real estate scams Archives - Page 2 of 3 - Real Estate News and Commentary

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

If you like this post, do not copy; instead please:
reference the article,
like it at facebook
or re-tweet.

Protected by Copyscape Web Plagiarism Detector

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.

August 5, 2016November 23, 2021

Money laundering through real estate

In the post financial crisis era, when anti-fraud units from various law enforcement agencies stepped up activity to prosecute real estate related crimes; real estate continues to be a vehicle for scammers and fraudsters. Although mortgage fraud and identity theft have been the mainstay, money laundering through real estate has not received the same attention. That is until this year, when a pilot program was initiated to identify money laundering in residential real estate. The program was ordered through the Financial Crimes Enforcement Network of the US Department of the Treasury (FinCEN), which is tasked with the protection of our financial system by primarily combating money laundering (fincen.gov).

FinCEN’s concern is the laundering and/or structuring of money through all cash deals into luxury real estate, primarily through shell companies. Through the use of LLC’s or other business structures, individuals can hide assets anonymously. According to FinCEN, “Money laundering” is the disguising of funds derived from illicit activity so that the funds may be used without detection of the illegal activity that produced them.”

A 2008 FinCEN report (Money Laundering in the Residential Real Estate Industry: Suspected Money Laundering in the Residential Real Estate Industry; April 2008) found that suspicious activity reports (SAR) remained steady through 2002. However, began to increase in 2003, and sharply rose through 2005; the increase was significantly more than the rapidly expanding real estate market at that time. Findings of the report indicated that over 75 percent of those engaging in money laundering activities were unaffiliated with the real estate industry.

The program to identify money laundering in residential real estate seemed to be the next logical step in a series of investigations. As a result, FinCEN announced Geographic Targeting Orders (GTO) on January 13^th of this year. The GTO was enforced from March 1^st, 2016 through August 27^th, 2016. And required title companies to report the individuals behind the companies buying high end real estate without financing (all cash deals), located in Manhattan and Miami-Dade County.

In an April 12^th FinCEN news release, former FinCEN director Jennifer Shasky Calvery stated “The analysis and DOJ forfeiture cases continue to show corrupt politicians, drug traffickers, and other criminals using shell companies to purchase luxury real estate with cash. We see wire transfers originating from foreign banks in offshore havens where shell companies have established accounts, but in many cases we also see criminals using U.S. incorporated limited liability companies to launder their illicit funds through the U.S. real estate market.”

On July 27^th, FinCEN announced the expansion of the GTO, beginning August 28^th and lasting for 180 days. The geographic areas were expanded to include: New York City; Miami-Dade, Broward and Palm Beach counties; Los Angeles County; San Francisco, San Mateo, and Santa Clara counties; San Diego County; and Bexar County, Texas.

Increased scrutiny of money laundering in residential real estate compelled the National Association of Realtors® to issue Anti-Money Laundering Guidelines for Real Estate Professionals (realtor.org; November 15, 2012). The voluntary guidelines state that the real estate agent’s exposure is generally “mitigated” because most real estate transactions involve financing and mortgages (which are regulated). However, when encountering risk factors that fall outside the norm, NAR encourages due diligence and reporting of suspicious activity.

By Dan Krell
Copyright © 2016

Original published at https://dankrell.com/blog/2016/08/05/money-laundering-and-real-estate/

If you like this post, do not copy; instead please:
reference the article,
like it at facebook
or re-tweet.

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

If you like this post, do not copy; instead please:
reference the article,
like it at facebook
or re-tweet.

February 2, 2011July 16, 2019

Protect yourself from the dark side of the internet: How to report internet real estate scams

There is no coincidence that the proliferation of the internet coincided with one of the largest housing booms in history. The value of receiving real time data was priceless when fierce competition to buy homes existed; having the information first often made the difference between getting a chance to make an offer on a home and missing out completely. Brokers, agents, and consumers readily adapted to new internet applications and technology increasing access to data and information sharing.

During the same time, the internet also became the preferred tool of the scammer. The internet offers scammers an easy venue to create false identities and find victims around the world. Although internet scams come in a variety of forms, internet real estate scams are becoming more prevalent.

To collect and research internet related criminal complaints, the Internet Crime Complaint Center (IC3.gov) was created as a collaboration between the Federal Bureau of Investigation (FBI.gov) and the National White Collar Crime Center (NW3C.org). Once known as the Internet Fraud Complain Center, the IC3 provides victims of internet crimes a “reporting mechanism” to alert authorities of possible criminal activity and/or civil infractions.

Numerous complaints regarding real estate internet scams prompted the IC3 to issue a warning in March 2010 to those who post ads on internet classified websites. Among the many forms of internet real estate scams, rental scams and duplicate real estate postings top the list.

Rental scams involve a potential tenant sending a deposit or rent check (usually without seeing the home). The scam is that the potential tenant will ask for their funds to be returned to them (either as an excess refund or a total refund) after their check is deposited in the victim’s bank account. Because the check appears to have cleared and the victim returns the funds, the victim later finds out that check was bogus and they are now responsible for the full amount of the scammer’s check.

Another scam garnering complaints is the duplication of legitimate real estate ads by scammers, posing as the home owner or real estate broker. This scam has the scammer posting a duplicate ad on internet classified sites using the wording and photos that are copied from the valid real estate ad (originally posted by the owner or the broker). The scammer creates a fake email address using the owner’s or broker’s name to make their post appear legitimate. When the victim responds to the fake post, they receive an email from the “owner” saying that the home needs to be rented while they are out of the country; the victim is asked to send funds out of the country to the “owner”.

Popular classified websites, such as Craigslist.org, warns consumers of internet scams. In addition to the warnings, Craigslist also posts tips to protect you from scammers. Craigslist says that if you follow their first tip “Deal Locally with Folks You Can Meet in Person…” you can avoid 99% of the scam attempts on their website.

FBI.gov (“Scams and Safety” link) and IC3.gov offer an extensive list of tips to protect you from real estate and other internet scams. If you are a victim of an internet scam, you can file a complaint with IC3; valid complaints are forwarded to local, federal, and/or international law enforcement and/or regulatory agencies for investigation.

By Dan Krell
Copyright © 2011

More news and articles on “the Blog”
Comments are welcome. This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

November 27, 2009October 5, 2019

Is this a valid offer or a scam?

These signs are all over the Silver Spring area. The sign reads: “Learn to make $$ in real estate in today’s market…” Given that these signs are handmade, written on poster board with marker on a wood tacking strip- you have to wonder how much money these guys are actually making in real estate!?

Is it a scam? I haven’t called the number on the sign, so I don’t have enough information to make a judgement on the offer. But, given the amateurish signs and unlisted phone number make me wonder about the validity of the money making claim and business. In general, the fact that many people are drawn to offers to make money will most likely make scam artists busy.

Before embarking on such endeavors, it is probably a good idea to call Montgomery County Office of Consumer Protection (240.777.3636), or the Maryland Attorney General-Consumer Protection Division (www.oag.state.md.us/consumer) to ask about such “money making” offers or businesses.

I’m curious, has anyone else seen these signs (in MD or elsewhere?) What do you think?