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Wire Fraud by Hackers

It happened to us – hackers got into somebody’s account.

They posed as the escrow officer and tried to divert my buyers’ down payment to the wrong bank account.  Their timing was impeccable too.

Six days before closing, an email was sent to the buyers that looked like a normal email from the escrow officer:

Good morning (buyers’ names),

We are getting close to closing. It is important that we get the Cash to Close to avoid delays in closing.

Please tell me when you would wire the Cash to Close.

Regards, (escrow officer’s name)

The buyer asked for the amount and for wire instructions by email – and the hacker responded three times by email and even sounded like the escrow officer.  This was the tip-off though:

Please find attached the wiring instructions. It is an account of one of our subsidiary company as our main account is currently undergoing compliance audit. As such, any funds entering the account would be held for review which would grossly affect the scheduled closing date.  The total closing cost is X.

The hacker asked for an amount that was within $2,000 of being accurate, and if the buyers had been in a big hurry, they might have just sent it.

Thankfully, Mr. Buyer called the escrow officer direct to verify. The escrow officer was stunned – she hadn’t sent any emails to the buyers that day!

Because no crime was actually committed, the escrow, title, and mortgage companies just shrugged it off.  We won’t ever know who the hackers were, or how they got in, but to call it unsettling is an under-statement.

From my buyer:

We felt very unnerved yet relieved. I couldn’t sleep that night, knowing how close we came to losing a substantial amount of money, by nearly anyone’s standards. I personally felt helpless, because I’m not sure what I could have done to recognize this fraud. We consider ourselves pretty plugged in and so we didn’t think twice about getting a wire request from escrow.

The bottom line is, escrow and bank request a lot of items and need responses ASAP so that escrow proceeds to a timely close. Therefore buyers are, in many cases, reading highly technical documents ‘on the fly’, often from smart phone screens. In my case, this meant that I was usually just skimming documents and electronically signing without really studying the material.

The escrow company did say in their instructions that buyers should call before wiring any funds. I didn’t notice this until after the attempted theft of our money. In the future, I would like to see escrow go back to speaking with buyers more often, instead of just emailing documents for signature. It sets a more personal tone and makes buyers more comfortable in picking up the phone to talk to the escrow agent with questions, rather than always relying on electronic communication.

Some escrow companies are now encrypting their wire instructions, but they are missing the point.  The hackers are way ahead of us!  All they need is a copy of the purchase contract (which agents, buyers, sellers, escrow and lenders email around unsecured), and the hackers can figure out the rest.

They just pose as the escrow officer a day early, and ask the buyers to wire the down payment and closing costs to them!

Short-Sale Scam

From C.A.R.

While we all are concerned about cybercrime and identity theft, it appears taking someone’s money the old-fashioned way has reappeared in a short sale scam in Southern California.

The alleged scam appears to follow the same basic format.  A short sale agreement was entered into four to six months ago.  The buyer made an initial deposit in the $5,000 to $15,000 range into the listing broker’s non-independent broker escrow.  As with most short sales, the process takes several months and the selling agent is assured that the listing agent is working towards lender approval – it is just taking more time.  Then the communication slows down, the selling agent begins to get concerned and calls the listing broker’s escrow.  There is no answer, no return call, no other number to contact, and the earnest money deposit is gone.

(more…)

Carmel Valley Wrap-Up

2016-11-17-10-31-16

We did open escrow before Thanksgiving on the sale of the two-bedroom  home in Trilogy 2 in Carmel Valley.

The MLS entry had been on Friday morning, with open house scheduled for 12-3 on Saturday and Sunday. The weather was somewhat overcast, it is a gated community, and it was the week before Thanksgiving – how many would attend?

Being the least-expensive detached-home in the whole zip code probably drove the activity, and we had parades of people both days.  By Tuesday, I had received seven written offers!

Here are my notes:

  1. As what usually happens, the first person who came to Saturday’s open house was probably the most-motivated – and made a great offer, though not right away.  I didn’t get any offers until Sunday, which made me think that buyers were either being very diligent about price, and/or strategic about delaying their offer, knowing that we were doing open house on Sunday (it is better to wait until after Sunday’s open house and get a feel for the action).
  2. Not only were the offers rolling in slowly, but they were also very orderly about price – nobody was going much over list, so it was a real horse race.  The comps were a problem, for a number of reasons; a) All three Trilogy neighborhoods use the same street name, Carmel Creek (making them all sound the same), b) some of the comps backed to busy streets, c) there is a 1,409sf, and a 1,410sf model, but they aren’t that similar.  To help buyers sort it out, I produced a simple map:

comps-map

If I had a chance to do it over, for easier reading I would group 1,3,7,8,10 as the more-valid comps, and those with street noise (2,4,5,6,9) as the inferior group.

3. We issued requests to every buyer for their highest-and-best offer, which helps to make it a fair race – the early offerors may not have known how competitive it is, and they deserve a chance to re-bid. Another benefit of requesting highest-and-best offers is that it buys time for other buyers to get in the game. In this case, the winner saw the house on Monday, and made offer right away.

4. I was working the phones all weekend, so once we opened escrow on Tuesday, I thought the action might die down.  But I got another handful of calls from people who saw a rental ad in Craigslist – and it’s not the first time it’s has happened. Somebody took my pro photos and remarks off my listing and created a Craigslist rental ad for $1,975 per month, which is well under market.  It is a scam that has been running for years – the guy on the phone tries to convince people that the rent is so attractive that you won’t mind sending the first and last month’s rent to a faraway address and wait by your mailbox for the keys.  But they never come.

I notified Craigslist immediately, and they are quick to take these scam ads down, but you feel sorry for anyone who gets duped.

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Wells Fargo Fraud

wells

Talk about unintended consequences.

Every big-time banker saw Angelo Mozilo sell off stock and pocket $17 million per week during the final sunset of Countrywide, and then he walked with immunity.  Who doesn’t want that package?

These people think they are above the law, and the way the feds ended this chapter will only make other bankers want to hatch their own scheme.

P.S. The long-time Wells Fargo employee who ran the scam was not prosecuted.  On no, instead she walked with $125 million in stock options.

Here’s the story:

Mortgage Fraud Could Get 90 Years

According to this Ripoff Report, it looks like they were promising to set up the victims with new corporations, and get them credit in the corporate name too, for just an extra $20,000 – $30,000:

Jacob Orona, Aide Orona, John Contreras, Prakashumar (“Kash”) Bhakta, Marcus Robinson, and David Boyd were indicted by a grand jury on 135 felony charges for operating a mortgage fraud scheme throughout Southern California and the Inland Empire, preying on homeowners facing foreclosure.  Charges include conspiracy, grand theft, filing false or forged documents, and identity theft.

The scam artists promised homeowners who were underwater on their mortgages that they could provide legal remedies to avoid foreclosure, convincing homeowners to stop making mortgage payments and instead pay them $3,500 to start with an “administrative process,” plus $1,000 every month and separate amounts to allegedly file legal documents.  The defendants filed bogus petitions and court pleadings and recorded false deeds in county recorders’ offices, causing over $4 million in loses while failing to halt any foreclosures.  The fraud stretched through San Diego, Riverside, San Bernardino, and Los Angeles counties of California.

The indictment was delivered following a two-week special statewide grand jury convened in San Diego County.  If convicted, Jacob and Aide Orona face over 90 years in prison; Contreras and Prakashkumar face over 70 years in prison; Robinson faces over 28 years in prison, and Boyd faces over 18 years in prison.

The indictment was announced by Attorney General Kamala D. Harris.  The arrests and arraignments are the culmination of a joint investigation by the Federal Housing Finance Agency Office of the Inspector General (FHFAOIG), the Attorney General’s Financial Fraud and Special Prosecutions Section (FFSPS), the California Department of Justice Bureau of Investigation, and the Stanislaus County District Attorney’s Office, Real Estate Fraud Unit.

http://mortgagefraudblog.com/six-indicted-in-san-diego-for-modification-fraud/

How they compare to Angelo Mozilo, who never spent a day in jail:

Mister Mozilo, a mortgage industry maverick who co-founded Countrywide in 1969, and nearly 30 years later co-founded the dramatically collapsed IndyMac Bank (now OneWest Bank), is widely regarded as one of the more Machiavellian sub-mortgage-men who helped march the U.S. (and global) economy straight off the cliff in the mid-Noughts. While Mister Mozilo and his mortgage-making army pushed and pedaled sub-prime home loans, he talked up the then-flourishing company’s stock price, earned hundreds of millions in compensation, and cashed out more than $400,000,000 worth of Countrywide stock, a large portion of it during the last couple of years of his tattered tenure as the king of Countrywide.

Alas, the sub-primed fueled real estate bubble burst sometime around 2007 and Mister Mozilo left Countrywide in 2008 after the crippled company was sold for $4.1 billion to Bank of America. In June 2009 the Securities and Exchange Commission (SEC) charged Mister Mozilo with insider trading and securities fraud and in September 2010 Mister Mozilo settled with the SEC and agreed to pay $67,500,000 in fines, $45,000,000 of which was paid by Bank of America. Despite the sizable payout, settlement terms allow Mister Mozilo to circumvent acknowledgement of any misconduct. We can’t vouch for or confirm it but online idle chatter says he has a net worth well in excess of half a billion dollars.

http://variety.com/2011/dirt/real-estalker/angelo-mozilo-shakes-up-real-estate-portfolio-1201232606/

Short-Sale Fraud

ss

The new guy named Jeremy wandered into the discussion about short-sale fraud the other day, and found that long-time readers here don’t take kindly to scams – and scammers.  But we’ve seen how short-sale fraud has run unabated, and that it has practically become a badge of honor among realtors. Nobody in the industry is motivated to stop it either.

Here are a few examples:

  1. At the top of the last article, Jeremy’s friends were filing notices that mortgages were paid off when they weren’t, which is outright fraud. But the second half of the article mentioned the typical example of short-sale fraud, where a straw buyer purchases the property at a below-market price, and then spoons it to a waiting buyer who pays retail. The banks who got shorted on the first sale might have caught the fraud with better appraisals, or if they just had a strict policy. I’ll never forget the one case where the perpetrator caught wind of his own story here on the blog and left a his comment. He said they included in their contract to flip the house immediately to the shorted bank.  They then flipped their short-sale buy on the SAME DAY to a retail buyer for a $100,000+ profit.  If the banks have knowledge and turn their head, then it’s on them.
  2. A short-sale that’s fully furnished. The seller makes the furniture sale mandatory so he can squeeze some cash out of the deal – he sells the ‘furniture’ to the buyer for $50,000 to $100,000 outside of escrow, in exchange to agreeing to a low-ish sales price for the house.  Usually these are cash sales only.
  3.  Listing agent twists seller’s arm to take his buyer, rather than one of the two higher cash offers.  I turned this one into VP of Fraud at the Bank of America, who said that because the lower price was still within their acceptable range, he’d let it go.
  4.  There were the investors who approached naive listing agents and insisted on negotiating their own deal with the bank.  If they could get the price approved low enough to flip immediately, they’d complete the purchase.
  5.  Both short sale and REO investors engage in ‘reverse staging’ to make a property appear in worse condition than it is, including the removal of kitchen-cabinet doors, garbage left lying around the home, and sometimes old fish hidden behind refrigerators to create pungent scents.  Sometimes BPOs include false property stigmas such as high crime rates, or claim the home was a meth lab that would need to be entirely gutted.
  6.  Parents buying their child’s over-encumbered house as a short-sale.  A favorite among realtors themselves.

Thankfully most of these are in the rear-view mirror!

Redfin Estimates

Hat tip to the folks who sent in a link to the new home-value estimator. I’m presenting what I’ve seen; please come to your own conclusions.

Here is the sexy explanation on their website, taking a direct shot at the other real estate portals:

https://www.redfin.com/redfin-estimate

The Redfin Estimate has the lowest published error rate of any valuation estimate in the U.S., with only a 1.96 percent median error rate for homes that are for sale, and 6.25 percent for off-market homes. This means that when a home that is currently on the market sells, the Redfin Estimate will be within 1.96 percent of the sales price half of the time. For off-market homes, the Redfin Estimate will be within 6.25 percent of the eventual sales price half the time. The Redfin Estimate is more accurate for homes that are for sale because there is more data available about those homes.

As a real estate brokerage, Redfin has 100% complete, direct access to Multiple Listing Services (MLSs), the databases that real estate agents use to list properties. This gives us information about homes that non-brokerage websites don’t have, like whether the home has a water view or is located on a busy street. The Redfin Estimate algorithm considers more than 500 data points about the market, the neighborhood, and the home itself. When all of this data meets the massive computing power of today’s best cloud technology, you get the Redfin Estimate.

(bold added by JtR)

More than 500 data points?

Massive computing power?

Today’s best cloud technology?

Those sound great from a marketing perspective.  They want you believe that they have developed a proprietary tool that is better than all others – especially better than anything from those dastardly folks at Zillow.

But it sure looks like their estimates are just closely tied to the list and sold prices, not some superior algorithm. 

Let’s consider some evidence.

Prior to it hitting the open market, no one would have estimated the value of my listing on Chaco above $620,000.  The average cost-per-sf of the solds over the last six months is a lofty $400/sf multiplied by 1,477 sf = $590,800.  There was a larger one-story house that had just closed around the corner for $605,000, and the current CMA shows that there hasn’t been any evidence before or since the sale that would indicate a value much higher:

Click here to link to Chaco CMA

Yet once the listing hit the market, the Redfin estimate is $638,030.  The only way it could be that high was if the estimate was tied to the list price, and they add or subtract their 1% to 2% to make it look legit:

Chaco before

The snip above was clipped the day before escrow closed.  Two days later, their estimate rose four percent to 1.8% ABOVE THE ACTUAL SALES PRICE.

But looking at the CMA, there wasn’t any other evidence to support a change in value over the three-day period. It appears that they just added a fairly random 1.8% to the sales price, which kept them within their pledge that half of the sales will close within 1.96% of their estimate:

Chaco Dec 9th

Here’s another example.

The day the Rios property listed on the MLS, I first snipped the Redfin old ad:

Rios Redfin estimate before

After the new listing was inputted onto the MLS and populated to Redfin, their estimate has magically risen $15,463 in just three hours, to $593,846 – and conveniently within their range of +/- 1.96%:

Rios Redfin estimate 3 hours after listing input

If all they are doing is adding or subtracting a couple of percentage points from the list and sales prices, then fine – they should state that.

But they give the impression that it’s their new whiz-bang technology that is generating their estimates, and claiming it to be the new and better-than-all-the-rest value estimator.

It also makes you wonder about their end game – will they also use their estimator to hype Redfin agents, and dog the other non-Redfin agents?

This buyer below was represented by a Redfin agent, and now the Redfin estimate of value has increased a whopping 15% in two months:

rios sold

They state that their estimate is based on six solds over the last year, and they list the comps.  Considering the evidence they provided, do you come up with a $607,442 value?

https://www.redfin.com/CA/San-Diego/12659-Rios-Rd-92128/home/4242277

Redfin will probably be able to shrug off any general criticism of their estimates by just calling it a rounding error. If they are deliberately pegging their estimates to within a couple of percentage points of the actual list and sold prices in an effort to play nice with their fellow realtors, it would be understandable – and playing nice has been their track record.

If they also want to add a little juice to their own agent’s history to make them look better, I guess it wouldn’t be a surprise – heck, every realtor fluffs their sales record.

But this is where they are going to get themselves in hot water.

When a zestimate is below the list price, the Zillow folks are quick to say that it is just a starting point, and to consult with a realtor to pinpoint the exact value.  The realtor community will live with that approach.

But what happens when a Redfin estimate is well under the list price?

luna

Don’t the agents who have listings that aren’t selling have a right to be upset with their fellow realtors at Redfin if they have a low estimate?  Yes, indeed.

A Redfin estimate – generated by more than 500 data points, massive computing power, and today’s best cloud technology – that comes in low and then is published on one of the most popular real estate websites will publicly undermine the chances of selling the house.

Listing agents won’t tolerate other realtors publishing low estimates online to a wide audience of buyers – especially when the estimates (and motives) are suspect from the beginning.

Realtor MLS Fraud & Extortion

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Thanks to Susie for sending in this story of everyday realtor fraud – committed by the third-highest-producing agent team in the country – and an agent who just couldn’t be a do-gooder and turn them in.  He tried to extort $800,000 from them instead:

http://www.kansascity.com/news/nation-world/national/article42205638.html

An excerpt:

As well as being outspoken, Tomlinson had earned a reputation as a whiz with an online database known as the Multiple Listing Service, which can only be accessed by brokers and Realtors, and supplies the data for web services such as Realtor.com.

He alleged that when the Jills couldn’t sell a home, they would sometimes hide it from other users of the MLS. That could mean, for example, changing the address of a mansion on North Bay Road so that it would appear to be located in Allapattah, where few high-end brokers would think to look.

To the untrained eye, it looked as if the Jills were better at selling homes than their actual record suggested. And even more important: the scheme prevented other brokers from offering their services to clients whose listing were expiring on the database. Realtors only have exclusive rights to sell a home for as long as their contract with the owner lasts. Once the listing expires, the home is fair game for competitors.

In his complaint to the board, Tomlinson cited 51 instances where the Jills had hidden homes.

Esther Percal, a top broker at EWM Realty International with nearly four decades of experience, blasted the Jills’ conduct.

“The Jills broke the rules. They have a near monopoly on the top of the market because they’ve branded themselves so well,” Percal said. “They say they’re the best and they can bring the best prices, but they don’t have a magic wand. Their listings can expire like everybody else.”

In a response to Tomlinson’s complaint — now evidence in the criminal case — the duo admitted using “poor judgment,” but said they never realized “the consequences” of the data jiggering. And they denied their conduct actually broke Realtor association rules.

About five years ago, the Jills explained, they got a call from an “irate client” whose property had not sold. The client had gotten “a barrage of unsolicited calls” from other Realtors looking to snag business as his listing had just expired.

The Jills said that a staffer — unnamed in the document — overheard the call and “indicated that, in the future, a client’s property could be kept off a list known as the ‘Hot Sheet,’ ” which Realtors scoured for new business. From then on, the Jills acknowledged, they would “from time to time” keep other unsold properties off the collection of the expired listings, according to the response.

Read full article here:

http://www.kansascity.com/news/nation-world/national/article42205638.html

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