New-Age Huckster

It’s amazing he has gotten away with this for so long….

“It’s a wake-up call to the middle class,” a booming voice assures listeners during the intro to Grant Cardone’s weekly podcast, This Is Not Your Daddy’s Economy. For listeners, Cardone has become the apotheosis of financial influencers: waking up the middle class and heralding a new economy for its chosen sons and daughters. Brash and populist, he promises anyone who listens that they too can ascend into the realms of passive income by following his real estate playbook.

An ostentatious Louisiana-born salesman with a penchant for down-home relationship advice, Cardone is a practicing Scientologist who casts himself as a plucky opponent to mainstream financial institutions. He rose to fame as a cold-calling guru, building a large online following with videos and courses that promised to reveal the secrets of salesmanship. He subsequently became a fixture on reality TV shows such as Turnaround King and Undercover Billionaire. He now operates a conference circuit that straddles the line between dumbed-down business school and a clumsy revival meeting (Donald Trump was a recent guest speaker). In Cardone’s videos on YouTube and Instagram, he champions a swaggering, somewhat cruel form of hustle culture aimed at a generation struggling to make sense of its economic misfortune.

Crucially, Cardone has been able to make money not just by imparting financial advice but by exploiting his fan base to build a $4 billion residential real estate portfolio. “We are becoming a renter nation,” Cardone explains in a video from 2020. He’s not wrong. But Cardone’s business model relies on increasing rents and squeezing tenants to maintain his debt-laden portfolio.

A newly filed class-action lawsuit against Cardone, however, threatens to unravel his empire. Last month, lawyers filed a suit alleging that he had misled small-time investors who’d put money into one of his recent Cardone Capital real estate funds. Whether Cardone has been cynically leveraging his followers is up to a court to decide. But the image Grant Cardone has fostered through his real estate ventures is as much about what it’s like to be an eccentric internet celebrity as it is about America’s unwieldy and ever-precarious property market—and the potential toxic admixture of the two.

Read the full article here:

Loan Fraud Pushed Home Values

While the PPP fraud was rampant across the country, the ultra-low mortgage rates and lack of inventory were more to blame for inflating home values recently – at least around here:

Anecdotal evidence suggests that many recipients of fraudulent PPP loans used the funds they received to purchase expensive houses, cars, and luxury items.13 In this section, we examine whether recipients of PPP loans flagged as potentially fraudulent are more likely to purchase houses than non-flagged recipients. We first examine house purchases using property records from PropertyRadar for a random sample of 250,000 individual PPP borrowers.

The sample was collected in February 2023 and consists of individual borrowers who received PPP loans during all three rounds of the PPP with data on house purchases through the end of 2022. Round 3 of the PPP ended in June 2021, so we observe at least 18 months of post-PPP house purchase activity for all individuals in the sample. We match names purchasing houses in the PropertyRadar data to names of PPP borrowers, limiting the sample to names that are unique.

Link to 150-page report

Preventing Title Theft

Those who don’t have a mortgage are particularly susceptible to fraudulent acts. Check out this free service being offered by the county to alert you! Hat tip just some guy!

Is title lock insurance a good investment?

Such insurance usually costs from $12 to $20 a month. But the San Diego County Assessor/Recorder/Clerk’s office now is offering the monitoring service at a far better price — free.

An announcement was made Friday that a real estate fraud notification service called “Owner Alert” is being activated for all homeowners who sign up for the service and register their parcel number.

“We timed this with the mailing of property tax bills,” says Jordan Marks, chief architect of the new service, noting that parcel numbers are easily available on the bills.

Through an electronic monitoring program, the county will notify property owners whenever their title is changed or a lien is attached.

“My goal is to sign up every San Diego property owner,” says Marks, chief deputy assessor. Marks, a Republican, is running against Democrat Barbara Bry to succeed retiring Ernest Dronenburg as head of the county’s Assessor-Recorder-Clerk’s Office in the Nov. 8 election.

Title theft is rare, but it does occur.

Patrick Ojeil, deputy district attorney in charge of real estate fraud in San Diego County, has 38 cases of potential title theft now under investigation.

Most of the time, he says, it is a family member or someone who knows the victim, such as a neighbor, a caregiver or an acquaintance, who tries to hijack the property title. But not always.

In 2015, a high-profile case came to light involving the bizarre theft of the title to Petco Park, appraised at the time for $539 million. A man, later determined to be mentally ill, had assumed title to the ballpark in 2013 by simply walking into the county recorder’s office and filing a fraudulently notarized title transfer form.

After the nefarious deed was discovered, perpetrator Derris McQuaig was charged with a felony. But a judge dismissed the case when McQuaig was determined to be mentally incompetent to stand trial. Instead, he was committed to Patton State Hospital in San Bernardino County.

No evidence was uncovered that McQuaig had plans to financially benefit from the title transfer, or that it was part of a larger scam. Nevertheless, it created a bureaucratic and legal headache for the city and the Padres and a challenge to get the title properly re-recorded.

Link to Article

Wire Fraud

Hat tip to just some guy for sending this in – an excerpt:

BEC scammers typically engage in what Alex calls a shotgun approach. They compile contact information for random players involved in any real estate transaction—lawyers, brokers, title agencies, mortgage lenders—then send mass phishing emails to this database, waiting for someone to take the bait.

In the email, the scammers might provide a link that leads to a website resembling the real estate agent or title company’s email login page. The duped individual will type out their credentials, which might lead to an error page. Most think nothing of it—perhaps it was merely an internet connection problem. They don’t realize they’ve sent their login information to the hacker, who now has access to their email and confidential company information. Critically, they are also able to track conversations about impending home sales with buyers, ultimately zeroing in on the specific deals they want to infiltrate.

That’s the easy part. What follows is complex social engineering, in which the scammers monitor correspondence about a specific transaction for months. Without tipping off anyone, they learn the minute details of a deal. When it becomes apparent that a down payment is about to be wired, they jump in with a fraudulent email to the buyer, pretending to give official instructions from the real estate or title agent: Please wire your money to this bank account. The email can be sent from the compromised account or from a fake one that looks almost identical to that of the agent in the deal. The unsuspecting buyer wires their life savings to a criminal.

Reports about this alarming scheme exploded during the pandemic, when home prices, bidding wars, and cash deals all rose. As transaction volume swelled, so did profits for real estate companies, lenders, and banks, and hackers smelled a growing opportunity. By targeting escrow wires, scammers are able to single out a particularly easy jackpot, a transaction involving multiple parties without proper internet security and the rare instance in which a giant sum of cash is sent in a single wire.

In 2020 and 2021 the FBI labeled BECs the costliest cyberthreat, accounting for reported losses of $4.2 billion, with real estate wire fraud becoming one of the most targeted sectors. “Those numbers are floors, not ceilings,” says Crane Hassold, director of threat intelligence at Abnormal Security, an email security company. “There’s a lot that doesn’t get reported.”

SB 1079 Exploited

An excerpt from this article:

Riggins, 67, retired early from his career in construction and maintenance for the city of Richmond after a knee injury put him on disability in 2008. But, the income from his tenants helped keep him afloat.

“The building was in good shape, and I had good tenants,” Riggins said. “Everything was just happy. Until. Yeah, until.”

Riggins went through a divorce and sought a modification on his mortgage in 2019. While that was being considered, his lender foreclosed. Everything his parents had worked for seemed to slip through his fingers.

“That sent me through a great depression for a year,” he said. “When you do everything you can do, and it seems like it’s not enough, it’s like everything is against you.”

The ultimate buyer was Southside Neighborhood Stabilization, a limited partnership registered to an Encinitas, Calif., address. The general partner was a Virginia nonprofit, Southside Community Development and Housing Corporation.

It was this partnership with a nonprofit that allowed the organization to buy the house under a 2020 California law, SB 1079. It allows tenants of foreclosed homes, owner-occupants, governments and nonprofits an exclusive 45-day window to match the winning bid at a foreclosure auction. It was one of 15 housing bills signed into law that year aimed at creating more affordable opportunities for renters and homeowners.

Southside’s website states its mission is “advocating for the needs of communities and families” to “stabilize communities throughout the United States.” And while that should have been a relief to Riggins, it wasn’t. He couldn’t understand why a nonprofit, nearly 3,000 miles away, had purchased his property.

“Why would they want to buy something in California?” Riggins wondered. “And I think that’s the part that just really has me just furious. Why would you want to invest in something that you have never seen?”

The two-story triplex, with its salmon-colored stucco and white trim, was one of at least 74 properties Southside Neighborhood Stabilization scooped up since it formed in early 2021.

The organization is one of at least three such entities created in California after SB 1079’s passage to purchase homes in partnership with nonprofits that have the stated goals of providing affordable housing to communities in need. But in a review of nearly 200 property records, and interviews with over a dozen homeowners and investors who’ve purchased properties from them, there’s little evidence these homes are actually being used as affordable housing.

“They’re all just being flipped,” said Jeff Cagle, a Central California house flipper who’s lost dozens of foreclosure auction bids to purchasers who invoked SB 1079. “The whole idea was that if nonprofits bought this, this was supposed to benefit affordable housing, but none of them were being retained as affordable housing.”

Read full article here:

Wire Fraud

Written by Richard Hopen from COMPASS Short Hills NJ:

When my wife and I sold our house in 2017, our $239,000 mortgage payoff was stolen.

The money was never recovered.  We were victims of real estate wire fraud.

I’m not only a victim, I’m also a real estate agent and lawyer. And shame on me for not knowing about wire fraud when I sold my house. Real estate wire fraud is perpetrated by cyber criminals who exploit the trust between home buyers and sellers and their real estate agents, title companies, lawyers, and mortgage lenders. Criminals steal home deposits, down payments, and mortgage payoffs by accessing and monitoring email accounts of the parties in a transaction.

When a criminal finds an email with attached wiring instructions, they change the depository account number and email the fraudulent wiring instructions to the person who will wire the funds. If the target is duped, the money will be wired into the criminal’s account. Accessing email accounts is easy for cyber-criminals and opportunities to commit the crime are unlimited. According to a 2021 ALTA survey, 1 in 3 real estate transactions are targeted.

Real estate transactions are ripe conditions for thieves. Each transaction involves multiple parties, working under pressure to meet the closing deadline. Many of the parties share information over unsecured email accounts that can lead a savvy criminal to the wiring instructions. Home buyers and sellers are vulnerable, and real estate agents need to do much more than include wire fraud warnings on emails or have customers sign wire fraud disclosures. At a minimum, every seller and buyer should know about the risk of real estate wire fraud and how to prevent it.

Rich Hopen of COMPASS Short Hills, NJ has worked closely with ALTA to create He has sat on a wire fraud panel with a U.S. Senator; participated in a roundtable discussion with the FBI, ALTA, the Mortgage Bankers Association, American Bankers Association, and NAR; was interviewed and quoted by HousingWire and the Wall Street Journal; and has spoken to many real estate offices and organizations.

Another thought: Avoid Friday closings to help stop wire fraud.

Friday is the most highly targeted day of the week for wire fraud at real estate closings, because the next business day is on Monday, and there is only a 24 hour window to identify a fraudulent transfer and reverse it, and criminals know and exploit this weakness.

Always tell your clients to follow up with their bank in the hours after closing to be sure wire transfers were done but to also check very first thing the next morning.  If the next morning is Saturday, there is no live person at the bank to follow up on the wire, and by Monday, the window to reverse it is past.

Listing Scam

Surprised we don’t see more of these – and wouldn’t you disappear after stealing $5 million?

LOS ANGELES – A Southern California brother-and-sister team were arrested today on federal charges alleging they orchestrated a $6 million real estate fraud scam in which they listed homes without the owners’ consent and collected money from multiple would-be buyers for each of the not-for-sale homes.

Adolfo Schoneke, 43, of Torrance, and his sister, Bianca Gonzalez, a.k.a. Blanca Schoneke, 38, of Walnut, each pleaded not guilty this afternoon to nine charges contained in an indictment unsealed after their arrests. The indictment charges Schoneke and Gonzalez with one count of conspiracy, seven counts of wire fraud, and one count of aggravated identity theft.

According to the indictment, Schoneke and Gonzalez, with the help of co-conspirators, operated real estate and escrow companies based in Cerritos, La Palma and Long Beach under a variety of names, including MCR and West Coast. The indictment alleges Schoneke and Gonzalez found properties that they would list for sale – even though many, in fact, were not for sale, and they did not have authority to list them for sale – and they then marketed the properties as short sales providing opportunities for purchases at below-market prices.

Using other people’s broker’s licenses, Schoneke and Gonzalez allegedly listed the properties on real estate websites such as the Multiple Listing Service (MLS). In some cases, the indictment alleges, the homes were marketed through open houses that co-conspirators were able to host after tricking homeowners into allowing their homes to be used.

As part of the alleged scheme, the co-conspirators accepted multiple offers for each of the not-for-sale properties, hiding this fact from the victims and instead leading each of the victims to believe that his or her offer was the only one accepted. The co-conspirators allegedly were able to string along the victims – sometimes for years – by telling them closings were being delayed because lenders needed to approve the purported short sales.

The indictment also alleges that Schoneke and Gonzalez directed office workers to open bank accounts in the office workers’ names. Those accounts were used to receive down payments on the homes and other payments from victims who were convinced to transfer the full “purchase price” to these bank accounts after receiving forged short sale approval letters. Schoneke and Gonzalez also allegedly directed the office workers to withdraw large amounts of cash from these accounts and give it to them – a procedure that allowed Schoneke and Gonzalez to take possession of the fraud proceeds while hiding their involvement in the scheme.

Investigators estimate that several hundred victims collectively lost more than $6 million during the scheme.

Zestimate Accuracy

Let’s go around the horn with the automated valuation models.

Zillow says that their zestimate is within 1.9% of being right on price with the on-market homes, which sounds really good until you realize what that means.

Their zestimates of the OFF-MARKET homes are way off – especially in this market:

Once we listed for $1,599,000, they kept their zestimate at the $1,336,035, but after we received six offers that were all over list price and accepted one at $1,770,000 – and raised the price accordingly – then Zillow bumped their zestimate by $352,658:

You sure you want to sell your house to them for the off-market zestimate?

Redfin said they didn’t have enough information to generate a value when they saw my initial $1,599,000, but then they came around once the list price was raised to $1,770,000:

The other automated valuation models aren’t any better, but at least they don’t cheat:



Agent Referral Networks

Have you been seeing more of this guy lately?

He wants to hook you up with the top agents in your area – AND only charge you a 2% commission.

They keep the 2% circle at the bottom of the advertisement for the entire 30 seconds to engrain in your head that they have some magic network of top agents who will work for the discount rate.

Don’t believe it.

The agreement they have with agents is that you will be presented with a 2% option, which is the typical For-Sale-By-Owner plan – if you find your own buyer, then the agent will handle your paperwork for 2%. At that point, you’ll probably wonder about the more traditional plans where your listing agent handles the whole process. The next thing you know, you’ll be signing the listing agreement at 6%.

Why will these listing agents insist on the more-expensive plan?

It’s because they have to pay a finder’s fee to the advertiser.

Whenever a corporate third-party is referring you to an agent, there is a fee paid by the agent – and it’s hefty. Whether it is a TV-advertiser, an internet pitch, or relocation company provided by your employer, they all take a big cut out of your agent’s commission – usually 25% to 30%.

The great listing agents – the ones you hope will sell your house for the most money – will pass along this finder’s fee to you. It means you’ll be presented with 6% or 7% options, and/or a commission that drastically discounts the buyer-agent’s side of the commission.

The agent-referral industry relies on the bait-and-switch.

If this guy said that he had the top agents in your area that charge 6%, would he get any calls?  No.

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