Fraudsters continue to seek out legitimate businesses they can use as a cover for illegal schemes that attempt to separate people from their money. One of the fraud scams that has reemerged is the check fraud scheme.
The claims team was recently notified of a scenario involving an Alliant National agent. A new purchase agreement and a sizeable earnest money deposit cashier’s check was presented to the agent. The cashier’s check was from a foreign bank and was promptly deposited by the agent into their escrow account. Shortly after depositing the check, the buyer notified the agent that the transaction was cancelled. The buyer demanded the agent promptly return the funds through aggressively worded emails and continuous phone calls. The agent did the right thing by not allowing the purported buyer to usurp the procedures that the agent already had in place. Ultimately, the foreign bank confirmed that the cashier’s check was fraudulent, and the purported buyer ceased any further efforts to communicate with the agent.
A few Red Flags from the transaction included:
- A foreign buyer,
- For sale by owner transaction,
- No real estate agent utilized in the transaction,
- Use of non-standard real estate purchase and sale agreement template,
- Termination of the purchase and sale agreement was quickly sent to the agent after the check was deposited, and
- An aggressive stance is taken by the buyer requesting that the funds be returned.
Appropriately, the agent did not rush the process, notified the purported foreign buyer of their check verification process, independently researched and located contact information for the foreign bank, confirmed the validity (or lack thereof) of the cashier’s check with the bank, and waited for confirmation from the bank on whether or not the funds cleared the account.
For a foreign bank’s check, it is important to remember that it may take several weeks for funds to clear an account. If you act and return funds too quickly, the buyer’s original check may be returned due to insufficient funds. If you attempt to try and recover the funds from the buyer, most likely the buyer will refuse to return the money or the buyer can no longer be located. Then, the agent is left without those funds in their escrow account, which will lead to other issues.
It is critical to stay alert and continue to recognize this and other fraud schemes before fraudsters visit your office. You can learn more about identifying and preventing fraud by downloading Alliant National’s white paper – Escrow Fraud/Social Engineering: Recent Schemes and Prevention Tips. This 23-page guide was also referenced in our recent #AllNatAdvantage post titled The #1 Tool For Recovering Diverted Funds: Your Wire Fraud Response Plan.
In addition, here are a few other resources that outline a similar check scam:
If you have questions, please contact the Alliant National claims team.
We’ve learned from the refinance boom and bust years that being a one trick pony in the title insurance profession is not the pathway to longevity. Diversifying your transactions with purchase, refinance, builder, REO and mobile home transactions is a good way to hedge your bets in the cyclical reality of the real estate market.
Commercial transactions can also be a great way to solidify your competitive position in the local market. However, many agents are a bit leery of taking the plunge due to the more complex nature of these deals.
Donna More, VP and Senior Underwriting Counsel for Alliant National Title Insurance Company, says that while she can understand an agent’s initial trepidation, there is a logical pathway for agents to move into the commercial end of the business, and Alliant National underwriting counsel can be a great resource as you are learning the ropes.
“I think an experienced underwriting attorney is key in these transactions,” More says. “We know right off the top what is going to come up. We can get the agent prepared, alert them on what they are going to need, and tell them what questions to ask – even before they get the search report – so they can avoid some surprises later on in the transaction.”
She notes that agents are hesitant to get into commercial because they don’t want to appear ignorant when questions and issues come up. But most of the tough issues will be resolved by underwriting counsel.
“We are going to be the ones who come up with methods of resolution, based on our professional experience,” she explains. “That is one of the big advantages we offer our agents. With our experience and knowledge, we are often able to predict what is going to happen, or what is going to be needed. We can already be thinking ahead to the best way to resolve potential issues.”
But let’s not put the cart before the horse.
There are some key steps you can take before venturing into commercial transactions. It’s also helpful to understand how the players’ roles are different and explore some of the elements that are unique to commercial transactions.
Learning about commercial transactions
The best way to learn the nuances of commercial deals, according to More, is first, to take on small deals in order to learn by doing; second, to work closely with underwriting counsel to get questions answered; and finally, to seek out educational opportunities.
“I recommend that agents who want to get into commercial and want to feel competent and prepared should take classes,” she advises. “There are always good takeaways from the commercial real estate seminars. Also, ask local attorneys what they recommend would be helpful to gain a higher degree of sophistication in commercial real estate.”
More says it shouldn’t be too hard to find educational opportunities, since bar associations and land title associations offer commercial real estate classes. Even if the class is geared towards lawyers, it can still give an agent insight into commercial deals, affording them a greater level of comfort, she adds.
Alliant National agents can check out a free webinar, Commercial Closings? No Problem! at alliantnationalacademy.com.
Securing commercial transaction title orders
More acknowledges that the most complicated commercial transactions are usually handled by attorney title agents but notes that there are plenty of non-attorney title agents who have been successful at developing a clientele with their existing real estate agent and broker customers who handle both residential and commercial transactions.
She also advises mining existing customer relationships for potential opportunities.
“Someone who bought a $3 million home and closed with you is probably a fairly successful businessperson and may be involved in buying and selling commercial properties,” she says. “Nurture those relationships.”
She also suggests getting immersed in the local business community and commercial industry organizations, especially the real estate associations like Commercial Real Estate Women (CREW) or NAIOP, the Commercial Real Estate Development Association (fka the National Association for Industrial and Office Parks).
“Being involved in the local commercial industry organizations is a very good source of knowledge and business,” More says. “Go to the local meetings and take advantage of the educational opportunities to build your confidence.”
How commercial title work differs from residential
Commercial transactions can be complicated, with more lawyers involved and often more parties to the transaction. In addition, the principals are often not individuals, but legal entities.
“The title agent needs to be very familiar with the types of legal entities in their state and what the requirements are for proof of good standing and proof of authority,” More explains.
She says an agent is also more likely to have to deal with ancillary issues, such as easements for access. Generally speaking, in a residential sale, the home is on a platted lot and there are no issues with access. But with commercial property, it could involve a landlocked parcel and you have to be concerned about access or the adequacy of access.
“The other important difference is how you deal with the lenders,” she says. “The lenders are going to expect more. In the more sophisticated transactions, there are going to be more requirements and different documentation needed. Even though you as the title agent would not be preparing the documents, you will have to familiarize yourself with all the documents in the transaction as well as get them signed as part of the package and recorded.”
More notes that construction loans are also more complicated for commercial properties and lenders will have a lot more requirements. The agent could also run into construction lien issues.
“Florida has a construction lien law that is very detailed and very complicated. That’s another reason why it’s so important to go to your underwriting attorney to get the guidance you need,” she advises.
Same basics, different pacing
The basics of the title and closing work in a commercial transaction is not very different from residential transaction.
“The agent needs to go through the commitment, see what the requirements are, and get familiar with the exceptions,” she explains. “It is especially important for a title agent to be able to distinguish what the parties are responsible for vs. what they are responsible for. And of course, they should come to underwriting as soon as they see something that makes them say, ‘I don’t know what this is.’”
However, More clarifies, the title agent must account for everything even if it is the sellers’ or buyers’ responsibility to actually perform the task or provide the documentation.
Sometimes commercial deals can be turned around quickly, but usually they take longer because the inspections and due diligence are more complicated, often involving permitting, approvals, DOT issues and access.
“In my seminars for Florida agents, I have always suggested checklists for any transaction, but it is most imperative in commercial deals,” More says. “Go through the contract. Check the timelines. Also, as the title agent, you need to share your title work with all parties – seller, buyer and lender. Sellers and their lawyers will have a much bigger role in a commercial transaction. The seller will have to come up with all kinds of documentation. On the buyer side, the lender will need to see the organization of the entity and will want to look at their books and balance sheets.”
And of course, the title agent will be involved in the curative work, even if it is only to give the seller guidance as to what will be required.
“In addition to keeping up with the timing, probably the most crucial part of what they do is keeping track of what needs to be fixed and how it needs to be fixed,” More notes. “That’s where we come in. They need underwriting to determine how to cure a problem or explore the alternatives available to fix an issue. We rate those alternatives – this is the best course of action or this is the option we don’t want to do.”
Commercial real estate transactions do require some expertise, but it is knowledge that can be acquired over time through educational opportunities and on-the-job experience with smaller transactions. But the most important resource you have at your disposal will always be the experienced and knowledgeable underwriting attorneys at Alliant National. We are always here to help you learn how to navigate this fascinating and challenging aspect of the title insurance business in order to take your agency to the next level.
What does it mean to get hacked? And how might we mitigate cybercrime?
Hacking is unfortunately far from uncommon. By some counts, more than 2,200 cyberattacks occur per day, which means that one cyberattack occurs every 39 seconds.[i] These hacks carry a tremendous financial cost, with some estimates putting them as high as $6 trillion per year or $500 billion per month, $115.4 billion per week, $16.4 billion per day, $684.9 million per hour, $11.4 million per minute and $190,000 every, single, second.[ii]
The figures are mind-boggling and scary, which is why it is more important than ever to understand what can occur when a business network is hacked. Without grasping the basics, it becomes more difficult to assess your risk and start proactively protecting your company.
What is the origin of the term “hacking”?
The use of the term “hacking” in a computer science context began all the way back in the 1950s at MIT. In those days, hacking simply meant dealing “with a technical problem in a creative way.”[iii] It wasn’t until the late 1970s that hacking started to refer to illicit activity, a definition it retains to this day.
These days, hacking primarily revolves around the compromising of digital devices and networks. While there is “ethical hacking,” which focuses on improving security systems and keeping data safe, most is “black hat,” which means that it is often motivated by money, such as:
- Wanting to sell private network information on the black market.
- Obtaining access to sensitive information and then attempting to coerce victims into paying money.
- Desiring to obtain confidential data and use it for financial benefit.
- Holding data hostage until a payment is made.
How do hacks occur?
Typically, business networks are targeted through the multiple endpoints that are vulnerable to criminal activity. Just think about it. Every day, employees access business networks with numerous devices that may or may not be secure. But that’s not all businesses need to be concerned about. Similarly vulnerable areas include:
- Any cloud-related services
- Unsecured WiFi
- Malicious websites
- Email accounts
Hacks come in every shape and style
There is no “one way” that hacking occurs, which makes it important to cover the different variations of hacking to gain a more complete understanding of the threat landscape. Here are seven distressingly common strategies that cybercriminals routinely employ:
- Phishing: By far, phishing is one of the most popular forms of hacking today – in part because it is so effective. To better understand the prevalence of phishing, look no further than to recent data that shows 1 in 99 emails is a phishing email.[iv] There are several different types of phishing emails, such as:
- Malware delivery emails, where malware is unleashed if the email recipient clicks on a malicious link.
- There are also credential harvesting emails, where the sender will impersonate someone the recipient knows to get them to hand over sensitive information.
- Denial of Service (DoS): DoScyberattacks occur when cybercriminals make an online property or service unavailable by inundating it with requests. This attack will frequently result in your website crashing or becoming unusable.
- Spyware: Spyware involves malicious code being embedded to monitor email correspondence or worse. Keying (key-logging) to obtain passwords is just one example.
- Malware: You’ve likely heard of malware before – and for good reason. Referring to any computer virus, worm, trojan horse, spyware, ransomware, adware or other malicious software, malware has been sneaking into user devices and business networks since the beginning of the computer age.
- Brute Force Password Decoding: In this type of hack, finesse or secrecy go out the window. The cybercriminal simply attempts to force his or her way inside your devices or network through automated tools that seek to decode your network passwords.
- DNS Attacks: With Domain Name Server (DNS) attacks, cybercriminals utilize an elaborate strategy where they take domain names and transform them into IP addresses, which often results in the domain name server redirecting web traffic to fake websites controlled by the criminal.
- Social Engineering: Social engineering cyberattacks are exceptionally difficult to guard against because they focus on manipulating human attributes like empathy, fear and urgency to gain access to personal information or a corporate network. Phishing is one example of such an attack, but there are many others that fall into this bucket.
Are we powerless against hacking?
With such a wide range of illicit cyber activity, it can feel almost impossible to keep up. However, there are numerous things business owners and employees can do to protect themselves and reduce the possibility of harm or financial loss. From following password best practices, to keeping your systems updated, to deploying new techniques like security awareness training (SAT), even the smallest firm can dramatically increase its security posture. The situation is not hopeless. In fact, by following expert advice and remaining vigilant, we all have the power to reduce our risk profile and stay safe online in both our personal and professional lives.
Keep learning! Read more about 2022 cybersecurity trends, the rise of ransomware and how to streamline your password use.
We also encourage agents to continue to explore and implement best practices to combat cyber fraud. Download Alliant National’s white paper – Escrow Fraud/Social Engineering: Recent Schemes and Prevention Tips to begin your own internal assessment.
[i] Clare Stouffer, Norton, “115 cybersecurity statistics and trends you need to know in 2021,” 9 Aug. 2021, 115 cybersecurity statistics and trends you need to know in 2021 | Norton
[iii] ECPI University, “What is Hacking and Cracking in Cybersecurity?”, What is Hacking and Cracking in Cybersecurity? (ecpi.edu)
[iv] Michael Guta, SmallBiz Trends, “1 in 99 Emails is a Phishing Attack, What Can Your Business Do?,” 4 May 2021, Phishing Statistics: What an Attack Costs Your Business [INFOGRAPHIC] – Small Business Trends (smallbiztrends.com)
Nearly 20 years into the age of social media, is organic content still enough?
For many people, social media is old hat these days. Oh sure, the kids are still rocking out on TikTok. Platforms like Twitter and Facebook still boast userbases in the millions and billions respectively. But let’s be honest, social seems to have lost some of its luster, prompting many to ask themselves: Is it still worth it for my business? The short answer is, absolutely! An overwhelming number of people in the business community agree with this, with 80 percent of enterprises saying social media is the most important factor in digital marketing success.[i]
The longer answer is: It’s complicated. Social media still represents an effective, low-cost way to connect with your customer base and position your brand. But the recipe for success has changed in the two decades many of these platforms have existed. In fact, research increasingly confirms that restricting your social media activity to organic posts will only get you so far.
Below, we’ll assess if this is a good option for your agency.
What do the experts say?
Research shows that people are increasingly deploying paid social media advertising. Eighty six percent of marketers noted in a recent survey, for instance, that they now combine paid and organic tactics.[ii] One reason for this is that some platforms are seeing a dip in organic reach. Organic posts on Facebook reach only 5.5 percent of a brand’s followers on average.[iii] There are multiple reasons for this decline. “For one, the high volume of ads competes with organic content for space on users’ news feeds.”[iv] There is also a widely held impression that algorithmic changes have disincentivized the role of organic social, making its ROI far less impressive than it might have once been.
So, has organic social’s time passed?
Even though there has been a clear decline in the reach of organic social media, that doesn’t mean that businesses can afford to not be active on these platforms. There are many reasons why companies need a strong social presence, some of which include:
- Increased brand recognition
- More brand loyalty and authority
- Higher conversion rates
- Increased inbound traffic
- Lower marketing costs
- Richer customer experiences
- Improved customer insights
Even a cursory look at U.S. social media usage should put doubts to rest about whether it is still worthwhile. As of 2020, for instance, nearly 65 percent of American adults are active social media users, while 42 percent of Twitter users visit the site daily.[v] These are facts you just can’t argue with when considering where to put your marketing time and effort.
What is the best approach today?
Instead of jettisoning organic social media, then, what should savvy business leaders and marketers do? Well, instead of choosing one or the other, marketers have increasingly paired organic and paid strategies. Perhaps one of the best things about social media is that it can serve as an enormously valuable source of data on your audience members. Unsurprisingly, these data-driven insights have come to be seen as a guide for which type of content you should boost and on which platform.
Basically, if you have a type of organic content that consistently performs well, you should take a hard look at whether you want to expand its reach with an ad buy. People respond to the content they do for a reason. Don’t miss your opportunity to leverage that knowledge to make a well-reasoned, moderately priced ad buy and expand your presence on social.
Final words on the organic/paid debate
Like so much in the marketing world, nothing in social media stays the same – at least not for long. Over the course of its lifespan, social has changed dramatically, nowhere more so than in the rise of paid postings. But before you throw out organic social altogether, you should look at it as something that can be paired effectively with paid social. That’s where the magic happens.
Want to learn more about how you can harvest data from your social media feeds? Check out this helpful primer.
And if you don’t yet feel confident about using paid advertising tools and running successful ad campaigns, look at this terrific introduction.
[iv] The Decline of Organic Reach in Social Media Marketing | Local View
[v] Is Social Media Marketing Worth It? 6 Reasons to Use Social – WebFX
I’m sure at some point in life, each of us has thrown up our hands and said, “I’m not worrying about the details, this is good enough.” Of course, when you deal with real property transactions, you quickly learn that the small stuff matters.
The claims team has seen several areas that can be typically resolved in the transaction or post-closing without ever rising to the level of a claim. Let’s look at three of those areas – Release of Liens, Release of Revolving Line of Credit / Home Equity Line of Credit, and Property Taxes – which all require attention to detail.
- Release of Liens
Let’s say you’ve obtained the payoff letter from the correctly identified and verified lienor, closed the transaction, sent the funds to the lienor, and now you are moving on to the transaction. But wait! The lien is recorded in the county land records, so how are others to know it has been paid? Several lienors will handle recording a release in the proper county land records, but there are few lienors who fail to do so. Either the lienor sends an unrecorded release to their borrower, to the title company, or does not prepare one at all. In a few states, there are statutes that provide a timeframe in which a lienor must record the release after receipt of payment. In other cases, the instrument may have a clause that discusses the obligation of the lienor when the debt is paid. In all cases, as part of a post-closing, best practice process, a release or satisfaction should be promptly filed in the property’s county land records before the file is classified as completed. This may require a few follow-up communications with the lienor to satisfy this requirement, but it will be worth it in the long run.
- Release of Revolving Line of Credit / Home Equity Line of Credit
The Revolving Line of Credit or Home Equity Line of Credit loans allow a borrower to draw funds, when needed, and the borrower can use the line of credit over and over while being secured with the property. Many closers may take the same steps as a typical payoff of a mortgage or deed of trust, but there are a few additional steps required to properly close down and have the loan released from the property. Just sending the payoff funds is not enough.
To properly address these types of loans, a written request from the borrower to close the account upon receipt of the full payoff is typically required. Many lenders request a signed letter from the borrower requesting to close the account. So, if you are wiring the funds, the seller’s written request to close the account will still need to be delivered to the lender. To provide evidence that the borrower’s written request was sent to the lender, a best practice would be to track the delivery of the request to the lender, either by facsimile, mail or email. Once you receive confirmation that it has been delivered and received, keep a copy of this information in the file along with a copy of the written request. Similar to the Release of Lien section above, a release or satisfaction should be properly filed in the property’s county land records before the file is classified as completed.
Whether you are using a tax company to provide a report on the outstanding property taxes or doing the research yourself, if not handled accurately, unpaid property taxes may result in a homeowner being subjected to additional taxes and penalties or losing the property. In a few states, just looking at the county’s tax collector site is not enough as there are other entities required to be paid that are situated outside of the tax collector’s office. If you are doing business in such a state, identify all the tax entities to which taxes are due and payable when a property is conveyed or refinanced.
Another tax example involves states that are reviewing prior owner exemptions. If an exemption was deemed to have expired in an earlier conveyance, the tax collector’s office is sending letters to the current homeowner seeking payment for the difference caused by the changed exemption for the prior years. As an example, if there is a homestead exemption reflected but a company has held title to the property for several years, this may require a discussion with the tax collector’s office as to the proper calculation of taxes owed if the exemption is no longer valid. With this information, the proper amount of taxes can be collected at closing.
Our final tax example involves prior year’s unpaid taxes or issued tax certificates. In these cases, make certain the proper payment amount is collected and timely delivered to stop a tax lien sale or, if sold, any certificate holder from obtaining a tax deed. Depending on the state, the expiration of the redemption period after a tax deed is issued may result in a loss. As a best practice, the title company should confirm with the tax collector’s office or its designated entity that it has received payment and that the payment is being applied to the correct account(s).
Attending to the details in these three areas will provide assurance to all those involved in the transaction. Having properly addressed these matters, a seller or buyer will not have to worry about being contacted in a few months, or possibly years from now, to address these issues. If you have questions, please contact the Alliant National claims team.