Occupancy Fraud
The interest-rate they get is only 1/2% better, but the down-payment requirements are lower – and that’s where the trouble starts. For those looking for some legit doom potential, here ya go!
Referral Fees
Paying referral fees is a standard practice in the realtor business.
Are you thinking of moving to a new town and need an introduction to a realtor there? Your agent here will track one down for you, and that agent will pay them a referral fee, which used to be 20% to 25% of the gross commission. The challenge? Getting good help!
Great agents don’t need any assistance with procuring new clients, and they might reluctantly pay a 20% or 25% referral fee only if the new client is motivated and in the upper regions, price-wise.
Less-experienced agents are willing to pay out higher referral fees, which doesn’t do the client any favors.
What we do is tough work, and fewer and fewer people want to do it.
It’s so hard to hire, train, and retain good/great agents now that many real estate companies are just resorting to referring clients, and taking a substantial referral fee instead.
Zillow has staff taking the incoming calls, and qualifying the leads before sending them to their Flex agents. Their referral fee is now 40% of the gross commission, AND they want buyers to use Zillow Home Loans too. Their Flex agents who send their buyers to ZHL will be rewarded with more leads, and vice versa:
Less than five percent of the U.S. real estate agent population works with Zillow (with far fewer Flex agents), and Zillow only touches around three percent of U.S. real estate transactions. They are running a small, exclusive ecosystem of agents that are willing to play by their rules, which now includes tight integration with Zillow Home Loans.
You’ve probably seen the TV ads by Homelight? The ones that pitch teaming you up with the best agents in town? Well, at least with the best agents who are willing to pay them a 30% cut of the gross commission.
Now Redfin is giving up on their agent-employee program, and they are testing the idea of hiring agents on commission splits, instead of salary and paying them “up to 75%”. It’s doubtful they will pay many of their agents the full 75% split. It’s just another way for them to get referral fees of 30% to 50%.
None of the referral fees are disclosed to the client, and it’s never discussed of how the size of the fee will impact the quality of the agent service you receive.
But most of all, any thought of commissions dropping will be fleeting at best. Commissions need to stay high in order to pay the larger referral fees!
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:
GET GOOD HELP!
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.
Underprivileged Get Foreclosure Privilege
Another story demonstrating how free enterprise is being squeezed:
California is taking steps to avoid a repeat of the conversion of thousands of single-family homes from ownership to rental properties as occurred during the Great Recession. In late September, the state’s governor Gavin Newson signed a bill that will give tenants, affordable housing groups and local governments the first crack at buying foreclosed homes.
As homes were foreclosed by the millions following the housing crisis, Wall Street stepped in and investors, according to Zillow, gobbled up over 5 million homes, turning them into rental properties. They were bought as individual homes, via bulk sales of lender real estate owned (REO), or as distressed loans upon which the investors later foreclosed.
It was expected that these houses would return to owner-occupied status once home prices recovered and the investors, largely big hedge funds, could realize a profit. Instead they have found ways to manage the geographically dispersed properties and continue to hold hundreds of thousands of them.
This has been problematic. While the investor purchases helped put a floor under home prices at a time when there was little appetite for buying distressed properties, it has continued to reduce the inventory of available homes for sale. There have also been many complaints of tenant abuses and deferred maintenance. Many of these were spotlighted last March in a New York Times Magazine article, “A $60 Billion Housing Grab by Wall Street” by Francesco Mari. We summarized her work here.
The California legislation, SB1079, was the brainchild of an activist Oakland group, Moms 4 Housing. It bars sellers of foreclosed homes from bundling them at auction for sale to a single buyer. In addition, it will allow tenants, families, local governments, affordable housing nonprofits and community land trusts 45 days to beat the best auction bid to buy the property. It also creates fines of as much as $2,000 per day for failure to properly maintain properties.
So far, the COVID-19 pandemic has not resulted in massive foreclosures due both to mortgage forbearance programs and a foreclosure moratorium put in place by the U.S. Congress’s Cares Act. Still mortgage delinquencies are rising, and weekly first-time unemployment claims have remained above 800,000 since March. Most forbearance plans are due to expire by next March lacking further government action.
SB1079 goes into effect on January 1, 2021.
http://www.mortgagenewsdaily.com/10132020_wall_street_landlords.asp
Global Financial Meltdown
A viewer’s comment on YouTube led me to this terrific inside view of the 2008 financial crisis, and the resulting impact on the world. It rightly blames the entire fiasco on the Tan Man, who pitched his mortgages to Wall Street based on the yields generated if borrowers made their full-interest payments, when in reality, only a much smaller minimum monthly payment was all that was due.
It’s eerie to watch today as our financial markets are in question again:
I make a quick comment in at the 2:38-minute mark, standing in front of the most-expensive REO listing we received in the era – a 2,900sf house in downtown Carlsbad that sold for $603,000 in December, 2009. It’s still owned by those buyers! The realtor.com estimate today is $973,900.
Barbara Gets Scammed
Barbara Corcoran said she lost nearly $400,000 after her financial team responded to an email that turned out to be a phishing scam.
“This morning I wired $388,000 into a false bank account in Asia,” Corcoran told ABC News.
Last week, the millionaire’s bookkeeper Christine received an email that appeared to be a routine message from Corcoran’s assistant Emily to approve a payment to a German company called FFH Concept. However, the email in question was never sent from Corcoran’s assistant, instead, it was sent from a con artist.
The bookkeeper at first questioned the payment and asked in her reply, “What is this? Need to know what account to pay out of.”
“Someone sends you a bill. It’s paid,” Corcoran said. “And this one instance, it was not a good strategy.”
The crook responded to the bookkeeper with a detailed explanation and as Corcoran said, $388,700.11 was then transferred.
After the fact, Corcoran’s team noticed a missing “O” in the “from” address
“When she showed me the emails that went back and forth with the false address, I realized immediately it’s something I would have fallen for if I had seen the emails,” Corcoran said.
The savvy “Shark Tank” star fell prey to an all too common phishing scam, which is something her fellow shark Robert Herjavec, who made his millions running a tech company, knows all too well.
“85% of all cybercrime across the world comes through email, which is what happened to Barbara,” Herjavec said. “This is very, very common. It’s been happening of businesses for two, three years now. It’s now happening to individuals.”
Herjavec said there are a couple quick best practices people can implement to ensure they don’t fall for this kind of deception.
“Always verify that the email is coming from somebody you trust. Get that person to call you,” he suggested. “Number two, check your bank statements every single day, because if you catch it within 48 hours, the bank can get it back for you.”
Unfortunately, the money in Corcoran’s case is already gone, but her team traced the original scam emails back to a Chinese IP address and her attorneys are reportedly figuring out next steps.
Link to ArticleREO Fraudster Goes to Jail
These are the crimes and attitude required to actually go to jail for real estate fraud:
A former Fannie Mae employee will spend more than the next six years in prison after being found guilty of accepting more than a million dollars in bribes and kickbacks in exchange for selling Fannie Mae-owned foreclosures for less than market value.
Back in January 2018, Shirene Hernandez was charged with accepting bribes for steering foreclosures to certain brokers and even allegedly buying some foreclosures herself at below market value. And nearly a year ago, Hernandez was found guilty of two wire fraud counts that involved the deprivation of honest services as a result of the scheme.
Hernandez formerly worked at Fannie Mae in California as an REO foreclosure specialist and was tasked with the sale of properties foreclosed on by Fannie Mae.
As a sales representative, a position she held from 2010 through 2015, Hernandez would assign Fannie Mae-owned properties to certain real estate brokers and approve sales of the properties based on offers the brokers submitted.
But, court documents showed that Hernandez demanded and received bribes – mostly in the form of cash – in exchange for brokers getting the listings and commissions those brokers earned on real estate sales in question.
Hernandez also approved sales of Fannie Mae REOs at discounted prices to both herself and to brokers who paid her kickbacks.
As part of the scheme, Hernandez also received bribes for approving below-market sale prices of Fannie Mae properties to the brokers, all of which were violations of Fannie Mae rules and federal law.
Hernandez also helped several family members become Fannie Mae-approved brokers, and then steered nearly $80 million in Fannie Mae listings to them, resulting in nearly $2 million in commissions in less than three years.
According to court documents, Hernandez received more than $1 million in benefits from the scheme, including cash kickbacks and equity in a Fannie Mae property she bought using said kickbacks.
And, according to court documents, Hernandez paid for that property using a duffle bag filled with $286,450 in cash, which she gave to her sister-in-law to bring to the closing.
“The crime that [Hernandez] committed was egregious,” the prosecutors wrote in their sentencing memorandum. “Rather than act in the public’s best interests…she used her position to line her own pockets. [She] is unremorseful and unrepentant, and would seemingly do it all again if she could avoid being caught.”
In addition to the 76-month prison sentence, Hernandez was also ordered her to pay $982,516 in restitution to Fannie Mae.
Link to ArticleAdverse Possession
Hat tip to SM for sending in this article:
If you break into an empty house, move in your family and your belongings and call it home, can you ever stake a legal claim to the property?
The answer is yes. But it’s a difficult process, and it rarely ends successfully.
“Sometimes I’m just overwhelmed with a sense of appreciation for the privilege of having a house,” said Steven DeCaprio, who moved into a vacant and dilapidated Oakland house in 2008, sued to be declared the home’s rightful owner — and won.
DeCaprio took advantage of “adverse possession” or “squatters rights” laws, which have a long history in California. Squatters can sue for legal possession after living in and taking care of an abandoned house for five years — as long as they meet certain strict conditions.
The California law allows a squatter to claim possession of a house after establishing his or her residency — by having mail and bills sent to the house, openly coming and going through the front door and paying the property taxes — for at least five years, said attorney Dan Siegel. If the owner catches wind and objects, the squatter could be arrested for trespassing or evicted in civil court, depending on the common practice in that jurisdiction, Siegel said.
Link to Full Article
Jim Klinge
Klinge Realty Group
Broker-Associate, Compass
Are you looking for an experienced agent to help you buy or sell a home?
Contact Jim the Realtor!
- 682 S. Coast Hwy 101, Suite #110
Encinitas, CA 92024 - (858) 997-3801 call or text
- klingerealty@gmail.com
CA DRE #01527365, CA DRE #00873197
