Arizona and Real Estate Fraud Go Way Back
Real estate scams, land grabs, and financial fraud started in the Arizona territory long before it was made a state in 1912.
“Arizona’s land fraud history goes back farther than many people might think,” said Greg Vogel, land expert, and CEO of Scottsdale-based Land Advisors Organization. “What some have tried to pull off in our state is surprising and even fascinating.”
Let’s dust off this desert state’s history of real estate scams.
Where It All Began – The Baron of Arizona
Arizona’s history of real estate schemes began back in the late 1800s with a man named James Addison Reavis. The self-proclaimed “Baron of Arizona” attempted one of the boldest, most brazen land grabs in U.S. history.
After fleeing from Missouri to Arizona in 1885 after creating fake furlough passes for Confederate soldiers, Reavis tried to claim ownership of a massive Spanish land grant that spanned the better part of Arizona to New Mexico. His plan hinged on the 1848 Treaty of Guadalupe Hidalgo, the treaty that ended the U.S.-Mexican War, and its promise to honor Spanish and Mexican land grants in the United States’ newly acquired territories. This was no overnight scam — it took 18 years for Reavis to lay out his scheme and execute it.
The origins of Reavis' scam are hazy. Some believe he met up with a similarly aligned man, Dr. Willing, who gave him the idea to forge documents so they could claim land in Arizona. Whether or not Dr. Willing was a key player, Reavis knew part of his scheme would require a wedding. It all started with a peasant girl that Reavis had convinced was the heir to this massive fortune, who he then married. With Sofia Treadway's hand in marriage, Reavis began creating fake birth certificates, deeds, wills, maps, and correspondences from the king of Spain.
These forged documents allowed him to stake his claim to the land, using his wife as a cover story. According to Reavis and the fake paper trail he created, his wife was the last surviving lineal descendant of the land claim made to the Spanish government.
Reavis collected more than $5 million from residents throughout this swath of land, taking money from notable figures in the area, influential industries, and even local officials. Reavis was rejoicing in his newfound wealth before a newspaper editor proved the documents were forgeries, and his 18-year scheme finally collapsed. The “Baron of Arizona” was arrested and charged with fraud. He was fined $5,000 and sentenced to two years in prison in 1896.
Scams Become Sophisticated – The “Godfather” of Land Fraud
Reavis wasn’t the last scammer looking to make his riches from the red sands of Arizona. In 1960, Ned Warren Sr. moved to Arizona under the instruction of the New York mafia to develop a land fraud operation. After bribing the head of the Arizona Department of Real Estate for a license, he began selling thousands of acres of unusable land in the Prescott Valley.
Warren reportedly sold the uninhabitable land, selling the same parcel of land to multiple buyers and then selling the mortgages on these parcels to multiple lenders.
The “Godfather” of land fraud was able to get away with his crimes for nearly a decade, successfully shifting money between 50 companies, including Western Growth Capital Corp. and Consolidated Mortgage Corp.
Warren’s fraudulent land and loan deals cost investors hundreds of millions before he was finally caught and charged in the late 1970s. He was sentenced to prison in 1978 and died two years later due to his poor health.
This fraud’s criminal activities were a family affair. Ned Warren Jr., Ned Warren Sr.'s son, was criminally charged in an $18 million land fraud scheme. We suppose it’s true what they say: Like father, like son.
Most Common Real Estate Scams
As a real estate professional, you are responsible for protecting your clients’ interests and should be aware of common real estate scams and schemes. Here are the five most common real estate scams to keep an eye out for:
1. Escrow wire fraud: Scammers claiming to work with your client’s title or escrow company will reach out to them with instructions on where to wire their escrow funds. Fraudsters will go to great lengths to enact this ruse, even setting up fake websites that appear similar to the title or lending company your client is working with, making their request seem like the real deal.
2. Loan flipping: Loan flipping occurs when a predatory lender persuades a homeowner to refinance their mortgage repeatedly, often borrowing more money each time.
3. Foreclosure relief: Homeowners who fall on hard times and get behind on their mortgage payments can become desperate to save their homes. Scammers will swoop in with offers of foreclosure relief to capitalize on homeowners’ vulnerability. In reality, they’re just collecting a large upfront fee with no real intentions of helping the homeowner.
4. Rental scams: Scammers post fake property rental ads on Craigslist or social media using photos from other listings to lure in unsuspecting renters. Fraudsters, who have no connection to the property or its owner, will ask for an upfront payment to let your clients see the property (or hold the money as a “deposit”).
5. Moving scams: Your client has found a new place to call home, and now they have to find a way to move all of their belongings. They might fill out a form for a moving company estimate, outlining all their items, and receive an estimate for $4,000 to ship them from their current home to their new one. Once this is done, the “company” will raise the estimate and corner your client into paying more to give their belongings back.