In today’s episode of “True Crimes of Real Estate” podcast, we shared the story of a well-established broker who’s committing fraud on a large scale — to the tune of several million dollars in an investment-based Ponzi scheme.
This broker didn’t start out as a walking red flag. He had been licensed for many years before the unlawful activity occurred and had a reputation as legitimate, experienced and successful. Clients had every reason to believe in the promise of that professional reputation when working with his brokerage.
As an agent, your role for your clients isn’t just order-taker. It’s interpreter, educator and, sometimes, fact-checker. Your fiduciary duty is designed to help protect your clients from the harm that comes when they trust too easily, move too fast or fail to verify the facts around the most dangerous part of any real estate deal — money movements.
Trust, but verify
In the case of the off-book broker we described, the fraud worked because clients followed instructions without questioning them. The broker had fake escrow accounts, fake emails and fake contracts, all designed to keep everything looking normal on the surface.
It was all propped up on a system of lies. None of it was real.
To protect your clients from bad actors — either within your brokerage or from an outside phishing scheme — keep an eye on the moments in a transaction where money is changing hands: earnest money deposits, inspection or repair payments or transferring funds for closing.
Wiring instructions are the highest-risk touchpoint in modern real estate, accounting for hundreds of millions of dollars in losses each year, according to the National Association of Realtors. That means it’s important to implement verification protocols to protect clients when they’re wiring money during the transaction.
Slowing down is a service
“Speed to lead” is a watchword for real estate agents, and speedy response times, offers and other elements are key to keeping clients happy. But once you’re inside the transaction, your fiduciary duty requires you to slow down, especially in high-risk moments when money is at stake.
Verification is not about being paranoid. It’s part of your fiduciary duty. Teach your clients how to protect themselves by educating them on how escrow actually works.
This includes:
- Explaining the escrow process and the prevalence of wire fraud in real estate. (Use NAR’s consumer guide, available in both English and Spanish, as a starting point.)
- Showing clients how to verify instructions from their escrow and/or title company or closing attorney.
- Normalizing double-checking everything, especially wiring instructions.
- Caution them never to deposit or wire funds based on an email request, as this is one of the most common and effective methods scammers use to defraud consumers.
Be the advocate your clients need, and ensure that they understand the importance of vigilance all the way up to the closing table.
How smart agents extend protection beyond the transaction
If you’re always looking for new ways to provide service beyond the sale — so you stay top of mind for reviews, referrals and repeat business — you can transform your educational content into relationship marketing.
Here’s how:
Periodic title checks
Most homeowners never think about their title again after closing, but that title record is public at the county level. That means that liens, judgments, fraudulent filing and unauthorized transfers can be recorded without the owner knowing it.
You can provide a title check periodically by pulling a fresh title report through a title company or attorney or by manually checking county records. It’s a value-added service that can protect your clients and add value years after the sale.
Property/title monitoring services
Just like credit monitoring, property or title monitoring provides ongoing protection for your clients. You can find these services in a couple of different places:
- Some counties offer free services where you can register a property and be notified automatically if a document is recorded under it. Look for names like “property fraud alert” or “recording notification service” to take advantage of this simple, but surprisingly underutilized, service.
- Otherwise, contact a private, paid service that monitors public records and alerts owners to new filings. Sometimes these can be bundled with identity theft protection. Do some research here, as private companies can vary in quality.
For what you’d normally spend on an annual client appreciation event or gift, you can provide real peace of mind for clients year after year. Instead of blasting generic content, you can position yourself as an ongoing resource and a valuable professional relationship.
A good agent gets a deal to the finish line. A great agent makes sure the client gets there with their money and their confidence intact. Protecting your clients goes beyond doing things the right way; it means having their back and watching their blind spots during the deal and for years to come.
Disclaimer: The information provided in this article is for general informational and educational purposes only and does not constitute legal advice. The discussion is based primarily on laws, regulations, and regulatory guidance applicable in the State of California, including those enforced by the California Department of Real Estate. Laws and regulatory interpretations vary by jurisdiction, and readers should consult with qualified legal counsel or their broker regarding how these issues may apply to their specific situation or in other states.
Troy Palmquist is the founder and principal at HomeCode Advisors. Connect with him on LinkedIn.
Summer Goralik is a real estate compliance consultant and former CA DRE Investigator in Huntington Beach, California. Connect with her on LinkedIn.
