April 2016 Newsletter

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HAVE YOU PAID YOUR PROPERTY TAXES YET? DUE BY APRIL 11TH!!!!
(The regular due date of April 10th is a Sunday)
 (This is my public service announcement for the month)

 IT’S ALL ABOUT THE WIRE FRAUD (THAT’S TROUBLE!)

It used to be that NO ONE knew what the heck we did; that you go into escrow and “everything falls into a black hole”.

Ah, those good old days.

Wouldn’t it be nice if certain elements of the public remained oblivious of our industry? Perhaps our efforts to educate everyone as to what we do – collect documents and funds, make sure that contingencies are met – were too successful.

All of a sudden, beginning with 2016, a bright incandescent light bulb has gone on and illuminated our industry to the effect that hackers have zeroed in on means and ways to get their hands on those funds that we have collected from the Buyer and are ready to remit to the Seller.

This issue is so huge right now that it is on the top of all our regulators, the FTC, NAR, CAR, IRS and every single escrow and title company’s WATCH list.

Here is a list of some of the things we are seeing:

  1. By the simple ruse of changing the Seller’s e-mail address by one letter, hackers pretend to be the Seller and sends revised wire instructions for proceeds immediately before closing.
  2. Hackers hacking into a real estate agent’s e-mail and sit and wait, monitoring the e-mails until they see that escrow is closing at which time they locate wire instructions sent from Escrow to client and proceed to revise them so that the funds go to the hacker.
  3. Hacker pretends to be the bank and sends escrow a fake incoming wire notification whereby Escrow thinks the money from the Buyer is in and closes escrow.
  4. Hacker hacks into directly into Escrow’s secured computer and orders outgoing wires directly from escrow’s bank to hacker.

The Federal Trade Commission (FTC) and the National Association of Realtors (NAR) have sent out strongly worded warnings to consumers and their real estate representatives regarding hackers posing as escrow officers or as real estate agents as noticed in this industry memo.

The Department of Business Oversight (the regulatory agency for independent escrow companies) has advised us that in the last 3 months, there were 5 escrow companies that were hit with wire fraud, to the tune of $1.3 million, of which only $700,000 were recovered.

The rest of the loss has to be borne by the company owners.

This problem is getting out of hand and in an effort to protect the funds that we are holding in Trust, escrow companies have been cautioned to institute certain protective and defensive measures:

  1. Encryption of all outgoing e-mails, particularly those which contain wire instructions
  2. Call Sellers prior to wiring funds to confirm their wire instructions and to give them verbal notification that funds are being sent out
  3. Ask Buyer to call escrow before funds are being sent to verify escrow company’s wire instructions and give escrow verbal notification
  4. NEVER, EVER take wire information from e-mails!
  5. Always have Seller complete and sign their own instructions on how they want proceeds. Add a copy of a void check to these instructions if they are asking for a wire.
  6. Some companies are asking Sellers to have these proceeds instructions notarized
  7. Communicate directly with Buyer and Seller during the transaction so that we build a direct relationship and know who we are working with
  8. Ask real estate representatives to use their company e-mail address if available, instead of a Yahoo, Gmail, AOL account, which are easily hackable
  9. We may have to go back to the good old days and ask for personal checks or cashiers checks as an alternative method to wired funds, if the transaction closing date is more than two weeks away (for ample check clearance times)
  10. Institute bank to escrow company physical callback verifications on outgoing wires
  11. Slow down and stay alert. Rush requests and rush closings are always open to mistakes, errors and irregularities. Don’t ever assume it will not happen to you. All it takes is one click and the money will be gone.

PROPERTY TAXES ARE DUE!

April 10th is coming up and because it is a Sunday, you get a pass card and can advance to April 11th before you end up in Jail at which time you will need to pay a penalty in order to get out of the hock.

Are you grumbling about your bill? You might be surprised to know that your property taxes may not be the highest in the nation (although it may sure seem so).

In this article, you can see that California stands 17th out of 51 in the nation (D.C. is considered a “state”of its own, LOL).

That’s not bad, considering we are paying for all that sunshine and proximity to Hollywood.

How would you like to be at the bottom end of the spectrum where taxes are higher per value, like New Jersey, and still have to live through 3 months of freezing weather.

PROPERTY VALUES

And while we are talking about property values, here is another interesting article about the location of your property and its appreciation.

Do properties appreciate more if they are located close to a Walmart or a Target? Aha!

I bet you always wanted to know that, didn’t you?

Well, see, that’s what I am here for – to bring you all these weird things that I pick up.

Apparently, the neighborhoods near a Target wins. BUT, the question then becomes, if you live in a neighborhood that has both, is that a DOUBLE WIN?

If this same neighborhood has a nice mall with a Nordstroms, did you just win the TRIPLE CROWN?

On the other hand, you could be living in the middle of nowhere (Oklahoma), where fracking is the name of the game, and where earthquakes have gone from 24 per year (1973-2008) to 318 per year (2009-2015) to 1010 just in one year (2015).

Yes! Is that scary, or what?

No matter how many Targets, Walmarts and Nordstroms you stick in there, you will still have this major rock and roll problem.

Make no mistake, this is not “natural”. We are talking ‘human induced” earthquakes and you have to wonder grimly at the long term economic repercussions of this.

So if you were an Oklahoman, fracking vs earthquakes, eeny meeny, miney, mo, which one would you choose?

OK, SO HOW ABOUT THOSE RENTALS?

With all this commotion of being close to Targets and Walmarts and those darned fracking earthquakes, what are the pros and cons of buying-for-rent (aka investing) single family homes, whether they are near Targets or Walmarts or both?

Realty Trac has come out with this article showing that well, Oklahoma, for some reason, did not make the top 10 best communities to invest in, but then again, neither did the Bay area of California (for different reasons).

In some circles SFR investments are a better choice than the multi family apartment units, for the simple reasons that:

1. Financing is cheaper and easier to obtain.

2. It’s easier to rent out.

3. It’s easier to maintain for the tenant if that’s what is called for under the lease. So, if you are looking to expand your investment portfolio, this might be an area to look into, particularly in growing communities of other states. If you are not interested in going to Iowa or Pennsylvania (think of the distance!) you might consider Las Vegas, a four hour drive to where prices are low enough that a positive cash flow is easily attainable PLUS (and that’s a BIG PLUS) you get to go the Strip and gorge yourself on buffets and then write it all off your income tax return.

Three birds! One stone!

Wherever your decision to invest, don’t just do it because Juliana the Escrow-Officer-Turned-Investment-Advisor said so, look before you leap (literally). You don’t want to purchase in areas of Florida (yes, yes, senior heaven and all that) where there is a possibility that the your investment would sink into a hole, that you could not get out of.

HACKING THE FEDERAL RESERVE       

Oh, no, it’s not just the escrow industry that is on the receiving end of hackers. Where there is money, there will be an attempt; where there is a will, there will be a way.

The New York Federal Reserve Bank is no different.

The only difference between their hack and our industry hack lies in how many zeros they are aiming for.  In the case of the NYFRB, the attempted hack was for $1 Billion but they only got away with $80 million.

It must have been a bad day for the hackers. Oh, yes, the nerve of these people trying to take away all this hard earned money from the Americans and other worldwide depositors.

This article provides for 3 tips for all of us small businesses who can be subject to these attacks. Simply said, watch out for phishing, human error and protocols.

RAMEN BURGER RAH RAH:

And finally, another public service message, this one for food aficionados.

For those of you who love Burgers (is it maybe 50% of the world population?) and those who love Ramen (maybe the other 50%?), now you can combine the two into one Ramen-Burger (and make it 100% of world population!!!!) for your one ideal, personal, over-the–counter-caloric-count.

I understand that a certain restaurant is now offering it to their patrons.

Check it out and post it on Facebook!

And for your amusement.

LAWS OF PROBABILITY

The probability of being watched is directly proportional to the stupidity of your act.

LAWS OF VARIATION
If you change lines (or traffic lanes), the one you were in will always move faster than the one you are in now.