Your Guide to Identity Verification for Real Estate Transactions

You’ve probably heard a lot about identity verification the past few years. With the rise of identity theft and credit card fraud, it has become an essential tool in fighting fraud. A 2023 survey found that 91% of businesses worldwide plan to increase their identity verification spending in the next one to three years. 

Fraud is affecting consumers and businesses–and it’s only getting worse. 2024 is projected to see new levels of identity crimes, especially impersonation, and synthetic identity fraud. Implementing identity verification software to protect your business and your customers is more important than ever. So, let’s take a look at what identity verification is and what you need to know about it as a real estate professional.

Table of Contents‍

• What Is Identity Verification? 
• Why Identity Verification Is Important
• Identity Verification vs. ID Verification
• Compliance and Regulatory Considerations
• How CertifID Addresses Identity Verification

What Is Identity Verification? 

The National Institute of Standards and Technology defines identity verification as “the process of confirming or denying that a claimed identity is correct by comparing the credentials of a person requesting access with those previously proven…” Simply put, it’s confirming that you are who you say you are. 

You’ve probably gone through the identity verification process countless times, even if you don’t realize it. It happens when you use your credit card to make an online purchase, when you submit your taxes, when you go through airport security, and even when you unlock your smartphone with a fingerprint or facial recognition. If you use Apple ID or Google Identity to store your login credentials, that’s another form of identity verification.  

Types of Identity Verification 

There are four main types of identity verification:

• Digital identity verification: Confirming that information isn’t fake or stolen by collecting names, dates of birth, addresses, and other relevant identifiers and checking that they exist in a digital format on a trusted data set, such as credit bureaus or official government documents.
• Data verification: Matching personal data against a selection of trusted comprehensive global data sources. Multiple data points, including names, dates of birth, and addresses, are usually used to ensure a correct identity match. 
• Document verification: Scanning and capturing information from a government-issued identity document, such as passports, ID cards, and driver’s licenses, and verifying the document as genuine.
• Identity authentication: Checking data that is difficult for someone other than the person to produce, such as biometric data (fingerprints, iris scans, or facial recognition).

Why Identity Verification Is Important 

Identity fraud is a serious—and growing—issue. As more information about individuals’ identities is digitized and stored in virtual and centralized databases, these repositories will become an increasingly appealing target for hackers. If cybercriminals can successfully hack into databases, they will have access to huge amounts of valuable personal data in one fell swoop.  

Real estate professionals, in particular, should be concerned about verifying an individual's identity as early as possible in a transaction due to increasingly common reports of seller impersonation. 54% of real estate professionals reported experiencing at least one seller impersonation fraud attempt between April and October 2023, and 77% saw an increase in seller impersonation fraud attempts within the same period. 

Identities can be confirmed before you even open a file or gather a client’s contact information, and should be confirmed early in the home purchasing process. 

Confirming early in the transaction whether a buyer or seller is a real individual reduces the likelihood of fraud and prevents wasting time and effort with bad actors. Identity verification software can help you accurately verify the identity of every party involved in the transaction, making it much more difficult for bad actors to infiltrate with false identities and reducing the chance of financial and reputational loss. 

Implementing identity verification also builds trust and credibility with your clients and everyone involved in the transaction. This foundation of trust is especially important in real estate where large transfers of money frequently occur. Once identity verification software is implemented, not only will your customers feel safer, but they’ll also have a faster and easier experience. 

Identity Verification vs. ID Verification 

You may be surprised to learn that identity verification and ID verification are not one in the same. While the main goals of both are to confirm that someone is who they claim to be and to prevent fraud, they are, in fact, two separate processes. 

We’ve already defined identity verification by looking at how it can be performed, including using documents, digital footprints, biometrics, and personal data to confirm an individual’s identity.   

ID verification, or identity document verification, refers to the authentication of identification documents themselves. This process ensures that documents used in home buying transactions are legitimate and haven’t been altered or forged. It also ensures that documents match transaction participants. 

Selfie identity verification is one technology that can achieve ID verification. Users can simply take a picture of themselves holding a government-issued ID card with their name and photo, and specialized software will match the ID’s information to the person holding it.

Compliance and Regulatory Considerations 

Identity verification is not only essential for preventing fraud and protecting customers, but it may also be a legal requirement for real estate professionals in your state. Check the regulations and laws in all counties where you conduct business, as they may require that property transactions be conducted only with verified identities. Failure to abide by these regulations can result in penalties and serious legal consequences for real estate companies, including fines, loss of license, or even imprisonment. 

Since 2016, geographic targeting orders (GTOs) have required that title insurance companies identify all individuals behind shell companies making a residential real estate cash purchase of $300,000 or more. If there is no external financing, such as a bank loan, the identities must be verified. GTOs were renewed in 2021, expanding the requirements to additional jurisdictions. You can find all of the locations covered by GTOs here.     

Another regulatory requirement to be aware of is "Know Your Customer" (KYC). It’s a crucial part of confirming identities and involves verifying personal information such as names, addresses, government-issued documents, and financial information. 

There are three tiers to the KYC process:

• Customer Due Diligence (CDD): All of a customer’s credentials are collected to verify their identity and evaluate their risk profile for suspicious account activity. 
• Customer Identification Program (CID): Financial firms obtain four pieces of identifying information about a client, including name, date of birth, address, and identification number.
• Enhanced Due Diligence (EDD): EDD is only necessary for customers that are at a higher risk of infiltration, terrorism financing, or money laundering, requiring that additional information be collected. 

While KYC is mostly associated with the financial services industries, it’s also important for real estate transactions. Why? Because real estate transactions are often used to launder money, most commonly through shell companies, which hide the identities of transaction participants during the purchase of a property. 

KYC ensures that no illegal activities occur during a property sale. By verifying the identity of property owners, you can prevent fraudulent transactions. It’s even more effective when combined with anti-money laundering regulations, which verify the source of funds and the legitimacy of the transaction. Lastly, KYC works to minimize mortgage and title fraud by authenticating financial information and verifying the rightful property owner. 

How CertifID Addresses Identity Verification

CertifID’s anti-fraud software protects your clients by using the latest digital device verification, multi-factor authentication, knowledge-based authentication (KBA), and KYC technology. It also analyzes more than 150 markers of fraud to verify your client’s identity and detect fraud in a matter of minutes.

‍Sign up for a demo today and set yourself apart from the competition by providing the highest standard of care throughout the entire transaction.