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Introduction
Few of us think about floods, but when they occur, they are among the most destructive natural forces on Earth. Water, chemicals, mud, and sewage seep everywhere and into everything. Afterward, clean-up takes months, if not years, and costs an arm and a leg. Mold flowers and coats your home and belongings, and the stench of decay may never disappear. A flood ruins lives, memories, homes, and cars.
Thanks to hurricanes Katrina and Rita, insurance companies will be declaring hundreds of thousands of cars, trucks, and SUVs as flood-damaged vehicles. Half of these vehicles will be sold at insurance auctions as scrap vehicles, some will go straight to the junkyard for crushing, and others will be repaired and placed back in service. To bring top dollar, those that make it back onto the road will likely have their titles "washed," so that official evidence of the flood damage is erased. If you're in the market for a nice used car, and you're looking for a great deal, you're also the target of the people who buy flood-damaged vehicles, rebuild them, "wash" the titles, and sell them in another state without telling the new owner about the vehicle's history.
You can avoid getting taken by these scam artists by spending a little money to perform due diligence on your prospective purchase. On the following pages, we'll tell you what title washing is, how it works, and what you can do to avoid getting scammed as thousands of formerly waterlogged vehicles make their way north, east, and west from the Gulf Coast disaster zone.
How Title Washing Works
When vehicles are crashed, stolen and stripped, or flooded beyond reasonable repair, an insurance company pays the owner a fair market value for the vehicle, takes possession of the vehicle, and issues a branded title for the vehicle that indicates the type of damage that the vehicle suffered. The new title will typically indicate one of the following types of damage: salvage, rebuilt wreck, or flood-damaged.
Once the new title is issued, the vehicle is hauled to an insurance auction. Most of the buyers at an insurance auction represent legitimate businesses such as body shops, car dealers, and salvage yards, but there are also opportunistic vehicle re-builders looking to make a quick buck. These vultures are vying to buy as many (formerly) premium vehicles as they are able, with the prospect of re-building them as cheaply as possible and selling them back into the auction circuit at a premium. Car dealers and consumers are their prey. And whenever there is a major natural disaster that produces a lot of damaged vehicles, these weasels multiply.
To maximize resale value and profit, these unscrupulous businesspeople will sometimes re-register a vehicle that has been declared salvage or flood-damaged in a state that doesn't recognize such title declarations from the originating state, thus "washing" the title and clearing the damage from the paperwork. The smarter of the breed make sure their tracks are covered by performing this act in several states, and then ship the vehicle to a distant region for resale. Sometimes, usually when the car is stolen, they even go to the extent of assigning a new VIN (Vehicle Identification Number) to the vehicle.
Once the vehicle is re-registered and the damage is washed clean from the title, it is fed back into the auction circuit or sold directly to a consumer at a premium. At auctions, these scumbags will sometimes bring along co-bidders to drive up the price of a vehicle for maximum profit. The wrecked or flooded vehicle is sold and winds up at a local car lot, with an equal chance of landing at either a Mom-and-Pop shop or the used car row of a new car dealership.
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