As real estate agents, we work with people during one of the most exciting, transitional and financially vulnerable points in their lives. Our clients lay out their financial lives as they apply for mortgages.
They put their trust in industry partners doing inspections and appraisals to be honest about what may be the individual client’s largest financial investment of their life. Just to start the process, our clients put thousands of dollars, or more, in earnest money on the line.
To say the stakes are high would be an understatement.
I’ve been in the industry as a Realtor and employing broker for many years. One thing I’ve learned is that easing the stress for people through the process by establishing protocols and safeguards helps immeasurably.
Below are three things I stay aware of and teach the agents I work with.
Guard against wire fraud
These days, wire fraud is one of agent’s and a homebuyers’ worst nightmares. According to the FBI, an estimated $1 billion was, or was attempted to be, diverted from homebuyers via escrow wire fraud scams in 2017.
Hackers can break into a real estate professional’s email account and sit in silence, monitoring for upcoming transactions.
Once the hackers find a victim in the process of buying a home, they send a fake email that looks like it’s from their agent, lender or attorney with wiring instructions to a fraudulent account. The homebuyer then unwittingly wires the funds directly into the hacker’s account. When they click send, the money is gone.
Hackers can also trick agents into downloading malicious software either through an email or by other means. From there, hackers have access to any information needed to steal money.
To protect consumers from this issue, there are five key things real estate professionals can do to ensure their clients are protected:
- Tell clients: Always use telephone verification, which means calling the person asking for money.
- Encourage clients to use strong, unique passwords: And agents should do the same.
- Title companies shouldn’t email or text wire information: Make sure clients are aware of this, and make sure your client uses a reputable title company.
- Make sure your client understands their Realtor’s means of communication: They’ll be more aware if something seems off. Remind your client to trust their gut. Radar is there for a reason.
Stand against sloppy inspections
Sometimes, if a client is attempting to make their offer stand out from the crowd, skipping the inspection may seem like a good idea. Spoiler alert — it isn’t.
Your client will thank you for encouraging them to complete an inspection — and remember, Realtors have a responsibility to help find top-notch professionals to do inspections.
Although a home might look to be in ship shape to the naked eye, oftentimes there are unseen issues that can cost clients tens of thousands of dollars hidden behind seemingly harmless drywall.
Nobody wants to move into a house and find the crack in the foundation. Similarly, a solid inspection or appraisal can pick up issues with the neighborhood.
On the other hand, while I always recommend an inspection, if a buyer is one of six people bidding on a property, it might be a good idea to encourage them to be strategic about requests to the seller stemming from an inspection.
Cosmetic fixes and small-line items can be easily reconciled after closing and might factor into whether or not your client closes on the home.
Part of protecting and reassuring a client is showing them you know the difference between what’s important and what’s not.
Protect earnest money
As the real estate market heats up, it’s important to guide a buyer to a lender whose reputation is above reproach. One way to tell? If the lender guarantees earnest money.
Although the amount of money put down varies by each market, depending on the price of the home, this “good faith” or “earnest money” can be a pretty penny (generally up to 3 percent of the total purchase price).
Some progressive lenders like Fairway, Eave and Amerifirst provide guarantees on earnest money. These guarantees ensure that if the seller does not refund the money and the transaction falls through due to lender error, the money will be reimbursed. Eave has pledged to refund a buyer’s earnest money in full up to $100,000, subject to conditions.
This is a rare situation — but going with a lender that offers a guarantee is both a protection and a reassurance. One of the things you offer as a Realtor is the ability to connect your buyer to a top-notch team.
At the end of the day, Realtors are professionals who pledge themselves to protect and promote the interests of their clients.
By taking active measures to educate clients about the potential risks associated with the process, professionals demonstrate the skill and expertise clients will intuitively know is valuable. And, in the rare case where the protective measures you take save a client the home of his or her dreams, or a bucket of money — you’re golden.
Heather Heuer is Denver Metro Association of Realtors chair elect and president and employing broker for PorchLight Real Estate Group in Denver. Follow her on Facebook, or connect with her on LinkedIn.