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December 8, 2016July 4, 2019

Real estate fakery

“Fake news” is the cause du-jour that has energized many into a movement to stop the spreading of falsehoods. Ironically, the crusaders who point their finger at alleged sources of fake news may also be guilty of promoting it; Fake news accusations are sometimes used to promote misinformation and half-truths. Unfortunately, fake news has become a meme that is becoming trite and meaningless. The promotion of fake news may be found throughout history, but real estate fakery is well established in the industry.

Fake real estate news isn’t always a manufactured story. It is more often a story that is misleading. When reporting real estate, the media typically sensationalizes a headline without reporting all the facts, which can make you draw inaccurate conclusions. An example of this is when the local media report on rising national average home prices, giving the false impression that the local market is expanding at the same pace. This is a mischaracterization of the local market because the regional data is often much different from the national trends.

The National Association of Realtors® is sometimes guilty of real estate fakery too by stating conjecture as fact when explaining market deviations. An example of this is when existing home sales declined about seven percent during February 2014 (March 20, 2014; nar.realtor). It was explained away because of the poor weather and snow that occurred that month. However, if snow is causal to poor winter home sales; then why was there a five percent increase in Montgomery County Home Sales during February of 2010 – when Snowmageddon and Snowzilla occurred? From “Real Estate, Climate Change, and Data-Porn” :

The National Association of Realtors® (realtor.org) March 20^th news release reported that February home sales remained subdued because of rising home prices and severe winter weather. The decline in existing home sales was just 0.4% from January, but was 7.1% lower than last February’s figures. NAR chief economist Lawrence Yun stated that home sales declines were due to “weather disruptions, limited inventory, increasingly restrictive mortgage underwriting, and decreasing housing affordability.” And although it may sound bad, Yun actually has a rosy outlook saying, “…Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year.”
So, if a snow filled and cold February is to blame for poor home sales, was Snowmagedden and Snowzilla the reason for increased home sales during February 2010? Of course not. And although home sales increased 5.1% year-over-year here in Montgomery County MD during February 2010, it was mostly due to increased home buyer demand that some speculate was due in part to the availability of first time home buyer tax credits.
Housing data cause and effect is only conjecture unless it is directly observed. To make sense of the “data-porn” that is excessively presented in the media, often without proper or erroneous explanation; economic writer Ben Casselman offers three rules to figure out what the media is saying (Three Rules to Make Sure Economic Data Aren’t Bunk; fivethirtyeight.com): Question the data; Know what is measured; and Look outside the data. Casselman states, “The first two rules have to do with questioning the numbers — what they’re measuring, how they’re measuring it, and how reliable those measurements are. But when a claim passes both those tests, it’s worth looking beyond the data for confirmation.”
Consumers also perpetuate fake real estate news by exaggerating their (good and bad) experiences, usually offering unsolicited advice or posting to the internet (to real estate forums and websites). Facts are often distorted or misrepresented about specific real estate situations, such as divorce, short sales, and foreclosure. Unfortunately, people in similar situations who are looking for answers are at their most vulnerable; and can take the “advice” as gospel, seeking a similar outcome with their transaction.

More real estate fakery on the internet comes in the form of fake reviews. Fake reviews has been an ongoing issue for a number of years. And although the online real estate portals have claimed to use artificial intelligence and other means to thwart the trend, fake reviews and those who provide them have adapted and have become more sophisticated such that it is increasingly difficult to spot. Even back in 2011, Cornell researchers claimed that detection of fake reviews is “well beyond the capability of human judges” (Proceedings of the 49th Annual Meeting of the Association for Computational Linguistics, pages 309–319).

From “Are internet Realtor® reviews real or fake?“:

The National Association of Realtors® (NAR) code of ethics prohibits deceptive practices, which includes posting or encouraging fake reviews. However, Lani Rosales of AGBeat (Sketchy new trend – hiring fake online review writers) argues that there has always been an element posting fake Realtor® reviews and testimonials.

Scammers and fraudsters also use fake real estate news to their advantage. Fake real estate listings have been an issue since the inception of the internet. Fraudsters publish pictures and information from a prior sale or rental, or may lift the photos and information from a legitimate listing being marketed by an agent. The con is to have the consumer send money, often before the home can be seen. Craigslist warns consumers: “Avoid scams, deal locally! DO NOT wire funds (e.g. Western Union), or buy/rent sight unseen.”

Real estate agents are also culpable for spreading fake news, which may be why agents are often characterized as being fake or phony sales people who will bend the truth to make a sale. Of course there are some in the industry who fit the stereotype, but many are “straight shooters.” Unfortunately, it is common for agents to use puffery to make a home seem nicer (until you visit it and realize the “rustic charmer” is a neglected home). Not as often, agents may create a history for the home that is not real to promote a lifestyle or even hide relevant defects.

When it comes to real estate news, advice, and listings – don’t take anything for granted. Don’t fall prey to real estate fakery – know the source, and verify the information with a local real estate professional or your real estate agent.

By Dan Krell
Copyright © 2016

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

February 4, 2016July 23, 2019

Evolving real estate scams – vigilance needed

Last year, an old wire transfer scam evolved to target Realtors® and their clients. A December 15^th “Alert” put out by the National Association of Realtors® (realtor.org) reminded NAR members and consumers to be vigilant. “The hackers often send an email that appears to be from an individual legitimately involved in the transaction, informing the recipient, often the buyer, that there has been a last minute change to the wiring instructions. Following the new instructions, the recipient will wire funds directly to the hacker’s account, which will be cleared out in a matter of minutes. The money is almost always lost forever.”

NAR offers guidance and “best practices” to prevent being a victim of scams and cybercrime. Even though your agent should be mindful and exercise caution, you should take the initiative to protect yourself. You should be attentive and alert to the possibility of email scams by: not sending sensitive information via email; never trust unverified email; you should not interact with suspicious emails; clean your email regularly; do not conduct business over free WiFi hotspots; and use strong passwords that are changed regularly.

NAR stipulates that the guidance is “not all-inclusive,” and you should check with your agent about their office’s cybersecurity policy. The warning states that the scammer emails are “extremely convincing,” such that “many sophisticated parties have been duped.” No one is “too small” to target, and don’t be over confident about being tech savvy. “This fraud is pervasive, convincing, and constantly evolving.”

According to an August 28th report issued by the Federal Bureau of Investigation (Business E-Mail Compromise, An Emerging Global Threat; fbi.gov) BEC (Business E-Mail Compromise) is an insidious scam that is not only targeting real estate, but all businesses and consumers. According to FBI Special Agent Maxwell Marker (of the FBI’s Transnational Organized Crime–Eastern Hemisphere Section in the Criminal Investigative Division), “BEC is a serious threat on a global scale…It’s a prime example of organized crime groups engaging in large-scale, computer-enabled fraud, and the losses are staggering.”

BEC statistics compiled by the FBI’s Internet Crime Complaint Center (ic3.gov), from October 2013 to August 2015 reported 8,179 total victims (U.S. and non-U.S.) and $798,897,959.25 combined U.S. and non-U.S. exposed dollar loss. The IC3 has reported that computer intrusions related to BEC are on the rise; and can be initiated via a phishing scam that downloads malware that can access the victim’s data, passwords, and financial information.

Multiple versions of the scam are being implemented, and it’s likely that the tactics will change as cybersecurity catches up with the scammers. The most recent version identified by the IC3 has fraudsters claiming to be a law firm handling confidential information (including real estate transactions). The scammer may use email and/or telephone to contact potential victims, who are pressured to act quickly at the end of the business day.

To learn more about BEC, protection strategies and how file a complaint – visit the Internet Crime Complaint Center (ic3.gov). If you are a victim of BEC, the IC3 recommends that you: contact your financial institution immediately; request that your financial institution contact the corresponding financial institution where the fraudulent transfer was sent; contact your local FBI office (if the wire is recent, the US Department of Treasury Financial Crimes Enforcement Network might be able to help return or freeze the funds); and, regardless of dollar loss, file a complaint with the IC3.

By Dan Krell
Copyright © 2016

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July 23, 2015May 21, 2019

Bait and switch tactics by real estate agents

The Federal Trade Commission (FTC.gov) states in its Advertising FAQ’s: A Guide for Small Business, “It’s illegal to advertise a product when the company has no intention of selling that item, but instead plans to sell a consumer something else, usually at a higher price…”, when describing “bait and switch” advertising.

The term “bait and switch” is sometimes bandied about by disgruntled consumers, when referring to their encounters with real estate agents. Although the scenarios depicted by the annoyed consumers require legal scrutiny to determine if the situations meet the definition of bait and switch as described by the FTC, it makes you wonder about what some agents are doing and/or saying to get business.

Bait and switch complaints are often about homes that are advertised for rent or sale, but are found to be off market after calling agent. These listings are often the result of listing syndication gone awry; or worse, “scraped” listing information (Internet scraping is when website data is taken and collected, often without authorization) reposted by an unauthorized website to attract traffic away from the website of origin.

Scraped listing information can float around cyberspace for months or years after a home has sold. Although there has always been an element of out of date listing information found on the internet; sham listings and unauthorized postings of listings used to lure consumers, are frequently cited by both consumers and agents because the information is often misleading or incorrect. And although some responsibility may be placed on the workings of the internet; some real estate agents may be to blame for using questionable advertising practices to get their phone ringing to attract home buyers. Such practices include: advertising other agents’ listings as their own, or advertising homes that are off the market.

The MLS syndicates and distributes home listing information across the internet to authorized websites, and updates the listings to maintain accuracy and integrity of the MLS. Although the internet seemed to coalesce for a brief time to present reliable home listings and other real estate information, while deterring scammers and rogue websites; the recent surge in home sales and other economics may be responsible for a return to a “wild west” atmosphere in cyberspace. This year’s reshuffling of MLS data access to major real estate portals, forcing some sites to find missing information elsewhere, is likely to have added some confusion.

Home buyers aren’t the only ones complaining; as some home sellers have similar complaints, saying they’ve been misled. Sometimes the complaint is that their agent “promised” a high sale price, only to be coerced to reduce the price at a later time; or the agent over-promised services that were never delivered.

It must be said that many buyer and seller complaints stem from their dissatisfaction, rather than an actual breach of ethics; and yet many legitimate ethical breaches go unreported. Regardless, it is unfortunate that some real estate agents resort to questionable sales tactics to attract buyers and sellers; and either learn the tactics from real estate trainers, and/or develop them on their own and share with other agents. Even though a Realtors® Code of Ethics exists to guide professional behavior and business practices, some have a “catch me if you can” attitude.

Due diligence, on your part, can make your home buying or selling experience increasingly trouble free and more enjoyable.

Original published at https://dankrell.com/blog/2015/07/23/bait-and-switch-tactics-by-real-estate-agents/

By Dan Krell

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May 23, 2014July 3, 2019

Local level home owner and buyer protection

Home owner and buyer consumer protection exists at all levels of government. For example, the creation of the Consumer Financial Protection Bureau (consumerfinance.gov) in 2010 brought together in one department oversight and enforcement for federal consumer financial laws. Likewise, Maryland has a Consumer Protection Division housed within the Office of the Attorney General (www.marylandattorneygeneral.gov); which provides information to assist consumers in making educated decisions, as well as offering mediation services to resolve consumer complaints. Some of the housing related consumer advocacy offered by the CPD includes: the administration of the Home Builder Registration Unit; and education about the Maryland Foreclosure Counseling Services Law, as well as “flipping scams.”

Many local governments also have a number of specific protections for home owners and buyers. An advantage of living in Montgomery County MD is the availability of housing related services and assistance with specific housing issues to home owners, buyers, renters and landlords.

To assist home buyers in understanding the associated costs of home ownership, Montgomery County requires sellers to disclose utility and estimated property tax information. Enacted in 2007, Bill 24-07 requires home sellers to provide an accurate estimate of what the property tax would be for the first full year of ownership. Home sellers and real estate agents access the estimated property tax information from the Montgomery County Office of Consumer Protection website (montgomerycountymd.gov/ocp).

The OCP also enforces the County’s utility bill disclosure law that requires home sellers to provide a history of the prior 12 months of electric, gas, and heating oil bills for a property, or a usage history for the same time period. Additionally, the seller must provide Montgomery County Department of Environmental Protection approved information to help the buyer with energy conservation choices and options. If you’re selling your home, your listing agent can provide you with the approved Greater Capital Area Association of Realtors® forms to fulfill these obligations.

County residents finding themselves at odds with their Home Owners or Condo Association can ask for help from the Office of Common Ownership Communities. Housed within the OCP, the OCOC offers information and a dispute resolution program for home owners, boards, management companies, and managers. The OCOC pledges transparency, integrity, and a commitment to the highest ethical standards.

If you’re buying a new home in Montgomery County, you are provided with an extra layer of protection through Montgomery County Code Chapter 31C, which requires new home builders to be licensed by the Montgomery County OCP as well as provide a new home warranty that meets specific criteria.

If you own rental property or are a tenant within the County, you’ll find the Office of Landlord – Tenant Affairs (housed within the Department of Housing and Community Affairs) a resource of valuable information. Besides publishing a Landlord – Tenant Handbook, the commission provides information on licensing, security deposits, evictions, leases, and rent increases. Besides informing of general rights and responsibilities of landlords and tenants, it offers a free and quick avenue for tenants to seek amicable dispute resolution (http://montgomerycountymd.gov/DHCA/housing/landlordtenant).

Home owners and tenants who have issues with their cable TV provider can seek assistance from the Office of Cable and Broadband Services (montgomerycountymd.gov/cable). Housed within the Office of Technology Services, the “Cable Office” administers the County’s cable TV franchise agreements; the office investigates and resolves subscriber complaints.

Check with your real estate agent about local home owner and buyer protections. Many consumer protection agencies (such as those listed above) have websites where information is posted to educate consumers.

September 18, 2013July 4, 2019

Five years ago – was real estate to blame for financial crisis

Five years ago this week Lehman Brothers filed for bankruptcy and almost immediately initiated the financial crisis. What followed in the wake of the Lehman Brothers collapse was a domino effect of financial sector failures which resulted in: a number of bailouts and government takeovers of failing entities; finger pointing and blame for the foreclosure and financial crises; and a number of laws to address the issues that are thought to have contributed to the crisis.

In retrospect, the financial crisis may have been circuitously the result of the foreclosure crisis, which was entering its second year. At the end of 2006, the real estate market was already seeing a major shift from the record breaking seller’s market, to a market that saw inventory climb to record highs. At that time I wrote about how nationwide foreclosures had increased 27%, and how economists were expecting existing home sales to continue at the same levels into 200, which was to initiate a housing recovery.

By the spring of 2007, the experts’ opinion of a short lived foreclosure crisis was not to be realized; and the blame game for the foreclosure crisis was in full swing. Trying to make sense of the foreclosure crisis, almost daily media reports of inflated appraisals and misrepresentation of mortgage terms were popular. At that time there was no way to pinpoint one source for the crisis. While the foreclosure crisis was in full swing, we did not have the perspective to understand all the participants and components that contributed to the resulting Great Recession.

Testimony to the Financial Crisis Inquiry Commission in 2010 included descriptions of the CDO (collateralized debt obligation) market. Financial brokers packaged mortgages into CDOs and sold them worldwide; the returns for these CDOs were so good that the demand was seemingly insatiable. As the demand for CDOs increased, the number of mortgages that were needed also increased. To meet the increasing demand of mortgage production, the temptation to bend the rules and lend to almost anyone seemed to be at the heart of this piece to the crisis; and many of those mortgages were subsequently foreclosed. The fraud seemed to reach in other areas too, including financial rating agencies that graded subprime CDOs as “AAA” to make them more appealing.

To improve accountability and transparency in the financial system, to protect consumers from abusive financial services practices, and to end “too big to fail,” the landmark Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted. The broad and wide sweeping Dodd-Frank legislation created the Consumer Financial Protection Bureau and the idea of the Qualified Residential Mortgage. Although the legislation has been widely acclaimed; there are many who remain critical of the legislation, saying that the markets could be set up for the next crisis.

Only in retrospect we can begin to understand the complexity of the dynamics which brought about the almost collapse of the financial sector through the mortgage markets. And while there have been a number of hearings, books, working papers, and dissertations about the causes and effects of the foreclosure and financial crises, we still seek to condense complex issues into a digestible statement. If a movie is produced about the financial crisis, the slugline might be: “Financial crisis that was a result of fraud that took advantage of a hot real estate market and easy money.”