NATIONAL
NEWS
| Real Estate Scams—What
Agents Need to Know |
|
 According
to the FBI, Real Estate fraud is one of the fastest-growing,
white-collar crimes in the United States. Real Estate professionals
have long known about this type of fraud, but con artists
are constantly coming up with new scams, targeting homeowners
and Real Estate professionals alike. As an agent, your best
defense is education—learning how to spot the signs
of fraud, how to prevent scams, and how to protect yourself
and your clients from becoming victims.
Two weeks ago, Florida
Real Estate agents were shocked when they received a fax from
Coastal Escrow Services announcing that the company had shut
down. The company catered to hundreds of agents in Florida,
and managed millions of dollars in deposits. However, when
agents tried to close sales after the company’s closure,
the money was missing and the owners were nowhere to be found.
Michael Thorpe Real Estate
has since sued Coastal Escrow, claiming it refused to return
money owed to about 175 clients. The Real Estate brokerage
filed a lawsuit, seeking $559,304 in interest and attorney's
fees. In addition, there have been several complaints from
other brokerages, and the local police are investigating this
potential fraud. The owners of Coastal Escrow could not be
reached for comment.
 Real
Estate agents, by the nature of their business, are common
targets for scams. Many of these scams are considered legal
but are designed to trick agents into unnecessary costs or
expenses. For example, Roxanne, a Real Estate agent in Nevada,
recently fell prey to a scam targeted toward Real Estate professionals.
She received an e-mail from Money Tree, a company that offered
her a list of pre-approved buyers who were looking for an
agent to help them buy a home. She called the sales manager
for more information, and agreed to pay a one-time fee. Unfortunately,
she missed the small print on the blurry agreement fax she
signed, which stated that money would be extracted from her
bank account every month. “This is a scam I was seduced
into,” says Roxanne. “I had to cancel my business
[credit] card.”
Most Real Estate scams
are against the law. However, scams like equity skimming do
not always appear to be fraudulent, therefore many agents
unwittingly become a part of this illegal practice. Equity
skimming occurs when an owner sells his property to a straw
(bogus) buyer at a price well above its actual value. An investor
may use a straw buyer, false income documents, and false credit
reports to get a mortgage loan in the straw buyer's name.
Before the closing, the straw buyer signs the property over
to the investor in a quit claim deed which relinquishes all
rights to the property and provides no guaranty to title.
In many cases, the mortgage payments are never made and the
loan goes into default. This is an illegal activity, and one
that agents may ultimately be liable for, even if they are
unaware of the scam.
Cash back at closing is
another illegal practice that agents must pay close attention
to, as it is easy for agents and consumers to be fooled. At
first glance, cash back at closing looks like a good opportunity
for all parties involved. The buyer pays more than the actual
home value up front, and the seller returns the cash to the
buyer after the closing. It appears to be a win-win situation—the
buyer has cash after the sale to invest in remodeling or home
improvements; the seller gets more money upfront; the Real
Estate agent gets a better commission; and the lender gets
a bigger loan.
 However,
cash back at closing schemes are illegal and potentially damaging
to buyers, lenders and the Real Estate industry. Lenders unknowingly
take on risky loans and buyers are tricked into taking on
inflated loans. Housing values in the area are artificially
inflated, making housing less affordable and increasing property
taxes. If a buyer, appraiser, Real Estate agent, loan officer,
or another Real Estate professional willingly goes along with
a cash-back scam, he or she becomes an accomplice and is subject
to prosecution.
In addition to traditional
frauds, a new category of fraud has surfaced—online
fraud. Phishing is a relatively new scam that frequently targets
Real Estate professionals. It is an e-mail scam conducted
for the purposes of information or identity theft. In a recent
example, the Arizona Association of REALTORS® contacted
its members, warning them that a phishing e-mail had been
sent to several Arizona REALTORS®. The phishing e-mail
claimed to be from Arizona Association of REALTORS® and
instructed recipients to provide additional information in
order to restore account access. The e-mail led recipients
to a separate site, where they were told to provide personal
information. The Association encouraged its members to delete
these e-mails and not provide any of the requested information.
This is just one example
of a phishing scam. Many other legitimate-looking e-mails
appear to come from companies like Citibank, eBay or PayPal.
It is important to take a close look because the sender may
be trying to empty your bank account or steal your identity.
Always remember that no legitimate company will e-mail you
an unsolicited request for your password or other confidential
financial account information.
 While
these are some of the most common Real Estate scams, there
are hundreds more, and fraudsters are constantly coming up
with new ways to con people out of their hard-earned money.
Real Estate fraud continues to grow every year, posing a major
threat to homeowners and the Real Estate industry as a whole.
Therefore, it is critical that Real Estate professionals know
the law, obey the law, and refuse to play a part in any Real
Estate scams.
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