Real estate scammers emailing you

real estate scammers
Business email scams (infographic from fbi.gov)

The warnings of real estate closing scams were rapidly broadcasted in 2015 .  And by 2016, there was awareness that criminals were wholeheartedly targeting all parties involved in real estate transactions through phishing emails.  The phishing emails that were sent seemed legit, and in many cases appeared to have come from your agent or title company, but were actually sent by criminals intent on having you wire money to them.  No one was immune from receiving these emails. Real estate scammers targeted home buyers and sellers, real estate agents, title companies and attorneys.

The FBI (fbi.gov) categorizes this type of crime as Business E-mail Compromise (BEC)/E-mail Account Compromise (EAC).  The scam didn’t begin in 2015, but the FBI began tracking this type of crime in 2013.  But it wasn’t until 2015 that it seemed as if the real estate scammers used BEC/EAC to target the real estate industry, and it spread ike a plague.  And despite efforts by the real estate industry to prevent such crime, BEC/EAC is on the rise.  Real estate scammers have adapted and have become increasingly sophisticated.  Many of the phishing emails (calls) are not distinguishable from the real thing.

Statistics compiled by the FBI Internet Crime Complaint Center (ic3.gov) indicate that there were 78,617 incidents of BEC/EAC worldwide between October 2013 and May 2018.  Over half of these victims (41,058) were in the U.S.  Total global losses during this time period is calculated to be $12,536,948,299 (U.S. losses were $2,935,161,457). 

Unfortunately, the real estate industry has been a target of interest since 2015.  According to FBI statistics, the number of BEC/EAC real estate related victims increased 1100% between 2015 and 2017.  So far, the highest number of BEC/EAC real estate victims were reported in May 2018, while the highest dollar loss from real estate victims was reported in September 2017.  The number of complaints and losses is likely correlated to real estate market activity (notwithstanding efforts to thwart such crimes).

How do criminals know about your real estate transaction?  The internet.  Real estate scammers use information available on real estate portals to identify homes that are pending (under contract) along with agent contact information.  The information is used to infiltrate agents’ emails to compile client names and closing information to target everyone involved in the real estate transaction with phishing emails.  The emails typically request changes in settlement funding.  The changes can request wire in lieu of check, and/or changes in the wire instructions (which would send funds directly to the criminals). 

The FBI has also described BEC/EAC spilling over into phone calls!  In addition to sending spoofed emails, the criminals are also calling you asking for personal information for “verification purposes.”  Experts suggest you be cautious about calls asking for changes in payment types and/or wire instructions.  The fake calls are so real such that victims have reported not being able to tell the difference. Security experts recommended that you create code phrases to verify phone calls with your agent and title company. 

Experts also warn of any communication that is exclusively email and/or asks you to call for verification purposes.  It is likely that any contact information listed in the phishing email is fake.  If the email sender claims to be from the title company or your agent, call them directly to verify the authenticity of the email.  If you receive any email requesting personal information and/or changes in payment/wire instructions, verify the email is legitimate by calling the sender directly (and use your code phrase).

Original article is published at https://dankrell.com/blog/2019/11/19/real-estate-scammers-emailing-you/

By Dan Krell
Copyright© 2019

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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.

Protecting Home Buyers

protecting home buyers
Home Buying Steps (infographic from nar.realtor)

Of the handful of new Maryland real estate related laws that go into effect this week, two are highly important for you to know.  These are passed for the purpose of protecting home buyers and sellers. One protects your confidential information, and the other concerns your earnest money deposit on a Maryland home sale.

Protecting home buyers and sellers’ confidentiality is HB1228/SB807, which was effective October 1st.  Besides cleaning up the definition of a brokerage relationship, the bill addresses client confidentiality.  Unless a client consents in writing, Maryland licensed real estate brokers and agents may not disclose confidential information received from or about a client to any other party and/or their representative (including their real estate agent).  The non-disclosure of confidential information protects past and present clients, and now is extended to potential clients as well. 

Confidential information is defined as: a seller/landlord willing to accept less than the listing price; a buyer/tenant willing to pay more than their offer; motivation of a client; the need or urgency to buy, sell, or rent; any facts that led the client to sell, buy, or rent; and also relates to the client’s negotiating strategy.  However, the duty to maintain confidentiality doesn’t apply to the disclosure of material facts about a property (which a home seller is also required to disclose).

Protecting home buyers deposits is effective October 1st. HB222 requires a written agreement between the buyer, seller and the escrow agent holding the earnest money deposit (EMD).  The EMD is described as “consideration” for a seller to accept an offer.  An escrow agent is the entity who accepts and holds the earnest money.  The EMD is credited to the buyer at the time of settlement.  However, if sale does not settle, the disbursement of the EMD can become contentious.  Under certain circumstances, the contract of sale is clear about when the buyer may receive their EMD.  However, real estate is not always black and white, and there are occasions when a dispute arises about whom is entitled to receive the EMD.

It used to be common practice for a real estate broker to accept and hold the EMD.  Real estate brokers are bound by law as to how to handle and care for the EMD.  However, brokers are increasingly reluctant in accepting EMDs for a number of reasons.  Instead, brokers are directing their agents to have title companies to hold these deposits.  But home buyers (and sometimes their agents) don’t realize that a title company is regulated differently than a real estate broker, and the EMD may not be handled as expected.

HB222 is important because it fills the gap for escrow agents who do not already have specific guidelines for handling EMDs. (HB222 doesn’t apply to Maryland real estate brokers and agents, and Maryland registered home builders selling new homes, as they are already regulated).  The bill provides transparency so both the buyer and seller understand the terms for holding the EMD.

The bill requires an escrow agent to enter into a written agreement with the buyer and seller when the escrow agent agrees to hold an EMD for a Maryland home sale. The written agreement must contain the amount of the EMD; the date the EMD was given to the escrow agent; the responsibility of the escrow agent to notify the buyer and seller if the EMD funds are “dishonored” (e.g., bounced check); the conditions under which the escrow agent may release the EMD; and the process to address disputes over the release of the EMD.

Original article is published at https://dankrell.com/blog/2019/10/28/protecting-home-buyers/

By Dan Krell
Copyright© 2019

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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.

Autumn Home Selling

autumn home selling
Autumn home selling

What was once considered a winding down period for the year’s home sales, has become housing’s second wind.  Autumn is not only a time when the leaves start falling, but it also has become a target selling season for home sellers who miss the spring market.  Autumn home selling is also a second chance for those who could not sell their home earlier in the year.  In fact, the fall has become an active home selling season.

The general consensus for the autumn home selling phenomenon is that home sale inventory is low.  But the truth is that the fall tends to be when home sale inventory begins to decrease anyway.  Many home sellers who didn’t sell their home during the spring or summer will be pulling their homes off the market.  Sure, new listings are available during the fall, but not as many as there were in the spring.  Fall is a time for home buyers and sellers to strike while the iron is hot.  The combination of fewer listings along with serious home buyers and sellers makes the fall housing market a brisk selling time. 

This year, autumn home selling may be different.  Existing home sales have declined year-to-date (compared to last year).  The National Association of Realtors reported that as of June, existing home sales are about 2.2 percent behind last year’s sales.  Year-to-date Montgomery County home sales are 2.1 percent below last year’s sales.  This decline actually started last fall.  The home sale drop-off stifled what could have been a record year for 2018 home sales.

Autumn home selling

If you’re selling a home this fall keep an eye on neighborhood home sales.  Setting a reasonable list price will be key to getting your home sold.  Keep in mind that although home sale prices continue to climb, monthly appreciation is slowing.  The S&P CoreLogic Case-Shiller Home Price Index (spindices.com) reported a year-to-date nationwide 2.29 percent increase.  You get a sense of the magnitude of decelerating appreciation when compared to 2018’s increase of 4.55 percent, and 2017’s increase of 6.24 percent nationwide.  The year-to-date Montgomery County average home sale price is about $554,932, which is only an increase of 1.2 percent from the same time last year (MarketStats by ShowingTime). 

Over pricing your home can be a disastrous mistake during the fall market.  Don’t be greedy, and be prepared to adjust your pricing strategy.  There are many storms brewing that can easily scare home buyers.  If the list price is too high, you may end up with low ball offers because of a protracted time in the MLS. 

Although having less competition makes it a good time to sell your home, it can also be challenging.  Fall weather can be significantly different day to day.  Be prepared to adjust the thermostat.  Make sure your HVAC system gets a fall service so it will be ready for colder temps.   

Don’t forget to keep up with your home’s curb appeal.  Although you may want to get lazy about maintaining your lawn, don’t let it grow too high.  Also, remove excessive leaves from the ground too, as this can also diminish your home’s curb appeal.

Make accommodations for home buyers to visit your home.  Many home buyers will probably schedule tours after work, when it will be getting dark.  Open houses are still a good option for a fall home sale.  Turnout may be scant, but fall open house visitors are more likely to buy.

Original article is located at https://dankrell.com/blog/2019/09/15/autumn-home-selling/

By Dan Krell
Copyright© 2019

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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.

Take it or leave it

take it or leave it
Home staging (infographic from nar.realtor)

If you’re listing your home for sale with a Realtor, you will likely encounter a one-page disclosure that’s important yet often neglected.  The purpose of the “Inclusions/Exclusions Disclosure and Addendum” is to communicate with the home buyer what conveys with house and what you intend to take.  This helps you decide to “take it or leave it.” If completed as intended, the disclosure can help you avoid a dispute with the buyer after closing. 

It’s understandable that, after completing a stack of listing documents and disclosures, home sellers want to quickly check the boxes of the obvious items that convey with the sale.  However, in their haste, many sellers overlook or forget about the fixtures they intend to take it or leave it when they move.  Common items that home sellers take include the chandelier (and other lighting fixtures), bathroom mirrors, brand new washer/dryer, or the extra freezer. 

The up-to-date GCAAR Inclusions/Exclusions Disclosure and Addendum helps you decide what fixtures and personal property convey.  The first paragraph states: “The Property includes the following personal property and fixtures, if existing: built-in heating and central air conditioning equipment, plumbing and lighting fixtures, sump pump, attic and exhaust fans, storm windows, storm doors, screens, installed wall-to-wall carpeting, window shades, blinds, window treatment hardware, mounting brackets for electronics components, smoke and heat detectors, TV antennas, exterior trees and shrubs. Unless otherwise agreed to herein, all surface or wall mounted electronic components/devices do not convey…

You’ll notice that the disclosure specifically mentions wall mounted electronics and mounting brackets.  This wording was added because new norms emerged with new technologies that created disputes about what was considered “permanently” attached.  As wall mounted TV’s became commonplace, home buyers expected plasma TV’s to convey and unsightly wall mounts to be removed. 

A more recent technology incorporated into a home that has become commonplace is the solar panel.  Do they convey or not?  Many home owners who install solar panels don’t actually own them, they are leased.  Of course, confusion and disputes regarding solar panels have occurred, and are now listed in the Lease Items and Service Contracts section. To help clarify what leased items convey and transfer, the Inclusions/Exclusions Disclosure states: “Leased items/systems or service contracts, including but not limited to: solar panels & systems, appliances, fuel tanks, water treatment systems, lawn contracts, security system and/or monitoring, and satellite contracts do not convey unless disclosed here…”

It’s not uncommon for a dispute to arise at the walkthrough because the home seller decides to take a fixture or appliance that is not listed as an exclusion.  Regardless whether the seller misunderstood or had a last-minute change of heart, the home buyer may be demanding the return of the item(s).  And since the Inclusions/Exclusions Disclosure and Addendum is part of the contract, the buyer may have recourse.

Take it or leave it?

If you’re selling your home, deciding to “take it or leave it” may be the last on your mind. But take the time to read and complete the disclosures carefully.  When completing the Inclusions/Exclusions Disclosure don’t be afraid to over communicate your intentions about taking or leaving fixtures and appliances.  Make sure you list items you will take as “Exclusions.”  It also helps to tag these items indicating “Does Not Convey,” so home buyers are on notice when they visit.   Also, don’t forget to identify older appliances or fixtures that are staying, so the buyer doesn’t assume you are removing them.  And of course, ask your agent for assistance if you’re unsure if specific items are fixtures and should be listed in the disclosure.

By Dan Krell
Copyright © 2019

Original located at https://dankrell.com/blog/2019/07/29/take-it-or-leave-it/

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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.

Buyer agent commission controversy

buyer agent commission
Annual mean wage of Real Estate Brokers (infographic from bls.gov)

One of the hottest controversies in real estate that you have yet to hear about is who should pay buyer agent commissions. Agent commissions controversies have been around in one form or another for decades.  The commissions issue typically becomes front and center when the housing market is doing well.  This time, however, the buyer agent commission controversy is gaining steam and has the potential of changing (and possibly upending) residential real estate and online real estate platforms.

The debate is center in an anti-trust class action law suit filed against the National Association of Realtors and a number of major real estate brokerage brands.  As I reported last month, the law suit alleges that the defendants engaged in “anticompetitive practices.”  Among the alleged issues listed in the law suit, includes a “Buyer Broker Commission Rule” that requires buyer agent compensation for a home to be listed in the MLS. 

Regardless of how a listing agreement “structures” broker commissions, the perception and general acknowledgement is that the (buyer broker) buyer agent commission is paid by the seller.  The seller typically pays the listing broker a commission, which is shared if another broker represents the buyer.  This commission “pass-through” is responsible for the growth of online platforms selling home buyer leads and contacts.  It has also been responsible for the growth of real estate groups that act as “buyer mills,” which rely on high volume leads generated via online platforms and other means.  It can be argued that because of Buyer Broker Commission Rules, the billions of dollars that are generated and spent on home buyer leads (as well as buyer rebates) can be traced back to the home seller. 

Home sellers are not the only victims.  A study (jstor.org/stable/24887258) conducted by Joachim Zietz and Bobby Newsome (A Note on Buyer’s Agent Commission and Sale Price; The Journal of Real Estate Research; 2001, Vol.21 No.3 p.245-254) revealed that buyer agent commissions had a positive effect on home sale price, but only on lower-priced homes.  The conclusions suggested that buyer agents “do not act in the best interest of their clients because of the institutional structure of sales commissions.

Is it possible that the MLS perpetuates steering and anticompetitive behavior?  A recent study by Barwick, Pathak and Wong (Conflicts of Interest and Steering in Residential Brokerage; American Economic Journal; 2017, Vol.9 No.3 p.191-222) has shocking conclusions that resonates with those who are wary of the residential real estate industry.  The study pointed out that real estate commissions are higher the US than other industrialized countries.  The authors concluded, “Properties listed with lower commission rates experience less favorable transaction outcomes…they are 5% less likely to sell and take 12% longer to sell. These adverse outcomes reflect decreased willingness of buyers’ agents to intermediate low commission properties (steering)…”  They “provide empirical support for regulatory concerns” because the data indicates buyer agents will steer their clients towards homes paying higher commission.

Home sellers can learn from home builders about marketing and agent compensation.  Home builders figured out buyer broker commissions a long time ago.  They will not pay advertised compensation to buyer brokers who don’t show up with their clients.  And during hot markets, they pay a modest referral fee in lieu of commission. 

All things considered, the issue of buyer broker commission is a complex issue that depends on multiple factors, including market conditions.  However, increasing awareness is inventing new business models and lower buyer broker compensation expectations. 

Original located at https://dankrell.com/blog/2019/05/24/buyer-agent-commission-controversy

By Dan Krell
Copyright © 2019

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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.