What the Escrow Officer Does

The escrow officer does…

  • serve as the communication link to all parties in the transaction.
  • prepare escrow instructions.
  • request a preliminary title search to determine the basis upon which a title insurance policy may be issued.
  • request a beneficiary’s statement or pay-off demand relating to existing financing.
  • comply with lender’s requirements, specified in escrow agreement.
  • receive purchase funds from the buyer.
  • prepare or secure the deed or other documents related to escrow.
  • prorate taxes, interest, insurance and rents according to instructions.
  • secure releases of all contingencies or other conditions as imposed on any particular escrow.
  • record deeds and any other documents as instructed.
  • request issuance of the title insurance policy.
  • close escrow when all of the instructions of buyer and seller have been carried out.
  • disburse funds as authorized by instructions, including charges for title insurance, recording fees, real estate commissions and loan payoffs.
  • prepare final statements for the parties accounting for the disposition of all funds deposited in escrow.

The escrow officer does not…

  • offer legal advice.
  • negotiate the transaction.
  • offer investment advice.

Reference: https://www.ceaescrow.org/

If an escrow company were polled and asked what were some common reasons why escrows cancel or are delayed, one of the answers would most likely be related to financing. If a transaction is subject to a buyer successfully obtaining a loan, the buyer must arrange for a loan, obtain loan approval, and satisfy the lender’s requirements prior to the request for funding and closing. More importantly, the lender must fund and close the loan in accordance with the agreed upon timeframe in the purchase agreement. In other words, it does not take much for that timeline to be thrown to the curb if there are difficulties with obtaining loan approval due to the buyer’s financial situation, providing the lender with an acceptable property appraisal, and/or fulfilling all of the lender’s conditions.

If your transaction is contingent on your obtaining a loan, please remember to communicate with your mortgage broker and/or lender from the very beginning of the transaction. It is crucial that you ask questions up-front, and continue checking with your broker or lender regarding the status of the loan throughout the escrow.

There are many steps that a lender or broker must take when underwriting and approving your loan, and knowing the status of those steps will not only provide you with an indication of where you are in the process, but alert you to any pending or special conditions that will need to be satisfied in order to obtain the loan. While keeping track of loan approval and/or loan requirements is usually something your real estate broker, mortgage loan broker and/or escrow officer will do, it is wise to keep an open dialogue with your mortgage or lending professional so that you too are kept in the loop at all times. This also means that you need to keep all of the relevant players updated on any changes in your financial situation, as this information is pertinent to the loan and underwriting approval process. Communication is the key to any transaction involving financing, and your active role in that exchange is crucial.

Reference: http://www.dre.ca.gov/files/pdf/escrow_info_consumers.pdf

The answer is that a notary (which some may refer to as a notary public) must acknowledge any real estate or related document that will be recorded in the office of the County Recorder where the real estate transaction will occur. Notaries are individuals authorized by the State to certify documents and attest to the authenticity of signatures, among other things.

If you are a buyer obtaining financing on a real estate purchase or a borrower refinancing your property, there are several documents included in the loan packet, particularly the deed of trust, that require a notarial acknowledgment. Typically, the lender will send your loan documents to escrow, and the escrow officer will coordinate the signing of your loan documents with a notary.

If any party to an escrow is in a trust, or taking title in trust, a certification of trust -­which is a notarized document — is often required by the title company.

If you are a seller, you will need to sign a grant deed and have it acknowledged by a notary. If any party is granting or conveying an interest or quitclaiming to another, he or she will need to have their signature notarized by a notary.

A California notary must be registered with the Secretary of State, and will be subject to several requirements before being commissioned to perform notarial duties. Please see the California Secretary of State’s website, www.sos.ca.gov, for more information.

Reference: http://www.dre.ca.gov/files/pdf/escrow_info_consumers.pdf

Balboa Park Twilight in the Park

Spreckels Organ Pavilion

Tuesdays, Wednesdays, Thursdays, 6:30-7:30pm

619-239-0512, www.balboapark.org

JULY 02 The New Catillacs – Smooth 50s, 60s and early 70s

03 Atomic Wave – 80’s tribute band

09 8 Track Highway – Classic 70’s & 80’s Cali Yacht Rock

10 Stoney B Blues – Chicago and Southern Blues

11 Breezin’ – Jazz, Blues, R & B

16 145th St. – Contemporary Blues Band

17 Ginger Cowgirl – Classic Country and Honky – Tonk

18 San Diego Civic Dance – Park & Recreation Department

23 San Diego Youth Symphony

24 Mariachi Estrella’s de Chula Vista-Mexican Music/Ballet Folklorico

25 Bayou Brothers – Cajun/Zydeco – Family Day

30 Pomerado Community Concert Band – Patriotic/Show tunes

31 Santana Ways – Tribute Band to Santana

31st International Summer Organ Festival

Spreckels Organ Pavilion: Balboa Park

Mondays, 7:30pm 619-702-8138, www.spreckelsorgan.org

JULY 01 Raúl Prieto Ramírez, USA/Spain

08 Dave Wickerham, USA

15 Rising Stars

22 Peter Richard Conte, USA, with Andrew Ennis, USA

29 Hector Olivera, USA/Argentina

Carlsbad TGIF Concerts in the Park

Fridays, 6-8pm 760-602-2090, www.carlsbadca.gov

Stagecoach Community Park: 3420 Camino De Los Coches

JULY 05 Sully and the Souljahs

Poinsettia Community Park: 6600 Hidden Valley Road

12 Pop Vinyl

19 Urban Renewal Project

Calavera Hills Community Park: 2997 Glasgow Drive

26 Rumba Y Soul

Chula Vista’s Summer Sundays

Village Walk at Eastlake: 878 East Lake Pkwy.

Sundays, 5-7pm www.shopvillagewalk.com

JULY 07 Steal Dawn

14 Graceland

21 Joe Rathburn’s Island

Coronado Summer Concert Series

Spreckels Park: 7th St. & Orange Ave.

Sundays, 6pm (unless noted) www.coronadoconcert.com

JULY 07 Bee Gees Gold

14 LA Allstars

21 In Midlife Crisis

28 Stone Soul

Del Mar Foundation Summer Twilight Concerts

Powerhouse Park: 1600 Coast Blvd.

Tuesdays, 6pm 858-635-1363, www.delmarfoundation.org

JULY 09 Hotel California: A Salute to the Eagles

30 Back to the Garden: 50th Anniversary of Woodstock

Encinitas Concerts at Moonlight Beach

Moonlight Beach: 400 B Street

Sundays, 3-5pm 760-633-2740, www.encinitasca.gov

JULY 07 Cold Duck – Old School 70s and 80s

21 Kings of 88 – Classic Piano Roc

El Cajon Dinner and A Concert

Prescott Promenade: 100 E Main Street

Fridays, 6-8pm 619-334-3000, www.downtownelcajon.com

JULY 05 Old School

12 Breakheart Pass

19 Fortunate Son

26 Heart of Rock and Roll

A real estate “broker controlled” escrow, also known as a “broker run” escrow, means

that a real estate broker is conducting the escrow while performing acts in the course of

or directly incidental to a real estate transaction in which the broker is a party or in which

the broker is an agent performing an act for which a real estate license is required. For

example, a real estate broker representing a buyer in the purchase of real property may

also perform escrow services in connection with that purchase pursuant to the

exemption of the Escrow Law. However, if the real estate broker were performing

escrow services with respect to a transaction where they are not a party or not an

agent performing underlying real estate services, they would be unlawfully performing

escrow services and in violation of the Escrow Law. Under the latter scenario, the BRE

could issue a Desist and Refrain Order against that broker for engaging in an activity

that is in violation of Division 6 of the Financial Code and for not being exempt under the

Escrow Law.

 

Because non-independent escrows have restrictions under the Escrow Law, you should

be aware of these restrictions and properly identify and confirm the escrow’s license

status with their regulatory agency before working with the person or company.

Recently, a regulation of the California Real Estate Commissioner was adopted which

requires that if a real estate broker is using a fictitious business name with the word

“escrow” in it, the name must also include the term “non-independent broker escrow” in

any advertising, signs or electronic promotional material. For example, if ABC Realty

were also doing business as ABC Escrow, they would have to state that they are “ABC

Escrow, a non-independent broker escrow.” This is important for you to know since

some names of escrows may suggest that they are doing business as a licensed,

independent escrow company when in reality, they are not independent.

It is to be noted here that real estate brokers who conduct broker escrows are

responsible for those escrows, cannot delegate that responsibility, must follow the

California Real Estate Law (which is set forth in Sections 10000, et seq. of the Business

and Professions Code, and which includes Regulations of the Real Estate

Commissioner) with respect to the handling and accounting of monies provided to the

brokers in trust, and appropriate discipline can be imposed against those licensees by

the BRE where violations of the law have occurred.

 

Reference: http://www.dre.ca.gov/files/pdf/escrow_info_consumers.pdf

J.K. Rowling: “The Fringe Benefits of Failure, and the Importance of Imagination” (2008)

David Foster Wallace: “This Is Water” (2005)

Simon Sinek: Live2Lead 2016

Fearless Motivation: “It’s Not Easy, But It’s Worth It” (2018)

Jim Carrey: Commencement Speech at Maharishi University of Management (2014)

Brené Brown: “The Power of Vulnerability” (2013)

Steve Jobs: “How to Live Before You Die” (2005)

Ellen DeGeneres: Tulane University Commencement Speech (2009)

Sheryl Sandberg: Harvard Business School Class Day Speech (2012)

Dan Pink: “The Puzzle of Motivation” (2009)

Denzel Washington: “Fall Forward” (2011)

Elizabeth Gilbert: “Your Elusive Creative Genius” (2009)

Charlie Day: Merrimack College Commencement Speech (2014)

Orlando Scampington: “The Pillars of C.L.A.M.” (2015)

Vera Jones: “But the Blind Can Lead the Blind…” (2016)

Jim Valvano: ESPY Speech (1993)

Kal Penn: DePauw University Commencement Speech (2014)

Charles Dutton: Speech from Rudy (1993)

William Wallace: Speech From the Battle of Stirling Bridge (1297)

Al Pacino: “Inch by Inch” (1999)

Sylvester Stallone: Speech from Rocky Balboa (2006)

Frank Oz/Yoda: Speech from The Empire Strikes Back (1980)

Will Smith: Speech from The Pursuit of Happiness (2006)

Kurt Russell: “This is Your Time” (2004)

Reference: https://blog.hubspot.com/marketing/best-motivational-speeches

The 2019 real estate market looks substantially different than it did a decade ago. The housing market has evolved each year, as the new generation became first-time home buyers and the senior generation began to downsize. Each generation has different buying behaviors, preferences and goals that are influenced by external factors such as the economy, social norms, technology and government regulation. For example, Baby Boomers are waiting longer in life to downsize than their older Silent Generation counterparts in their senior years. So how does this affect the younger generations? 

In this article, we will examine the Baby Boomer, Generation X (Gen X) and Millennial generation demographics to predict their 2019 housing preferences, buying/selling behaviors and the hottest markets for each generation. 

1. Baby Boomers

Born between 1944 and 1964, Baby Boomers are currently between the ages of 55 and 75 with approximately 76 million individuals in the U.S.

A.   Downsizing later in life: According to a post by Trulia, “Baby boomers are delaying downsizing until later in life.” Why? They are living and working longer than previous generations. When they purchased their home 30 years ago, they made sure it was “perfect” for all their needs. They feel the same way in 2019, which is why they don’t have a reason to move.

·         Based on a study by Realtor.com, “85% of Baby Boomers indicated they were not planning to sell their home” in 2018. This trend will continue, inventory will become even lower in 2019 as Baby Boomers postpone downsizing; making it more difficult for younger generations such as Millennial first-time home buyers and Gen Xers looking to upsize to a bigger home.

B.   Downsizing preferences: When Boomers finally decide to move in 2019, they will differ from the older “isolated retirement home” trend of the Silent Generation. Instead, they will look for an engaging local community populated by a variety of generations. They want an active and walkable neighborhood that provides social clubs, community/activity centers, pools, walking trails, fitness centers, health care and more. “Their primary goal will be to stay busy and be social while remaining independent”, as stated in an article by Curbed.com

·         Renters: In the past decade, we’ve seen, “…the number of renters over 55 years old increase by 28%, compared to a 3% increase in renters 34 years or younger” as claimed by RentCafe.com. In 2019, the real estate market should see Boomer renter numbers steadily increase throughout the year.

C.   Hottest markets for Boomers: Phoenix, AZ; North Port, FL; Miami, FL; The Villages, FL; Punta Gorda, FL

2. Generation X

Born between 1965 and 1979, Generation Xers are currently between the ages of 40 and 54 with approximately 82 million individuals in the U.S.

A.   Tech-savvy upsizing: Gen Xers are ready to upsize and they are using the internet to research and communicate with others to do so. Though not as tech-savvy as their Millennial counterparts, they spend about 2 hours per day on social media looking for the latest news and keeping in touch with friends. Plus, they are more likely to use mobile than a PC/laptop when searching for a product to buy online (59% mobile vs 54% PC/laptop)

·         According to an article from MediaPost.com, “Email is the primary means of messaging but they also like direct mail still…They like Facebook and YouTube, accounting for more than 1.5 billion YouTube views per day.”

B.   Upsizing preferences: Gen Xers are looking to sell their first home and upsize to accommodate their growing family. Their main focus in 2019 will be to find affordable housing in a family neighborhood where there are high paying job opportunities so they can grow their families, have education opportunities for their children and save money for the future.

C.   Hottest Markets for Gen Xers: Houston, TX; Miami, FL; Dallas, TX; Washington, DC; Riverside, CA

3. Millennials

Born between 1980 and 1994, Millennials are currently between the ages of 25 and 39 with approximately 95 million individuals in the U.S.

A.   Knowledgeable first-time home buyers: Millennials are more informed when it comes to renovations, repairs and real estate process than other generations. Since they grew up during the development of the internet, they are very tech and research savvy. They’re able to find ways to access important information such as listings, neighborhood reports, HGTV home renovation videos and other types of real estate information on their own. In 2019, they will rely on real estate agents to share information that they can’t find online such as neighborhood developments, local market forecasts, local housing regulations and more.

·         In 2019, your online presence will have a huge impact on whether a Millennial will hire you as their agent. Having quality testimonials, attractive social media profiles and online tools/resources are important factors that shape their decision-making in hiring an agent.

B.   Buying preferences: According to a Magazine.realtor article, “In 2018, 30% of Millennials purchased home for $300,000 and higher…That means Millennials and Boomers are competing for the same home.” Some similarities between the groups include a walkable and engaging neighborhood as well as a smaller home with upgraded amenities.

·         In 2019, they will account for most of the first-time home buyer market as they gain more purchasing power, acquire higher paying jobs and get married. 

C.   Hottest markets for Millennials: San Francisco, CA; Seattle, WA; Houston, TX; Dallas, TX; Washington, DC

Generational housing preferences have changed over the past decade, causing a ripple effect in the housing marketing for 2019. Boomers waiting until later in life to downsize means less housing inventory, driving up prices for younger, first-time buyer generations (or those trying to upsize). This insight into generational trends and key differences can be leveraged to your advantage – approach and communicate with these different generations with a personalized touch, and watch your prospects turn into leads.

Article originally posted by Z57 Internet Solutions https://blog.z57.com/2019-housing-trends-for-baby-boomers-gen-xers-and-millennials

Brokers and agents in California need to start adjusting their roles as the law defining contractors v employees is upended.

BY: BERNICE ROSS

With more than 1,000 Inman posts, Bernice Ross is a long-time contributor whose weekly column on real estate trends, luxury, marketing and other best practices publishes every Monday.

Brokerages and their independent contractor agents in California should prepare to redefine their relationships with each other in the near future as a result of several significant legal developments in employment law earlier this month.

A federal appellate court in early May clarified that a controversial 2018 California state Supreme Court opinion on employment status can be applied retroactively. The state Supreme Court opinion established a new three-pronged legal standard to determine whether someone is an independent contractor or employee.

The decision, Dynamex Operations West, Inc. v. Superior Court, significantly changed California’s established legal standards upon which businesses had relied to decide whether workers are independent contractors or employees.

After the 9th Circuit’s decision, the California’s Division of Labor Standards Enforcement issued its own opinion on how the California state Supreme Court’s new employment classification standard impacts the state’s Labor Code.

A lawyer for the California Labor Commissioner said in a letter to a question from an attorney at Bet Tzedek, a public interest law firm in Los Angeles, that the “ABC” test set out in the 2018 California Supreme Court opinion can be used in certain contexts as applied to the state’s rules on wage orders, which, as California State Supreme Court Justice Tani Cantil-Sakauye explained in her opinion on behalf of the court “impose obligations relating to the minimum wages, maximum hours, and a limited number of very basic working conditions (such as minimally required meal and rest breaks) of California employees.”

The “ABC” test

The “ABC” test is already used by other state authorities such as Massachusetts to determine whether state wage orders apply to workers. It stipulates that workers can only be classified as independent contractors if the hiring entity can demonstrate that they’re:

1.       Not directing or controlling how a worker performs or accomplishes the work desired (either in a contract, or an actuality)

2.       That the work performed is outside of the hiring entity’s main business — for example, a plumber comes to fix your brokerage’s plumbing system

3.       That “the worker is customarily engaged in an independently established trade occupation, or business”

“When a worker has not independently decided to engage in an independently established business but instead is simply designated an independent contractor by the unilateral action of a hiring entity, there is a substantial risk that the hiring business is attempting to evade the demands of an applicable wage order through misclassification,” wrote Chief Justice Cantil-Sakauye.

Having watched these and other developments unfold over the past few years, I worry that these developments may force California brokerages to treat agents as employees rather than independent contractors.

The biggest issue for real estate is the second test, which essentially says that if you’re a real estate agent who works for a broker whose primary business is selling real estate, you must be an employee.

What’s particularly notable is that the 9th U.S. Circuit Court of Appeals found that “applying Dynamex retroactively is consistent with the state’s ‘legal tradition’ to apply judicial decisions retroactively,” as Justine M. Phillips, an attorney at the law firm of Sheppard Mullin writes in the National Law Review.

She added: “While the Court acknowledged that there is an exception to apply judicial decisions retroactively, it held that the exception is not applicable to the Dynamex decision.

“Rather, the Court reasoned that there is a strong presumption in favor of retroactivity, Dynamex only clarifies existing law, and that California state courts provide no indication of an intention to limit Dynamex to new cases.”

You should read Phillips’ full piece regarding potential liabilities and other actions you should be thinking about in light of these facts. (But before you panic and dissolve your brokerage overnight, just note that these developments aren’t the end of the story.)

Multiple companies and organizations are duking it out to preserve the status of the independent contractor both in California and in states around the rest of the country.

Having said that, the smart move for California real estate professionals is to create a transition plan now in case they have to make a rapid transition into an employee model.

What Steps Can You Take to Protect Your Business? 

If you’re a broker or an agent in California, start making a contingency plans that address how you will cope if you suddenly are faced with the prospect of converting all your independent contractors to full-time employees.

For agents:

1. Agents who meet the minimum wage threshold 

If you’re making at least $45,000 per year, the disruption to your business will be minimal.

You will have to negotiate a new compensation schedule as an employee. For example, this could be a basic salary (minimum wage) with some sort of bonuses or draw against commissions.

As an employee, your broker will be able to set guidelines about the systems and tools you use as well as sales quotas and performance standards. You will also be entitled to full-time employee benefits.

2. Obtain your broker’s license

If you meet the requirements to become a broker, begin studying for your broker’s license now.

This allows you to have the flexibility to operate as a solo brokerage. You could also affiliate with a consortium of other brokers who each have their own individual businesses, but share office resources, marketing, and administration.

In either scenario, you will need to set up an LLC or S-Corp with a taxpayer ID (EIN) for your business.

3. If you don’t meet minimum wage criteria

If you earn under $45,000 a year, you could be hired on an hourly rate basis to hold open houses, handle transaction paperwork, meet inspectors and appraisers, etc.

You could also cover for full-time agents who are on vacation, have conflicting appointments, or would like to take off evenings or weekends.

Your employer must provide you with breaks, withholding, workers’ compensation, and other hourly-rate employee benefits.

4. Referral programs

As more agents retire or exit the business, referral agent programs have grown exponentially.

These programs could now be used to help less productive agents transition into the employee model.

The agent’s leads stay in-house and are given to productive agents who will be most likely to close them.

For brokers

Brokerage models that would be least impacted by a shift to an employee model include:

·         Companies who already operate using an employee model.

·         Solo practitioners.

·         Agent team leads who have no independent contractor agents and are supported by full or part-time employee assistants and/or virtual assistants.

For those brokers who do not fall into one of these categories:

1. Have all agents sign an individual arbitration clause

Every California broker who supervises agents needs an individual arbitration clause in their Independent Contractor Agreements (ICA) to limit their exposure to class action litigation.

2. Cut overhead now!

Reduce the amount of square footage you have devoted to office space and look for ways to cut overhead in as many areas as possible.

If your brokerage has been surviving on fees from non-productive agents, those will be going away. The time to slash expenses is now.

3. Who stays, who goes, who becomes full-time vs. part-time? 

If you have to move to an employee model, identify which agents would stay on (it will probably be the top 10-15 percent who earn at least $45,000 per year.)

Next, identify the second tier of agents who could possibly work on a part-time basis, and then the bottom tier that you will need to terminate.

4. See your employment attorney ASAP

Visit with your employment attorney to determine what an employee model would look like for your brokerage and to help you create a transition plan that you can implement quickly if need be.

Elements of this plan could be designed to fit with any of the agent models outlined above.

5. Consider making a move to a subscription plus a transaction fee 

Given how tight brokerage margins are these days, moving to a flat rate subscription model with a transaction fee may be more profitable than operating in today’s current commission model.

Agents could contract with your brokerage for compliance, transaction coordination, marketing, technology tools, etc.

Alternatively, you could unbundle these services and provide them on an as needed basis, especially to solo practitioners.

California has always been a bellwether for other states. The real question will be to what extent large brokerage models can weather this storm, and if not, how that plays out across their businesses elsewhere in the country.

Sun Tzu, the author of The Art of War, once said: “In the midst of chaos, there is also opportunity.”

It looks as if there could be an abundance of opportunity in the not too distant future.

Bernice Ross, President and CEO of BrokerageUP and RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles. Learn about her broker/manager training programs designed for women, by women, at BrokerageUp.com and her new agent sales training at RealEstateCoach.com/newagent.

The behavior of the group resulting from the interactions of individual group members is called Social Dynamics. The management of social dynamics and their enhancement is critical to the success of teams at the workplace and therefore their importance cannot be discounted.

Along similar lines, Communication, which is the process of conveying the ideas, information, thoughts, feelings and concepts from one entity to another with the help of mutually understood signs, language and rules, is of immense importance in organizations. Effective communication facilitates clarity of roles and expectations, which are vital to organizational efficiency.

The following measures can be adopted by organizations for the enhancement of social dynamics and communication at the workplace:

  • Developing Familiarity and Comfort

Managers or Team Leaders should periodically organize team-building and bonding activities. Activities like team-versus-team contests, informal gatherings, or just simple outings like picnics or going to watch a baseball match together helps the team members in knowing each other better and develops a degree of comfort. They build solid informal relationships which, in turn, ameliorate their relationships at the workplace, thus providing a fillip to productivity and efficiency.

  • When in Doubt- Over communicate

Every member in a team works with a set of expectations or assumptions about their roles, their job and the social dynamics involved. However, when there is an inconsistency between the expectations of the individual and the expectations of the superiors or the team, there is a possibility of conflict, which can be highly unhealthy for the team.

Such friction can be minimized by clearing expectations via communication. Another noteworthy point here would be that over communication is always better than giving a brief, vague gist of the matter at hand, as the ultimate goal is complete clarity in the mind of the receiver of the message. Thus, the manager and team-members should actively focus on clarifying roles, tasks and expectations in order to prevent inconsistencies and to ensure the smooth functioning of the team.
 

  • Simplify the Complex.

Employees are constantly bombarded with information at the workplace, as are customers. Therefore, condensing complex thoughts, ideas and concepts into simple, memorable and easily comprehensible terms would work wonders for facilitating clear understanding of the matter being communicated. This may involve breaking down jargon into simple words and communicating the essence of the subject in terms which the team and customers and understand and act upon easily.

  • Be an Active Listener

Whether you are a manager, a team leader or a member of the team, active listening will solve a major part of your problems. Active Listening involves listening to others, paraphrasing their problem into your own words, and providing feedback indicating that you have correctly understood the message. Active Listening as a manager helps to resolve intra-team conflicts as well as tackle challenges on the job. Besides, employees feel more at ease when they know that their concerns are being heard and acknowledged, that they are actually being listened to. This helps build trust and cordial relations between the leader and the team members, as well as among the members.

Thus, a few simple techniques can greatly enhance social dynamics and communication at the workplace. Small efforts to ameliorate team relations and little steps towards better communication go a long way in enhancing both, managerial and team efficiency, which are the very basis of organizational success. 

As lending standards loosen, the environment for fraud — and cautionary tales — returns 

BYJIM WEIX

Whether you’re a rookie agent, a rising team leader or an established veteran broker, we can all benefit from sharpening our skills. Follow our “Back to Basics” series to learn fundamental strategies, tactics, philosophies and more from real estate pros across the industry.

When former Keller Williams and RE/MAX real estate agent Holly Pasut shared her experience of going to prison for a 2013 mortgage fraud case, my heart raced. Had it not been for good legal advice, this could have just as easily been me.

I remember clearly the day that I came to my office and noticed a dark Suburban parked at my office’s front door. Upon entering, I saw my receptionist with a shocked look on her face. Next to her were two serious looking men in suits, sporting FBI shields.

The crazy days of ‘liar loans’

For several years before the real estate crash in 2008, I was living was a Realtor’s dream. I had my own brokerage firm, with 12 agents, and life was good. Not only did homes sell quickly at record prices, but also the buyers often threw a fresh coat of paint on them and relisted them with you at an even more ridiculous price.

Even more astonishing was the fact that nobody seemed to get turned down for a mortgage, and the homes always appraised.

Even the fellow who cut my grass was able to qualify for a $400,000 mortgage with no money down. This was because he could declare any income that he wanted and didn’t have to provide any documentation.

Then comes the creative deal

In 2006, I got a call from the owner of a new small real estate company. He asked me about one of my ocean access canal homes. I met him at the home, and an hour later he gave me a full-price offer of $700,000. I was amazed because the home was overpriced by at least $70,000.

It was not uncommon, with annual appreciation rates of 30 percent, that sellers would price their home high and wait four months for values to rise. But this offer was unusual. Although the purchase price was $700,000, the buyer would get a 3 percent cash credit, and the seller would pay a 7 percent commission to that real estate company, and I would also pay a $30,000 referral fee.

To top it off, the buyer was doing 100 percent financing.

When I questioned the broker, he explained that the credits and commissions would be used to fix up the properties, rent them out and then resell them for a profit in about a year. Given the real estate market at the time, it seemed like a reasonable business plan.

Run to the attorney

I was fortunate enough to have an attorney who used to be a prosecutor for Florida’s Division of Real Estate. I blocked out the buyer’s name and purchase price, and then I emailed him the sales contract. I also advised my seller to contact his attorney.

My attorney responded that as long as all of the credits and commissions were included in the closing documents, there should be no problem. He doubted, however, that the buyer would ever get financing for such a deal. The seller’s attorney also agreed.

Not only did the buyer get financing, but this same buyer — plus two others — got 100 percent financing on another 12 homes. Seven of those homes were my listings.

How this scam worked

Although it appeared that this real estate company was simply making a killing in commissions, this group — the real estate company and the three buyers — were in reality sharing the roughly $100,000 in credits, commissions and referral fees.

The 12 homes purchased and financed at 100 percent resulted in about a $1.2 million windfall. Whether they ever intended to fix up and resell the properties is unknown, as the real estate market began to crash. However, with most of the purchases, the buyers only made a few payments, if any at all. The result was that all of these homes went into foreclosure.

Here comes the FBI

Although foreclosures were rampant at the time, 12 foreclosures involving the same real estate company and same buyers caught the attention of the FBI. A number of other local real estate brokerage firms and agents were suddenly getting surprise visitors — and they weren’t looking to buy or sell a home.

Their investigation lasted about a year. During that time, the listing agents involved were getting to know the FBI agents way too well and wondering if their phones were tapped.

In the end, the real estate broker, the three buyers and a mortgage broker all went to prison.

Tread carefully, and get legal advice

Like real estate agent Holly Pasut, many agents will encounter unusual or creative real estate situations in their careers. This doesn’t mean that they are scams, but you need to keep yourself protected by fully understanding the deal.

The return of so-called “liar loans,” where buyers simply state their income and may not have to provide much in the way of proof of income, creates an ideal environment for fraud. The last thing you want is to be connected in any way.

If you find yourself questioning a particular deal, talk to your broker. Let them run it by their firm’s attorney. You might also want to talk to a real estate attorney you know.

Jim Weix is a Broker Associate with The Keyes Company, Florida. He is best known as being the catalyst that brought about “MLS of Choice” nationally.