Realtor Education Series
Recap of Sun National Title Company’s Webinar: Tackling Scams and Fraud in Real Estate
On 11-5-2024, Sun National Title Company hosted a highly informative webinar focused on a topic that is becoming increasingly critical for professionals in the real estate industry: scams and fraud. As fraudsters become more sophisticated, it’s essential for real estate agents, title professionals, lenders, and consumers to stay informed about the latest trends and best practices to protect themselves and their clients.
Here’s a quick recap of what was covered during the session:
The Growing Threat of Fraud in Real Estate
Our expert panelists began by highlighting the alarming rise of fraudulent activities in the real estate market. From wire fraud to title theft and fake deeds, fraudsters are using increasingly sophisticated methods to exploit gaps in security and unsuspecting parties. One of the key takeaways was that fraud doesn’t just happen to individuals—it can impact entire transactions, involving multiple parties, and it’s often difficult to detect until it’s too late.
Types of Scams Affecting the Real Estate Industry
Throughout the webinar, we discussed the most prevalent types of scams that real estate professionals need to be aware of:
- Wire Fraud: This scam typically involves cybercriminals intercepting and altering email communications between buyers, sellers, and title companies. Fraudsters provide fake wiring instructions, resulting in significant financial losses when funds are sent to the wrong account.
- Title Fraud: In these scams, criminals illegally transfer the title of a property into their name, often without the owner’s knowledge. This is especially common in vacant or distressed properties. The fraudster may then attempt to sell the property, leaving the legitimate owner with little recourse.
- Fake Closings: Fraudsters may pose as legitimate buyers or sellers, convincing real estate professionals to proceed with transactions that do not exist. These scams often lead to lost deposits and delays.
- Identity Theft: Fraudsters use stolen identities to assume the roles of buyers or sellers in a transaction, leading to the creation of fraudulent documents and the illegal transfer of property.
Best Practices for Protecting Yourself and Clients
Our expert panel provided practical, actionable advice for minimizing the risk of falling victim to these scams. Here are a few key best practices for real estate professionals:
1. Verify Everything: Always verify wiring instructions over the phone using known contact numbers, not those provided in emails. If something feels off, trust your instincts and double-check before taking any action.
2. Use Secure Technology: Ensure your business is using secure systems for communication and financial transactions. Implementing encryption and multi-factor authentication on your email can add layers of protection against cybercriminals.
3. Educate Clients: One of the most effective ways to combat fraud is through education. Make sure your clients understand the risks, the signs of fraudulent activity, and the importance of safeguarding their personal and financial information.
4. Collaborate with Trusted Partners: Work closely with reliable title companies, lenders, and legal professionals who are knowledgeable about fraud prevention and follow secure protocols. At Sun National Title, we make it a priority to stay up-to-date on fraud trends and invest in the best technologies to protect our clients.
5. Monitor Transactions Closely: Fraud can happen at any point in the process, from offer to closing. Regularly check and re-check all documents and communications to ensure they’re legitimate and accurate.
Q&A Session: Addressing Attendee Concerns
During the Q&A portion of the webinar, attendees had the opportunity to ask questions directly to our panel of experts. Common concerns included how to spot red flags during a transaction, what to do if fraud is suspected, and how to educate clients on the importance of cybersecurity.
One key point emphasized during the discussion was the need for vigilance—fraud can happen to anyone, and the more proactive we are in recognizing the warning signs, the better we can protect our clients and businesses.
Conclusion: Stay Vigilant and Proactive
As scams and fraud continue to evolve, it’s crucial for everyone involved in the real estate transaction process to stay informed and vigilant. The best defense against fraud is a combination of education, secure practices, and a commitment to working with trusted partners.
We’d like to thank everyone who attended the webinar and engaged in the discussion. If you missed the event or would like to review the content, we’ll be sharing a recording soon, so stay tuned!
In the meantime, if you have any questions or need further information on how Sun National Title can help you protect your real estate transactions, don’t hesitate to reach out to us.
Let’s work together to keep our industry secure!
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About Sun National Title Company
Sun National Title Company is committed to providing the highest level of service and security in every real estate transaction. We pride ourselves on being a trusted partner for real estate professionals, offering comprehensive title and escrow services backed by the latest technology and industry expertise. Learn more about our services at www.closewithsun.com.
ChatGPT for Real Estate Agents
9 Must-Know Online Security Tips for Real Estate Agents
Safeguarding Your Virtual Space: 9 Must-Know Online Security Tips for Real Estate Agents
In today's increasingly digital world, where transactions, communications, and data storage are predominantly conducted online, ensuring robust cybersecurity measures is paramount, especially for professionals like real estate agents. Real estate transactions involve sensitive information and significant financial transactions, making them prime targets for cyber threats. From client data to financial records, the stakes are high. Therefore, it's essential for real estate agents to prioritize online security to protect both their clients and their business.
Here are nine indispensable online security tips tailored specifically for real estate agents:
1. Invest in Reliable Security Software: Begin by investing in reputable antivirus and anti-malware software. These tools act as the first line of defense against various online threats, including viruses, spyware, and ransomware.
2. Keep Software Updated: Regularly update all software, including operating systems and applications, to patch vulnerabilities and guard against potential security breaches. Outdated software is a common entry point for cyber attacks.
3. Utilize Strong Passwords: Strong passwords are essential for securing accounts. Create unique passwords for each account, incorporating a mix of uppercase and lowercase letters, numbers, and symbols. Consider using a reliable password manager to securely store and manage passwords.
4. Implement Multi-Factor Authentication (MFA): Enable multi-factor authentication wherever possible. MFA adds an extra layer of security by requiring users to verify their identity through multiple methods, such as a password, biometric verification, or a one-time code sent to a registered device.
5. Encrypt Sensitive Data: Encrypt sensitive data, such as client information and financial records, both in transit and at rest. Encryption scrambles data into an unreadable format, ensuring that even if intercepted, it remains unintelligible to unauthorized users.
6. Be Cautious of Phishing Attempts: Educate yourself and your team about the dangers of phishing emails, which often masquerade as legitimate communications to trick recipients into divulging sensitive information or downloading malware. Exercise caution when clicking on links or downloading attachments from unknown senders.
7. Secure Wi-Fi Networks: Secure your Wi-Fi network with a strong, unique password and utilize WPA (Wi-Fi Protected Access) or WPA2 encryption. Avoid conducting sensitive transactions over public Wi-Fi networks, as they are more susceptible to interception by malicious actors.
8. Regularly Backup Data: Implement a regular backup schedule for critical data. In the event of a cyber attack or data breach, having recent backups ensures that essential information can be restored without significant loss or downtime.
9. Verify Wiring Instructions: Always have your buyers call a number that they find on the internet to verify that they are wiring the correct amount and that they are wiring the funds to the correct place.
By implementing these nine online security tips, real estate agents can significantly enhance their cybersecurity posture, safeguarding their clients' sensitive information and preserving the integrity of their business operations. In an era where cyber threats continue to evolve and proliferate, proactive measures are essential to stay one step ahead of potential adversaries. Remember, when it comes to cybersecurity, vigilance and preparedness are key.
Real Estate Wire Fraud Webinar
How to spot a fake passport.
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Compare Passports Here: https://www.consilium.europa.eu/prado/en/search-by-document-country.html
Selling a property that was acquired
via Tax Deed.
If you purchase a property in Florida through tax deed auction, the title is automatically 'clouded' and requires subsequent action. Meaning, the tax deed purchaser does not have the ability to sell by a Warranty Deed.
Tax deed properties represent a risk to underwriters issuing title insurance. A "Clear to Sell Tax Deed Search Certificate" will enable the owner of a tax deed to obtain a full title policy on normal terms from one of our expansive Florida underwriting partners.
Without a Certificate, a tax deed owners only options for obtaining insurable title would be quiet title action, which can be a lengthy and expensive process, or wait four years for the statutory limitations period to expire. In either of the latter cases, the property owner is at risk of high carrying costs.
Quiet title action is a judicial process that is initiated by an attorney in an attempt to legally quiet any other claims/interest in the property. Due to unpredictable court time frames, noticing of prior owners and heirs, and potentially divergent hourly and material legal fees, this process can be both long and costly. Our underwriter approved research-based method avoids these delays by instead evaluating the Clerk processes were done correctly prior to auction and prevents the need for court involvement.
You can learn more at: https://cleartosell.com/
Understanding FIRPTA
The U.S. continues to be a popular place for foreign investment in real estate. According to a 2023 study conducted by the National Association of REALTORS® (NAR), foreign buyers purchased over $50 billion worth of U.S. homes from April 2022 through March 2023. Eventually, foreign property owners will become sellers, and when that time comes, the transaction may be subject to income taxes and withholdings under the Foreign Investment in Real Property Tax Act of 1980 (FIRPTA).
FIRPTA is a complex tax law that, if ignored, can result in significant financial penalties. If you find yourself purchasing a home from a foreign seller, it’s important to consult with a tax professional to ensure you’re in compliance with the law. In this blog, we’ll explore a basic overview of the FIRPTA withholding requirements, general exceptions and limitations, special rules and the role of the closer during FIRPTA transactions.
What is FIRPTA and How Does It Work?
FIRPTA was enacted to ensure that foreign sellers who realize capital gains from disposition of United States (U.S.) real property interests are held accountable for their tax obligations. FIRPTA defines a foreign person as a nonresident alien individual or foreign corporation that has not made an election to be treated as a domestic corporation, foreign partnership, foreign trust, or foreign estate. A foreign person does not include a resident alien individual.
When a foreign person disposes real property interests, FIRPTA requires fifteen percent (15%) on the amount realized to be withheld as a “deposit” per the Internal Revenue Service (IRS), unless an exception applies. Although the withholding is subject to the seller/transferor, in most cases, the withholding agent is the buyer/transferee. Therefore, the buyer/transferee is generally required to report to the IRS the amount withheld within 20 days of the closing by filing the applicable tax forms.
The withholding amount is applied to the total tax due by the foreign seller/transferor and is not the tax itself. The IRS calculates the full tax due once the seller/transferor files a U.S. tax return. If the buyer/transferee fails to withhold and the foreign seller/transferor fails to satisfy its U.S. tax liability, both the buyer/transferee and the seller/transferor can be held liable for the tax, along with interest and penalties.
Exceptions to FIRPTA Withholding
There are some exceptions that eliminate or reduce the FIRPTA withholding requirement for individuals. The most common exceptions include, but are not limited to, the following:
• Property Value and Use. If the buyer/transferee purchases a property that is less than $300,000, the FIRPTA withholding is not required if the buyer/transferee, or a member of the buyer/transferee’s family, resides in the property for at least 50 percent of the time for the first two years following the date of the transfer of the property (the days the property is vacant are not included). It is required that the buyer/transferee signs an affidavit attesting to the use of the property.
• Non-Foreign Status. The seller/transferor provides a certification stating, under penalty of perjury, that they are not a foreign person. The certification must include the seller/transferor’s name, U.S. taxpayer identification number and home address (or office address, in the case of an entity).
• Withholding Certificate. Under the circumstances listed below, the buyer/transferee or the seller/transferor can reduce or eliminate the FIRPTA withholding by submitting an application to the IRS for a withholding certificate. If the seller/transferor applies for a certificate, notification must be provided to the buyer/transferee in writing on the day of, or prior to, the transfer of the property. Once an application is submitted, the IRS generally processes the application within 90 days of receipt.
The IRS may issue a withholding certificate under the following circumstances:
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The withholding is more than the seller/transferor’s maximum tax liability, or reducing the withholding does not impede the ability to collect the tax. For instance, the foreign seller/transferor receives no gains because the property was sold at a price lower than originally purchased;
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The seller/transferor is exempt from U.S. tax on the gain realized from the transfer of the property, such as a qualifying 1031 exchange; or
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There is an agreement for payment of the tax that provides security for the tax liability by either the buyer/transferee or the seller/transferor.
Limitations on the Amount Required to be Withheld
Some transactions may qualify for a reduced withholding rate equal to ten percent (10%). To qualify, all of the following criteria must apply:
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Buyer/transferee must be individuals and use the property as a residence;
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The amount realized does not exceed $1,000,000; and
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The $300,000 exception does not apply.
The withholding can also be reduced when the property is owned jointly by a foreign and nonforeign seller/transferor. The amount subject to withholding is determined by allocating the amount realized from the disposition based upon the capital contribution of each party. If the sellers/transferors are a married couple, each seller/transferor will be deemed to have contributed 50 percent.
Rates of Withholding
FIRPTA withholding rates (for individuals) are based upon the buyer/transferee’s intended use of the property and the total amount realized from the disposition of the foreign seller/transferor’s U.S. real property interests. Given the list of FIRPTA exceptions and limitations on the amounts required to be withheld, the applicable withholding rates are calculated as follows:
Transactions with Special Rules
Some transactions, including the ones listed below, have special rules regarding FIRPTA requirements. It’s imperative to consult with a tax professional to make sure you understand them.
• Seller/transferor is a domestic partnership, domestic trust or domestic estate: If any partner or beneficiary of the partnership, trust or estate is a foreign person, a withholding as much as 35 percent may be required. FIRPTA places the burden of the withholding on the partner, fiduciary or other representative of the domestic entity.
• Purchaser/transferee is a government body: No withholding is required when the buyer/transferee is the United States government, a state or possession of the United States, a political subdivision thereof, or the District of Columbia.
• Foreclosures: If the borrower being foreclosed upon is a foreign person, the transaction may still be subject to the FIRPTA withholding. However, special rules allow for an “alternative amount” that is less than the standard withholding. The amount is determined by the court or trustee and is generally calculated from any surplus of proceeds from the foreclosure sale after the foreclosing loan has been paid in full.
• Deeds in lieu of foreclosure: Transactions with deeds in lieu of foreclosure are subject to the ordinary withholding rules, except if one of the following occur: (1) the buyer/transferee is the only person with a security interest in the property; (2) no cash or other property is paid to any person with respect to the transfer of the property; and (3) applicable notice requirements are met.
The Role of the Closing Agent
During a FIRPTA transaction, the buyer/transferee and foreign seller/transferor may instruct the closing agent to gather the applicable tax forms, deduct the withholding from the seller/transferor’s proceeds and remit the funds to the IRS on behalf of the buyer/transferee. The closing agent is generally not licensed or authorized to prepare any of the FIRPTA tax forms, provide advice regarding the FIRPTA withholding, or offer any legal advice.
With the high number of foreign investment in the U.S., it is crucial to understand FIRPTA requirements. This blog provides a basic overview of the FIRPTA requirements. For more information on FIRPTA, click here. Navigating the details can be challenging, so it’s imperative to consult with a tax professional and real estate attorney before closing on a property with a foreign seller.
Copyright ©2023 “2023 International Transactions in U.S. Residential Real Estate.” NATIONAL ASSOCIATION OF REALTORS®. All rights reserved. Reprinted with permission. August 1, 2023. https://cdn.nar.realtor//sites/default/files/documents/2023-international-transactions-in-us-residential-real-estate-08-01-2023.pdf