Preventing Real Estate Fraud in 1-2-3

Preventing real estate fraud is a major challenge that most real estate sales professionals, and even lenders for that matter, encounter. Real estate fraud presents itself in many forms – some more common than others.

Title fraud: Though this doesn’t happen often, it is a costly form of fraud that one hopes they are protected against with their title insurance. As a real estate sales professional, do you want to be associated with the origination where title fraud is present on a deal? Absolutely not. The best ways to combat title fraud are to meet the borrowers, request identification, independently verify who is on title to the home and ask them questions about the home, sales history, even things in the area that may help you identify if something seems a bit off!

Value fraud: in a recent publication, the Law Society of BC had an excellent example of this type of fraud that we thought it would be prudent to share.

“Value fraud in this situation, back-to-back purchases of the same property are arranged from a legitimate vendor. The first purchase is for the arranged sale price — say $300,000. Then a subsequent (fraudulent) deal (from one fraudster to another) is arranged (i.e., a “flip”) for $400,000. Both purchases are set to close on the same day. The fraudster arranges for a high-ratio mortgage on the basis of the second deal. The high-ratio mortgage funds are used to close the real estate deals, since the amount of the mortgage (95% of $400,000 = $380,000) is enough to cover the deals. The fraudsters are counting on the financial institutions not doing their full due diligence or having an on-site appraisal done of the property to verify the stated property value. Sooner or later, the balance of the mortgage funds and the fraudster disappear, leaving the bank holding a mortgage for far more than the property is worth.”

“A second value fraud occurs when a legitimate agreement of purchase and sale is entered into between a vendor and the fraudster, say for $350,000. The vendor and the fraudster then sign a one-page amendment that provides a credit of $50,000 against the purchase price (stated to be for repairs). The fraudster does not disclose this credit in obtaining high-ratio financing. The deal closes and the mortgage payments stop shortly thereafter. The fraudster disappears with the balance of the financing leaving the bank with a mortgage greater than the value of the property.”

Check out the full article here: https://www.lawsociety.bc.ca/page.cfm?cid=1347&t=Practice-Tips:-Fighting-back-against-fraud-%E2%80%94-the-risks-in-real-estate.

Here are some red flags that can help you to suss out a real estate fraudster:

·         A client is making a large property purchase with cash and cannot evidence this from the sale of another property.

·         The client has documents to confirm the property transfer but not the original purchase and sale agreement.

·         The property’s sales history is showing multiple recent purchases – each showing the value increasing.

·         The client doesn’t want to provide identification, or will, but doesn’t want you to make a copy of it.

·         The seller indicates that there was a deposit made that was not recorded on the purchase and sale agreement – with payment being made directly to the seller and not through you.

·         The client wants the transaction closed very quickly.

·         The client wants you to indicate a higher purchase price on the agreement than the actual purchase price.

·         The sale price is unreasonably greater than that of other homes in the area.

·         The title shows a history of mortgages being registered and then discharged in short time spans.

Above is just a short list of behaviours that can occur that can mean fraud. Your ears might be ringing but here come the words again: due diligence saves the day, most of the time. Think of water, forcefully flowing from the tap as your deals, now think of the spatter that escapes the stream as representing these instances when something on a deal is off. Maybe in these cases it is better to dig a little deeper and perhaps pass on a deal rather than getting caught in the middle of a fraud scheme that can not only get you in trouble, but also put your relationships with your partners at risk.

For more information about tools you can use to identify real estate fraud please visit www.geowarehouse.ca.

Virtual Home Sales – Do You Think it is Safe for a Client to Buy a Home Sight Unseen?

It seems everything is online, absolutely everything. We can buy clothes online, electronics, even groceries… and these are all delivered right to your door. Groceries continue to be a surprise because who thought that one could purchase produce without seeing and feeling it? Well, the same seems to be occurring with real estate.

Virtual home sales (more common in the U.S. with all the fire sales going on) seem to be occurring more and more, especially with savvy real estate investor who are buying properties sight unseen. Here in Canada, many Canadians bought U.S. real estate without even taking a visit, just because prices dropped so low that it was worth the risk to some. There are even realty TV programs where investors buy homes at auctions that don’t even take place in front of the property in question!

This is not even considering the international housing market and the thousands of foreigners who buy real estate here, from abroad, through their trusted real estate sales professionals.

Could you ever see this becoming the norm in Canada? A day when a client comes to your office and views properties with you online, and then boom, is ready to make an offer. Sounds crazy, but in Canada this could be a standard practice in only a few years.

Look at the tools available to you when showing a property:

·         You are able to access photos of the property from the street and from above.

·         Many agents offer virtual tours of properties online to preview the inside.

·         You are able to access demographics in a particular area to identify who lives in a neighbourhood, schools, transportation, etc…

·         You are able to view a property from above to see what is beside it, behind it, and in the area.

·         You can search the property’s history and transfers.

·         You are able to access comparable sales in a neighbourhood.

·         You can validate that your client is the legal homeowner of the property.

There is not much that you can’t show your client online about a particular property as it stands today – outside of walking them through it. In the future though, they may not even want to.

Risky business or what could become the norm in the future - what do you think?

For information about how you can validate the information presented on your deals please visit www.geowarehouse.ca.

Due Diligence in Real Estate – Is There Such Thing as Too Much?

This question is fair enough and asked often enough for us to blog about it. There are many different skilled professionals involved in a real estate transaction: you, the real estate sales professional, a lender and/or mortgage broker, a real estate lawyer and many more. You, however, are the first line of defense when it comes to the long list of due diligence measures that have to be taken to prevent mortgage fraud and ensure that good quality deals are taking place.

OREA defines due diligence as “the reasonable analysis or research that is done to check or verify material information about a property.”https://www.oreablog.com/2013/02/what-is-due-diligence/

Real estate sales professionals can and do choose how far they can go with due diligence, making it a time consuming and costly task on some deals. With all the tools and capabilities available, one could spend countless time and a significant amount of money performing due diligence – so is there in fact such a thing as too much due diligence?

One way to mitigate the time spent on due diligence is to evaluate what due diligence to perform and when you do it.

For example, common types of due diligence performed by real estate sales professionals include:

·         Verifying who the legal homeowners are

·         Obtaining a survey

·         Validating the legal description of the property

·         Reviewing the sales history on a particular property

·         Checking for encumbrances like mortgages and liens and more…

Once you know what needs to be verified on every deal, your next step is to look at how you can get it verified. This is going to come down to the tools and technology you use to perform due diligence. Place a monetary value on your time and pursue tools that do as many of the due diligence items you need to perform, in one place – even in a single report. This will reduce the need to do 5-6 things separately, instead doing them all together.

Finally, when should you do it? We firmly believe at the application stage. Once a client has made the decision to engage you, due diligence should begin. Again, getting back to placing monetary value on your time – wasting time on deals that have issues is not good for you or any of your colleagues along the supplier chain. Not only do you stand to save time and expense, but you also stand to save credibility by performing due diligence at the point where a customer signs on.

There can never be too much due diligence when it comes to preventing real estate fraud. Generally speaking, if you establish a standard framework to perform due diligence within a set time and expense parameter, you should never find performing due diligence too time consuming and should be able to get through it with ease.

For more information about GeoWarehouse, a revolutionary tool that helps real estate sales professionals perform due diligence, please visit www.geowarehouse.ca

Real Estate Pulse: Barbara Corcoran a Hit at this Year’s InMan Events!

If you like Shark Tank or work in the real estate business, you can surely relate to this invigorating talk by Barbara Corcoran, presented at this year’s InMan. Real estate sales professionals across North America are raving! With a little something for all - and a whole lot of humor - she is worth going to see!

We don’t have the video from the keynote at InMan but here is another speech by Ms. Corcoran that covers similar subject matter.

 

As always, if you are interested in more information about GeoWarehouse, our tool that makes doing your job that much easier please visit www.geowarehouse.ca.

Representing Divorcing Spouses Means Exercising Extra Due Diligence

One major factor that contributes to homes hitting the market or being transferred is the ugly process of divorce. When marriage problems lead to separation or divorce, the home is usually the largest asset. What will then happen to the home can become a volatile and contentious issue for spouses - which puts you in a sensitive and tricky position?

One spouse may want the home sold immediately, or perhaps one spouse is living in the home while the other is not. In addition, if the home is a matrimonial property both spouses must consent to its sale, just as both spouses should have consented to its purchase and any subsequent refinancing, whether they are on title or not.

There are occasions where other people appear on title that were not initially disclosed to you as the real estate sales professional. This is often the result of one spouse hoping to hurry divorce proceedings along faster than the other spouse may want or may be ready for. These situations require extra due diligence on your part.

Some people believe that because the home is in only their name they can simply sell it. Well, you sure don't want to show up with your ‘For Sale’ sign only to learn that the other spouse actually lives there, won't let you in, and won't let your sign on the front lawn. Some people also think they can sell the matrimonial home without a spouse’s signature… the old, “I’ll take this home for my husband/wife to sign” (not!!).

So how can you identify when a home is a matrimonial? Here are some tips:

·         The interview. Ask lots of questions including the client’s marital status. If they indicate they are separated or divorced, ask them if the home is/was a matrimonial property. Most people when directly asked won’t lie. If they do, it doesn’t matter because step two will move you closer to the truth.

·         Search homeownership information. In GeoWarehouse you can see who owns the home up to the past month or so. If you want this information up to the date in question you can request a Parcel Register through the GeoWarehouse Store. If there is more than one person on title, then you will need to ask the customer to have the other parties meet with you to obtain identification and sign off on all paperwork.

·         Ask the client to bring documents to your meeting – things like utility bills. If other names are on them, ask the client about this. Even if one person shows up on title, two names on a collection of utility bills may be a tip that a separation has taken place.

·         If you are visiting or showing a listing - and this one should be obvious – you must be able to gain entry to the home to show the property. If gaining entry is posing challenges there can be two very likely reasons: there is a tenant on the premises or there is an ex-spouse still in the home.

Nothing is fool proof and if a client is bound and determined to hide something from you they may very well pull it off. As a real estate sales professional, the best you can do is to deploy the tools available to you and let your professional experience to guide you through deals that have some hair on them.

For more information about how you can validate homeownership information please visit www.geowarehouse.ca.

Landing Good Real Estate Deals and Mitigating the Ones That go POW!

Deals go POW all the time…. Most times deals go POW when they weren’t "a deal" in the first place. Landing good real estate deals depends upon discerning good deals from POW-destined deals right from the get-go.

What does that mean? Well, when you meet a client and conduct a new client interview, the prospective buyer or a seller provides you with available personal information. But at this point in your relationship with them, the information provided is all you have with which to assess them…. So what do you do next?

Often times, a client may often innocently omit information they could have provided you. Many times a prospective client could have been confused or simply forgot about other documents that would have been of appropriate interest to you. Other times a prospective client may intentionally omit providing information he or she well knows positions them to reap some personal gain, perhaps even at your expense.

Whether you are trying to prevent fraud or simply keep a deal from going POW, you should perform your due diligence at this crucial application stage. So what information is vital to confirm at the application stage? Here are some essentials:

Verifying a Seller's worthiness

·         Verify your client’s identification by asking to see it

·         Verify that your client is the legal homeowner

·         Verify that your client is the only legal homeowner and if they are not, insist on knowing who all other legal homeowners are

·         Check registered mortgages to ensure that there is enough equity to pay for closing costs (including your commission)

·         Check the sales history on the property to make sure that there is no funny-business or reason to suspect the property has issues

Verifying a Buyer's worthiness

·         Check the client’s identification

·         Ensure that your client is able to finance a mortgage

·         If a client tells you their purchase depends on the sale of their other property – check that the other property has enough equity to finance the purchase of another (including land transfer taxes and related closing costs)

Conducting an airtight interview is the first vital component to your landing a good real estate deal as a real estate sales professional. Utilize tools to validate information about your clients ahead of all other business to pave the way for a successful deal - and close. Some real estate sales professionals perform due diligence at various stages in the real estate process and for good reason. If something comes up the deal could go POW.

Even if the client provides you with documents like the deed or MPAC assessments – you should still independently verify all information provided by a client or prospective client. Tools like GeoWarehouse, Google and even the MLS are great ways to do this and can save you substantial money and headaches in the long run!

For more information about how you can validate the information your client provides to you please visit www.geowarehouse.ca.

CRMs for Real Estate Professionals: Are CRMs Like Salesforce Too Big?

During recent years, Customer Relationship Management Systems (CRMs) have become increasingly popular in the real estate industry. CRM's offer real estate sales professionals the ability to keep track of all interactions with clients, market directly to them, encourage strong relationships with them, and also connect with other professionals in the industry.  This means more time spent on the deal itself and less time going back and forth to get there! CRM's also result in better organization with greater ease.

So while this is well and good, real estate sales professionals have a whole host of platforms to consider when choosing the right CRM for their needs. Most CRMs offer many of the same capabilities: marketing, tracking, workforce automation, etc. and, of course, there are pros and cons for each kind. So does size matter when choosing your CRM for real estate? Is bigger always better?

Let’s take a look at a CRM like Salesforce. As one of the most popular CRMs available, Salesforce is a major player on the CRM scene.  CRM, and others like it, offer a plethora of options for businesses looking to fully automate their workflows. And this is great, but does one size fit all?

Your budget is an important consideration when it comes to the CRM that best fits your business size and needs. Larger, major players can charge more for their services, and if your budget allows for expansion, one of the big names might be a great fit for you. However, smaller businesses, especially real estate professionals who work largely independently, would likely find a CRM with a proportionately smaller price point to be a better option.

Does less money mean lower quality? Not by any stretch. But it will likely boil down to fewer capabilities - which this isn’t necessarily a bad thing. Sometimes narrowing down the list to include only what you actually need just makes better business sense. 

Configuration should also be taken into consideration. With the big name companies, configuration can take more legwork. If you have the support to carry configuration out with no issues, then it is advantageous for you. But if your team consists of you and you alone, perhaps you may want to consider how much time you can devote to configuration. Again, this is all relative.

A CRM custom-fit for your business may actually be one that is better when bigger - especially if you have the time and budget to make it work for you. However, bigger isn't the answer for everyone, and many businesses have chosen to cater their CRM to fit their needs, doing so without attachment to a big name. It's perfectly viable to opt for specifics rather than adopting the ‘everything but the kitchen sink’ approach.

What CRM are you using? What capabilities are most important to you? Join the discussion.

For more, or to join the conversation, visit www.geowarehouse.ca today.