, meaning there aren't unpaid taxes or loans on it, and that you're buying it from the 100 % real owner.
If you've ever bought a house, it is most likely that you also bought a title insurance policy.
Lenders require them.
And these companies, there are only like four of them in the whole country, have these separately maintained, comprehensive, highly efficient, proprietary records of land ownership called title plants, their own system.
And when someone buys title insurance on a property, the company looks in those records, which maybe takes them like a couple hours since they already have the information on hand.
So once they've compiled those super secret records, title insurance is a very good business.
They've done all the work.
Right. Right. They've done.
There's no more to do.
Exactly. So anything they can get out of the homeowner is basically gravy.
Huh. And what they can get out of the homeowner is significant, up to 2 % of the cost of a property for a couple hours of work.
But homeowners pay it because it's often required.
And because that fee, it's just one more closing cost in the midst of a huge purchase with a ton of paperwork and all kinds of fees.
So people stomach it.
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.
Our lawyer was extremely good at keeping my husband and I calm and said, you know, we're going to find a solution.
Don't worry. And at the end of the day, you have title insurance.
Gina and her partner had $350 ,000 of title insurance on the property.
So her lawyer told her no matter what, she would get back that $350 ,000.
However, we had a house on that land.
A nearly million dollar house.
And while the land clearly belonged to the man who owned the property, who did not sell the property, who who did the house belong to?
And how did the land get sold if Apple Tree Daniel didn't sell it?
That's after the break.
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So, to tell you what actually happened, we're going to tell you a third side of this story.
The story of the person who actually sold the land.
Some months before all of this went down, Anthony Minnelli, a lawyer in Connecticut who does real estate transactions, got a phone call.
I got a referral from a real estate agent.
Hey, can you represent this guy?
He's selling some property that he inherited and by the way, he's an expatriate.
Ooh, an expat. Anthony actually does hundreds of real estate transactions a year and he regularly works with overseas clients.
I mean, do you just do a Google search on your clients or anything?
Usually we don't, but that is now one of the practices that we teach now, including me.
So, Anthony starts talking to his new client, a guy who calls himself Daniel.
Daniel Kennigsberg, but who apparently lives in South Africa.
You talked to him over the phone, actually?
Yes, I talked to him over the phone.
Yeah, there was a, the country code was South African country code.
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.
Was there anything that seemed like suspicious or different or whatever?
It didn't really raise a hair.
And before the closing, the title insurance company did its thing.
And so, what did they find?
They found that a gentleman by the name of Daniel Kennigsberg owned this piece of property and that is what we expected.
And so you closed? And we closed.
Gina and her partner gave Anthony a bank check and he wired the total cost for the land to a Wells Fargo bank account.
Anthony took his fee and he moved on with his life.
Several months later, I had received a call from another local attorney who said, hey, remember that closing you did?
Kinda. Well, it was not real.
It was a fraudulent situation.
And the person who was selling the property wasn't who they claimed to be.
And the real owner had his land stolen basically.
And I said, wow. 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.
Who found this unattended piece of land and looked up who owned it?
That passport Anthony had scanned?
Fake. The email, danielkennigsberg at yahoo .com, made up.
The DocuSign signature.
It wasn't really Daniel.
This fake Daniel is what we now call a title pirate.
Someone who, by fraudulent means, steals a title to someone else's land.
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.
Did I miss things that caused this bad situation to happen?
Did you? That's a good question.
Because at the end of the day, based on the facts, the answer has to be yes.
Because it happened, right?
There are all kinds of things Anthony could have done.
He could have video rarified that Daniel was Daniel.
He could have caught a typo in the fake passport.
He could have made reference calls on his client.
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.
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.
So when they searched, there weren't any problems with the title itself.
I mean I've asked myself the question a million times.
Could I have done anything to see that this did not happen?
And could you have?
Without overstepping my role and stepping on toes of the professionals involved, I don't really think so.
The title system is clearly messy.
And wherever there is mess and a lot at stake, that creates opportunities for fraudsters.
The title insurance company is the professional entity assuming the risk of our tack together receipt by receipt property record system.
And the entire real estate industry, from the listing agents, the real estate lawyers, to the banks running transactions, to the people recording those transactions in county offices, relies on these private title insurers, which serve as a de facto centralized registry to catch any and all problems.
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.
Now, in lots of other insurance markets, moral hazard?
It's bad. You don't want people with auto insurance to take more risks on the road just because insurance will cover the costs of their accidents.
But in the world of real estate, you could say the system works better.
It's more profitable, more efficient.
If buyers aren't so worried about risk, then they can just focus on buying the house and not have to sit around doing detective work.
But flagging problems before they happen is only part of the responsibility of a title insurance company.
The other part is, when something goes wrong, they pay out.
They absorb the cost of the risk.
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%. But in the case of the overgrown lot slash apple tree forest, it's one of the rare times things did go wrong.
And the title insurance company did pay, as did a few other responsible parties.
Here's how it all played out.
Did you sue anybody?
Or did anybody sue you?
Yes, both. Pretty much everyone involved ended up suing everyone else.
In this case, every single party, Gina, Daniel, Anthony, was a victim.
They were all defrauded.
The case ended up in federal court.
Real Daniel, who has never even been to South Africa, wanted one thing.
My starting position was you could really make everything go back to the time when this had never happened.
You could tear down the house, and you could replant the land, and you could pay me for my expenses.
And I would be restored to where I was before this ever happened.
Is that what you actually wanted?
Yeah, that's what I was willing to accept.
It's not like somebody lost an arm, and you can't put their arm back on.
I mean, this could be remedied.
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.
We thought initially that we would be paid out $350 ,000, and that we would have to use that money to try to figure out how to maybe buy the property from the owner.
But it was a complicated situation.
In the end, all parties ended up settling.
As part of the settlement, Daniel, the real Daniel, ended up selling the land to Gina and her partner.
They couldn't tell me for how much, but I looked it up for $965 ,000.
Did you then end up buying the property twice?
Yeah. Yes. Theoretically, yes, we did, because we had to go through closing statements again.
And if you're thinking, man, these people, they all seem so kind and so gracious about this whole thing, that too was part of the settlement.
None of them can disparage each other.
These days, when Gina buys property from someone, she's doing a little bit more than just a cursory Google search.
Obviously, I'm a crazy loon now every time we did buy a property while this was going on.
But the builder knew the person, but it was a family estate.
So I was asking a million questions.
I wanted to make sure everyone that was involved had to sign.
So everyone was taking deep breaths with me, because I think I was irritating everyone.
Real Daniel, he has made his peace with all of this.
And as for fake Daniel, he still has his money.
And he's still out there.
Today's episode was produced by Sam Yellow Horse Kessler.
It was edited by Liza Jaeger and fact -checked by Sarah McClure.
Engineering by Valentina Rodriguez Sanchez.
Planet Money's executive producer is Alex Goldmark.
I'm Jeff Guo. I'm Erika Barris.
This is NPR. Thanks for listening.
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