Tips for protecting yourself from real-estate wire transfer fraud
Real estate transaction cybercrime is on the rise.
According to The Wall Street Journal, hackers have targeted email accounts belonging to the parties in transactions, such as real-estate professionals, lawyers, and title agents, devising custom scams specific to the deals.
Profits from sales are then diverted from intended recipients to the hacker’s bank account.
It can take months to recover funds, and sometimes they are never recovered.
Earlier this year, a bipartisan group of 43 members of the U.S. House of Representatives sent a letter to Federal Reserve Chairman Jerome Powell asking him to explore ways of better protecting homebuyers from wire fraud.
Meanwhile, Sen. Doug Jones, D-Ala., along with the American Land Title Association and other real estate groups, started the Coalition to Stop Real Estate Wire Fraud, which seeks to educate homebuyers about wire scams, beginning with three cities that have seen surges in first-time homeownership: Pittsburgh, Pennsylvania; Virginia Beach, Virginia; and Birmingham, Alabama.
Lawmakers cite the FBI’s internet crime report, which counted 11,300 victims of real estate wire fraud for 2018, versus 9,645 victims in 2017, totalling $149,458,114 in losses.
One reason scams succeed in the U.S. is the fact that the name of a wire transfer recipient is not required to match the account into which the funds are transferred.
In the U.K., regulators are working to make it possible to confirm that the person receiving a funds transfer is the account holder. U.S. lawmakers are asking Powell to consider a similar solution.
In the meantime, follow these tips to protect your transactions from real-estate wire fraud:
Verify all wire transfer requests personally. Wire transfer requests, whether by email, text or phone, should be verified in as personal a way as possible. At the closing, ask the seller to sign wire instructions with his or her attorney present. Alternatively, ensure that instructions are included in the deed package, signed by the seller, with a notarized signature whenever possible. For additional protection, have the seller confirm wire instructions in a phone call with an attorney. Make sure that all contact information was received before the wire transfer. Then verify the plan via email.
For instructions received by email, verify in person or with a call back. When wire instructions are first received by email, schedule an in-person meeting or set up a call back with a phone number from a third-party source. Double-check the instructions with your attorney or title agent. When all else fails, check the website of the title company, settlement company or closing agent. Typically, instructions are posted there. If wiring instructions are changed for an ongoing transaction, review them carefully for inconsistencies.
Be wary of instructions sent via a free email service. Free email accounts tend to have significant security issues, and they may be mined by providers. Be aware that wiring instructions sent through free services such as Gmail, Yahoo or AOL.com may be fraudulent. Choose a more secure option for business transactions. Pay special attention if the sender name in an email is similar to the name of someone involved in the transaction, but not quite the same.
Check the details on the destination account. Make sure the name on the recipient account matches the name of the seller. Also, check the location to be certain it matches the seller’s location. While inconsistencies could be legitimate, they can be red flags and should be confirmed in person or by phone.
Make the transfer in person at the bank. Protect yourself by making the entire transaction in person. See the closing or settlement agent in person and then initiate the transfer in person at the bank.
Never wire money overseas. Funds sent overseas are nearly impossible to recover if sent to the wrong place.
Ensure that your passwords are secure. Update your passwords regularly and ensure that they are secure. That makes it less likely that a hacker will access your accounts.
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Financing a home for your retired parents
Lenders are making it easier for people who want to finance homes with rental units for their retirement-age parents.
In the past, banks treated such arrangements as partial investment properties and required higher down payments and loan rates than those required for typical single-family homes.But that’s not the case anymore.
According to the Pew Center, 20 percent of Americans, or 64 million people, live in multigenerational homes, with at least two adult generations in the home, as opposed to 12 percent in 1980.
Wells Fargo has created a program for Fannie Mae and Freddie Mac loans that reduces the down payment for purchasers of duplexes from 15 to 20 percent to 5 percent. A duplex loan can be issued to up to four borrowers, allowing a couple and their older parents to take the loan out together.
To participate in the program, borrowers must take an online course on serving as a landlord.
Some families look for bigger homes, with bedrooms and bathrooms on the ground floor, for their parents or in-laws.
In some cases, the older generation sells a home and applies the equity to the down payment on a new place. Depending on gifting rules, this may require that the older couple serve as co-borrowers on the mortgage loan and as an owner on the title.
When the older co-owners die, especially if they have other heirs, the property may have to be refinanced to turn the parents’ equity into cash. Or the property may have to be sold.
To make such purchases easier, some lenders offer an online calculator to determine how much each party can afford, and to project closing costs and interest rates, along with monthly ownership costs.
If you’re thinking of buying a duplex and renting to your parents, be sure to inform the lender in advance.
Many banks offer lower rates and less stringent requirements when family members are the renters.
Be aware that lenders send mortgage-interest statements to each person on a loan, leaving it to borrowers to determine how to divide the interest on their respective tax returns.
In addition, specific tax code rules apply when renting to family members at a discount and can affect landlord-related deductions.
Consult a tax advisor or real estate lawyer to determine how to handle any deductions.
U.S. Supreme Court says yes to immediate takings claim
In a big change affecting property owners, the U.S. Supreme Court has ruled that people whose land is taken for public use without payment may, as soon as the property is taken, file federal lawsuits for constitutional violations of property rights.
The decision makes it much easier for property owners to sue for federal relief.
The high court revisited the question of whether property owners have standing to bring §1983 claims under the Fifth Amendment in federal court when a taking occurs, or if they must exhaust all state court remedies first.
The court in June overturned a long-standing requirement that property owners must pursue all options for compensation in state court before bringing federal claims, saying owners may bring claims right away even if state courts have not considered the issue of just compensation.
The old requirement had been in place for nearly 35 years. The new decision found that the rule made it too difficult for property owners to exercise their rights under the federal takings clause.
The court also said the rule presented unfair obstacles that did not exist for people looking to bring §1983 claims based on other constitutional protections.
The decision makes it much easier for property owners to sue for federal relief.
Tips for charging rent to your adult child
In some ways, it might seem great to have your adult child move home and spend more time with you. Or maybe you never expected it to happen, and suddenly the child you thought was moving on is at your doorstep.
Base rent on a percentage of your child’s take-home income. A good range to consider is between 10 and 30 percent, depending on his or her income and debt.
No matter how you feel about it, here are some tips on charging your adult child rent:
- Base rent on a percentage of your child’s take-home income. A good range to consider is between 10 and 30 percent, depending on his or her income and debt.
- Make an advance plan for your adult child’s payment of other expenses, such as car insurance, student-loan payments, etc.
- Discuss responsibilities beyond basic cleanliness and laundry. Request assistance with home maintenance tasks, such as lawn mowing and cleaning projects.
- Be clear about what you will do if your child fails to pay the rent. Find a way for your child to reduce any balance. If he or she simply cannot afford it, consider reducing the amount, or help him or her find a part-time job so they can pay.
- If you decide to ask your child to move out, be sure to give at least one month’s notice, and allow plenty of time for him or her to find another dwelling space.
Should you choose a reverse mortgage? Pluses and minuses
For seniors, deciding whether to enter into a reverse mortgage can be complicated.
Here are some pros and cons to consider:
- A reverse mortgage allows you to maintain the title to your home while receiving income from your equity.
- The loan doesn’t typically affect Medicare or Social Security benefits.
- Reverse mortgage income is viewed as loan proceeds, and therefore isn’t likely to be taxed. Be sure to consult an advisor to confirm the tax consequences of any loan.
- As long as you follow the terms of your loan and pay for all insurance, property taxes and maintenance, you won’t be evicted.
- After your loan reaches maturity and your home is sold, you are not required to pay more than the home’s value, even if the loan is greater than the value of the home. Also, the lender can leverage only the home, and no other assets, for repayment.
- The loan maturity date is triggered if you no longer use your home as your primary residence. If you move to a retirement or nursing home, the loan matures and you will have to repay the reverse mortgage.
- Reverse mortgages cost more than traditional ones. The higher costs include the interest rate, appraisal fee, loan origination fee, mortgage insurance fee, title insurance fees and other closing costs.
- Contracts for reverse mortgages include lots of complex provisions. Consult an attorney before signing.
- Be aware that mortgage salespeople typically work on commission. Don’t let anyone pressure you into an arrangement.
- If you want to keep the reverse mortgage in place after a spouse dies, it’s best to have both spouses’ names on the contract. If not, and the borrower dies first or otherwise transfers the home, or no longer uses it as a primary residence, the loan will mature. This is true even if the spouse is using the home as his/her primary residence.