October 16, 2017
- A potential class of homeowners will not allow the state of Illinois’s Cook County, to escape the consequences of their behavior. Allegedly, Cook County’s treasurer failed to pay refunds granted to a class of homeowners in a prior proceeding. The class of homeowners won the refund by appealing the valuations of their property so that they could receive property tax benefits which they were duped out of by Cook County.
- Pricewaterhouse Coopers LLP (PwC), one of the nation’s largest accounting firms, failed to effectively monitor the Federal Deposit Insurance Corp. The Federal Deposit Insurance Corporation’s downfall stemmed from a mortgage transaction scheme whicg led to a loss of more than one billion dollars. PwC, if properly monitoring the bank, should have identified the fraud which would have minimized the amount of loss and possibly saved the bank.
- The U.S. Securities and Exchange Commission struck again. This time, the federal agency settled a property based fraud scheme for $9.1 million with two managers of Silverleaf Financial LLC. Allegedly, the duo defrauded investors out of their funds invested in a phony plan to purchase defaulted property loans.
- A recently released employment report shows a recent severe decline of jobs within the U.S. economy. A total of 33,000 jobs were lost in the month of September. Industry experts cite the nation’s natural disasters as a source aiding in the decline. This loss served as the first monthly decline in approximately seven years, which came as a shock to many because the economy showed many strengths. Though jobs were loss, wage growth grew 2.9%.
- The House Ways and Means Committee and Senate Finance Committee recently released a report titled, Unified Framework for Fixing Our Broken Tax Code. The goal of the report is to decrease tax rates, ensure the readability of the tax code is simpler, and expand the tax base and facilitate economic growth. The report has many hot topics such as decreasing the corporate tax rate to 20 percent. Further, the report purports to preserve only two corporate tax expenditures such as the Low-Income Housing Tax Credit.
October 12, 2017
NYU’s Furman Center released its 2017 National Rental Housing Landscape. My two takeaways are that, compared to the years before the financial crisis, (1) many tenants remain rent burdened and (2) higher income households are renting more. These takeaways have a lot of consequences for housing policymakers. We should keep these developments in mind as we debate tax reform proposals regarding the mortgage interest deduction and the deduction of property taxes. When it comes to housing, who should the tax code be helping more — homeowners or renters?
The Executive Summary of the report reads,
This study examines rental housing trends from 2006 to 2015 in the 53 metropolitan areas of the U.S. that had populations of over one million in 2015 (“metros”), with a particular focus on the economic recovery period beginning in 2012.
Median rents grew faster than inflation in virtually every metro between 2012 and 2015, especially in already high rent metros.
Despite rising rents, the share of renters spending more than 30 percent of their income on rent (defined as rent burdened households) fell slightly between 2012 and 2015, as did the share spending more than 50 percent (defined as severely rent burdened households). Still, these shares were higher in 2015 than in 2006, and far higher than in earlier decades.
The number and share of renters has increased considerably since 2006 and continued to rise in virtually every metro from 2012 to 2015. Within that period, the increase in renter share was relatively larger for high socioeconomic status households. That said, the typical renter household still has lower income and less educational attainment than the typical non-renter household.
Following years of decline during the Great Recession, the real median income of renters grew between 2012 and 2015, but this was primarily driven by the larger numbers of higher income households that are renting and the increasing incomes of renter households with at least one member holding a bachelor’s degree or higher. The real median income of renter households with members with just a high school degree or some college grew more modestly and remained below 2006 levels in 2015.
Thus, the recent decline in the share of rent burdened households should be cautiously interpreted. The income of the typical renter household increased as the economy recovered, but part of this increase came from a change in the composition of the renter population as more high socioeconomic status households chose to rent their homes.
For almost every metro, the median rent in 2015 for units that had been on the market within the previous year was higher than that for other units, suggesting that renters would likely face a rent hike if they moved. The share of recently available rental units that were affordable to households earning their metro’s median income fell between 2012 and 2015. And in 2015, only a small share of recently available rental units were affordable to households earning half of their metro’s median income. (3, footnote omitted)
- Vision Property Management (Vision) can no longer operate in state of Wisconsin. Wisconsin’s Department of Justice sued the entity and all entities related to it for their misleading and deceptive practices. The entity allegedly marketed “uninhabitable properties” to Wisconsin consumers which violated Wisconsin’s “landlord-tenant and mortgage banking laws.” Vision’s current tenant practice mandates an upfront payment from consumers for any past due tax and code violations due upon the property. While their preclusion from market participation is temporary, tenants may terminate their agreements with the company without penalty.
- While the percentage of rent-burdened households decreased, a report released by the NYU Furman Center shows that the number of rent-burdened households has yet to return to its pre-recession low. Further, the report determined inflation played a significant role in the seemingly stagnant percentage of rent-burdened households. Industry experts believe many municipalities must determine various methods to revamp policy to create more incentives and means for affordable housing.
October 11, 2017
Scam Detector quoted me in 10 Real Estate Scams That You Need To Avoid Today. It opens,
The real estate industry is a sector that’s extremely profitable if done right. If you think about it, a house is the most expensive item that a person buys over his/her lifetime. Big money, big opportunities. However, on the same token criminals prey on the weak and use creative ways to make a lot of money by scamming victims all over the world, whether buyers, sellers or realtors.
Amongst the most notorious fraudulent practices on the market, we have already exposed and shared information about real estate investment scams, home buying scams, residential real estate tips and the Real Estate Agent Scam.
This week we caught up with a few fraud prevention experts and real estate professionals. We invited them to share new tips and expose some prevalent scams they’re aware of, which are happening now.
Here are 10 real estate scams that you need to avoid today:
1. Hackers Stealing Your Down Payment: Mortgage Closing Date
“A hacker could fool you into thinking he’s your agent and trick you into sending him money, which you’ll never get back. It’s so bad the FTC even sent an alert warning consumers that real estate agents email accounts are getting hacked.”, says Robert Siciliano, fraud prevention expert with IDTheftSecurity.com.
He continues: “Let’s say your realtor’s name is Bill Baker. Bill Baker’s e-mail account gets hacked. The hacker observes Baker’s correspondences with his clients—including you. Ahhh, the hacker sees you have an upcoming closing. The hacker, posing as Bill Baker, sends you an e-mail, complete with instructions on where to wire your closing funds. You follow these instructions. But there’s one last step: kissing your money goodbye, as it will disappear into an untraceable abyss overseas. This scam can also target your escrow agent.”
“It’s obvious that one way to prevent this is to arrange a home purchase deal where there are zero closing costs”, says Siciliano. “The scam is prevalent, perhaps having occurred thousands of times. It was just a matter of time until scammers recognized the opportunity to target real estate agents and their clients.
The lax security defences of the real estate industry haven’t helped. Unlike the entire financial industry who have encrypted communications, the real estate industry is a hodgepodge of free e-mail accounts and unprotected communications.”
In addition, Robert points out: “Realtors, who are so often on the go and in a hurry, frequently use public Wi-Fi like at coffee houses. Anyone involved in a real estate transaction can be hacked, such as lawyers”.
When it comes to preventing this particular scam, here are a few points that Siciliano suggests:
– Eliminate e-mail as a correspondence conduit—at least as far as information on closings and other sensitive information.
– On the other hand, you may value having “everything in writing,” and e-mail provides a permanent record. In that case, use encrypted email or some setup that requires additional login credentials to gain access to the communication.
– For money-wiring instructions, request a phone call. And make this request over the phone so that the hacker doesn’t try to pose as your Realtor over the phone.
– Any e-mailed money instructions should be confirmed by phone—with the Realtor and the bank to send the money to.
– Get verification of the transfer ASAP. If you suspect a scam, have the receiving bank freeze any withdrawal attempt of the newly deposited funds—if you’ve reached the bank in time, that is.
2. Real Estate Agents Assigning The Sales To Themselves
“I know a victim of a realtor who is scamming his buyers by taking advantage of sudden traumatic life events”, says Mariko Baerg from Bridgewell Group.
A buyer had purchased a house. Between the time it was a firm deal and the title transfer date he got in a severe car accident and could no longer work for the short term.
The realtor that was representing him had coerced the buyer into assigning the sale to the realtor himself for a discounted price because he fearfully convinced the buyer that he would have difficulties keeping his financing from the lender.
Assigning to yourself is a clear conflict of interest, the realtor did not try to market the assignment to anyone else, and the sale amount was $100,000 less than market value! He also forged the seller’s signature to convince the buyer that it was OK to assign the property.
The issue could be avoided by making sure you have a power of attorney lined up in the case that you have an accident, making your realtor show you comparables to confirm what market value is before transferring. Also, if you have a feeling there may be a conflict of interest always obtain legal counsel or receive a second opinion to determine what your options are.”, explains Berg.
3. Arc Fault Breaker Swap Out Scam
This next fraudulent practice is exposed by Jeff Miller, co-founder of AE Home Group: “Arc fault breaker swap outs are a common scam I’ve seen in the flipping industry. Modern building code requires that electrical boxes contain arc fault breakers as opposed to traditional breakers in order to further prevent electrical fires.
While safer, these arc fault breakers can add upwards of $800 to the cost of the renovation. Following the issuance of a use and occupancy permit, some flippers will return to the home and replace these expensive arc fault breakers with the cheaper traditional breakers, adding profit to their bottom line.”, says Miller.
4. Real Estate News: Bait and Switch Scheme
Another fraudulent real estate practice is the “bait and switch” scheme, explained here by Lucas Machado, President of House Heroes: “The scam occurs when a prospective buyer offers an “above market value” price to a home seller. The seller – blown away by the high offer – excitedly signs on the dotted line.
Sadly, the unscrupulous buyer has no intention to purchase the property at this price.
Once the seller signs the contract, the seller may only sell to that buyer for a specified time (weeks to even months) for the buyer’s purported due diligence. When that time ends, the fraudster asks to extend the contract a few weeks to work out closing details. Sounding reasonable, the seller agrees to the extension blinded by the high offer.”, warns Machado.
“There are two impacts on the seller. The seller keeps paying taxes, maintenance, utilities, insurance and develops an emotional commitment to sell.
Here’s what happens in the bait and switch: the buyer comes back to the seller with an excuse as to why this price no longer works, requests a reduction to below market value, and threatens to cancel if their demand is not met. Stressed by passage of time and on-going costs, the frustrated seller agrees to the reduction.”
Machado offers a concrete example: “Our company had a scenario where we offered $185,000. The seller accepted a $220,000 offer. The “buyer” asked for extension after extension, for 12 months, and then the tired seller agreed to sale price $180,000. The victimized seller had on-going costs around $10,000 and lost approximately $20,000 by not accepting our offer a year ago.”
How can you avoid the bait and switch scheme?
a. Confirm proof of funds at time of executing the contract.
b. Do not grant unreasonable extensions or reductions.
c. Set expectations early on.
d. If extension or reduction is based on condition, request an inspector or general contractor report verifying claims.
5. Duplicated Listings
Leah Slaughter with OmniKey Realty warns about a scam constantly happening in the real estate business: the Duplicated Listings.
“We often see companies copy our legitimate rental listings and post on Craigslist for a much cheaper price. Unfortunately, many people fall for these fake listings and wire or overnight money to the owners of these fake listings and then cannot get access and eventually locate us and all we can do is refer them to the police.”, says Slaughter.
“When searching for a rental, do your research and make sure you are working with a reputable company or a licensed agent/broker. If a landlord says they are not local and cannot give you access to the property, that is an immediate red flag.”
6. Real Estate Lawyers: Fake Profiles
David Reiss from Brooklyn Law School warns about a new type of scam: impersonating real estate lawyers. “In this case, the scammer takes control of the proceeds of a real estate closing by impersonating one of the parties to the closing and redirecting proceeds to an account controlled by him/her. The criminal might impersonate the seller’s lawyer and instruct that the proceeds from the sale be redirected to a new account.”, says Reiss.
“All such changes should be confirmed by a phone call (to a number that you know to be valid!) to confirm that they are from the real seller.”
- Measuring Mortgage Credit Availability: A Frontier Estimation Approach, Anenber, Hizmo, Kung and Molloy
- Household Balance Sheets and Social Policy Preferences: New Survey Evidence, Hariri, Jensen, Lassen, and Wiedemann
- Does Skin-In-The-Game Discipline Risk Management? Evidence from Mortgage Insurance, Liu
- Bank Credit Supply and Shadow Mortgage Growth, Meursault
- Investing in Real Estate Debt: Is it Real Estate or Fixed Income?, Maarten van der Spek