Admit it. You’ve been approached. In fact, several such approaches have probably done 3-point landings into your mailbox, blasted your text messages and phone calls like a flash flood, or peppered your inboxes and social media accounts like radioactive fallout.

Somebody wants to buy your home in a quick and easy cash deal.

However true it may be that someone wants to buy your home, “quick” and “easy” will almost guarantee that you, the Seller, will get burned as badly as a chicken roasted too long over flames on a rotisserie and drenched in raw habanero sauce. Welcome to the creepy and corrosive world of artists specializing in scam, flim-flam, and operators on the lam.

If you don’t protect your own interests but blindly listen to the hucksters, God help you.

“WE BUY HOUSES,” AND YES THEY DO (OKIE DOKIE, GRIN, GRIN, GRIN)

Can anybody buy or sell a home? You betcha! Can anybody buy or sell a home to the greatest benefit of all parties involved? That’s another matter entirely

Real estate brokerage is an art. It also requires the highest level of ethics to do that art beneficially. Sadly, many who are in the business couldn’t care less about ethics. To them, it’s all about making a buck and they’d keep any information under wraps if it gives away their intentions.

I recall one Off-Market Dealer who courted a real estate Broker who claimed that he could do better at real estate as an unlicensed operator. He offered to find Buyers at 80%% of the commission. Naturally, that business relationship was doomed to fail like a deflating hot air balloon stuck in a power line.

There wasn’t anything transparent about his actions either. He cared nothing about agency. He cared everything about quick purchases and sales of property. In California, if you do 8 home sales, you’re considered “in the business” and consequently, subject to licensing requirements per Sec. 10139 of the Business and Professions Code:

“Any person acting as a real estate broker, real estate salesperson, or mortgage loan originator without a license or license endorsement, or who advertises using words indicating that he or she is a real estate broker, real estate salesperson, or mortgage loan originator without being so licensed or without having obtained a license endorsement, shall be guilty of a public offense punishable by a fine not exceeding twenty thousand dollars ($20,000), or by imprisonment in the county jail for a term not to exceed six months, or by both fine and imprisonment; or if a corporation, be punished by a fine not exceeding sixty thousand dollars ($60,000).”

People like that Off-Market Dealer stand as some of the most stupendous stars of speculation.

SOCIAL MEDIA IMAGE AND SUBSTANCE

Whenever the real estate market climbs as if powered by rocket engines from SpaceX, a flash flood of new people fill the seats at real estate schools. Plenty of real estate schools train new candidates for real estate licenses in California. In fact, 40% of all REALTORS® in the entire United States are in Arizona, Florida, Texas, and California and 45% of them have Bachelors or advanced degrees. Every time the appeal is the same: let’s get rich as quickly as possible.

The California Department of Real Estate (DRE) says, “Whoa, Nelly!” In the past couple of decades, the education requirements for new real estate Salespersons have risen, and no Salesperson may operate without hanging a license with a licensed Broker. Education includes some college-level courses, but these can be taken without actually being enrolled at a college or university. But outside the college or university, they must all be approved by the DRE Education Division and total 135 hours:

1. Real Estate Principles, and
2. Real Estate Practice, and
3. One course from the following:

Real Estate Appraisal

Property Management

Real Estate Finance

Real Estate Economics

Legal Aspects of Real Estate

Real Estate Office Administration

General Accounting

Business Law

Escrows

Mortgage Loan Brokering and Lending

Computer Applications in Real Estate

Common Interest Developments

Any Salesperson or Broker must be 18 years of age, fingerprinted, and be free of criminal conviction and liabilities for back taxes and child support. The purpose is to assure the public that professionals are “truthful and honest.” If either a Salesperson or Broker is in a position for license renewal, which sends them scrambling to their battle stations every 4 years, each must take an additional 45 hours of classes that refresh and update on the subjects of Agency, Fair Housing, Trust Fund Handling, Ethics, Risk Management, and often, Supervision in addition to a course on Consumer Protection or Consumer Service. Their License status is a matter of public record too.

So your prospective Salesperson or Broker has completed these courses and is announcing on Facebook and Twitter that he has passed the Real Estate Exam. He even posts his smiling picture on Instagram showing his new Real Estate License.

Yippee for him! What a guy!

But does that make that person competent enough to handle your Listing or Mortgage? Not necessarily. These educational prerequisites are just bare-bones requirements in state attempts at consumer protection. If they’re not met, you can’t begin to expect that this person understands what to do on your behalf as a fiduciary.

But it takes a lot of time to learn the art of real estate. Basic contracts like the Residential Listing Agreement: (Exclusive Authorization and Right to Sell) is a 5-page document of legal boilerplate and it by no means stands alone. Does that Salesperson fully understand this document so that he can clearly walk the Seller through it? A surprising number of Salespeople can’t, even after the Real Estate Practices course. The California Residential Purchase Agreement and Joint Escrow Instructions is 16 pages long and highly detailed and guess what? It doesn’t stand alone either. Other legal forms accompany it as well. Anyone who presents either document without a 2-page Agency Disclosure Statement is an immediate red flag telling you to not sign or initial anything.

These documents alone take time to learn and require close attention to detail when drawing them up for clients. More than that, a Salesperson must be ready to clearly explain those details. If you find yourself being rushed into signing without fully reviewing these documents, watch out!

PUT ON THE ARMOR OF… DUE DILIGENCE

“Due diligence” is a phrase of great importance to real estate professionals and it carries legal weight. How? Consider this scenario regarding the centerpiece of due diligence— disclosure:

Let’s say Mr. Akuleni (a random name from ancient Babylonia) places an offer to purchase property in Tujunga as a “flipper”. It means that he  wants to purchase property of low value because it has fallen into disrepair. He does a home inspection and determines the repairs needed will be sufficient to add much more value to the property upon resale. The Listing Agent supplies Mr. Akuleni with the standard Transfer Disclosure Statement (TDS) but lied on Item II.C.4 which asks whether any alterations such as room additions had been made without necessary permits. The Listing Agent claims no unpermitted additions have been made. The deal closes. Mr. Akuleni applies for his own permit for work to fix up the house but— o my! When he presents his plans to the Los Angeles Department of Building and Safety, he learns that the addition was never permitted. Mr. Akuleni now faces a fine as the new Owner and is ordered to tear down the unpermitted structure. He takes a massive loss in the process. But let’s suppose the matter gets worse because while a section of the structure has been exposed in the demolition, a surprise downpour of rain hits like what sometimes happens during monsoon season sends a muddy stream into the structure before he has a chance to intervene. He does his best to clean up the mess but now has to take extra steps to assure no mold has a chance to sprout like unwanted weeds. What should have yielded a tidy profit for Mr. Akuleni has turned into a crushing liability.

You can see how a lawsuit can fly as happily as a cruise missile powered by schnapps. Any real estate Attorney would be delighted to represent Mr. Akuleni against the parties who sold him that house. Worse yet for the Listing Agent, the Department of Real Estate will be interested in auditing, not his activities, but his Broker’s activities because he violated that prime directive that such must be “truthful and honest.” That Broker will probably have fired that Salesperson all the way to Mongolia because, as a Broker, he’s legally responsible for what his Salespeople do. But just firing that Salesperson would hardly be the end of the matter. Brokers take out insurance against Errors and Omissions. The Broker can file a claim, but his premium rises dramatically if indeed the insurer doesn’t cancel his policy altogether.

That’s serious stuff when you’re trying to run a real estate business.

IT’S NOT JUST FOR THE PROS

Because Off-Market Buyers are less regulated than licensed real estate professionals, scams abound. It’s not just an age of caveat emptor (Buyer beware) but also caveat venditor (Seller Beware). You have your own interests to protect. Here are some things to watch when approached by an Off-Market Buyer, and these would apply to other parties in transactions as well:

1. Do a Google Search on the Off-Market Business.If it doesn’t show up, it’s probably a fake.
2. Check for a Business License.Does this Off-Market Buyer have a brick-and-mortar location? Pay this entity a visit and ask to see its business license. Whenever anyone files a DBA (Doing Business As) with the County, the County will inform the municipality in which the business operates. The city will require its own Business License for an annual fee by which businesses contribute to the city’s revenue base. If that business doesn’t proudly post its credentials as it should, don’t count on that business being there a month later. That business doesn’t really exist. Consider reporting it to the authorities.
3. Check any document presented to you as to whether your house is put under contract, especially if any fees are involved, while investors are allowed to opt out. Don’tbe afraid to consult an Attorney on this either. Your property could be locked into a contract while “investors” appear and opt out over and over while you’re liable for the fee. It’s a scam.
4. Check the Better Business Bureau. Have other customers complained and were those complaints resolved?
5. Watch out if you’re offered a deal without anyone seeing the property.Chances are, they will pay with a forged check while you lose title. Nobody in his right mind will buy a property without viewing it and having it inspected— unless that person is a crook.
6. Never accept an offer that doesn’tinvolve an Escrow whose credentials you’ve personally verified, especially whenever wire transfers through your bank are involved. Again, is this independent Escrow really an Escrow? You can verify an independent Escrow office at https://docqnet.dfpi.ca.gov/licensesearch/. Legitimate real estate transactions conducted through Escrow will include Wire Transfer Instructions for Buyers along with issuance of a Prelim to the parties, though Escrows may make payments through Cashier’s Checks. Escrow companies issue title insurance policies which Sellers properly purchase to protect against loss resulting from any defect in title. The Prelim tells the conditions by which a Title Company is willing to issue a policy. This Prelim tells many details about the property, not only in terms of ownership, but any liens, easements, legal description, Assessor’s Parcel Number, etc. For all Buyers doing wire transfers, after verifying an Escrow, you should also verify in person the Wire Transfer Instructions you may receive through an email. Why? Scammers watch for pending purchases, and may find out how to contact you. These scammers then send a spoof email pretending to be your assigned Escrow Officer but changing the account information so that the money goes to another party… possibly even a terrorist organization. The deal is lost for everyone.
7. If an offer is made through someone claiming to be an Attorney, check the Attorney’s license status with the California BAR Association at https://www.calbar.ca.gov/Attorneys, then contact that office through the number on the BAR website.Verify that this is an actual practicing Attorney and that this person actually drew up the offer. Ask also whether the Attorney is controlling the escrow process. You might want some help from your own Attorney. Follow up with the tips previously provided.

Even if you’re dealing with someone who appears to be a licensed real estate professional, you need to verify the License of the Salesperson and his/her/their you’re considering. Understand, that any Salesperson’s real estate license not hanging with that of a Broker is cancelled. A Salesperson’s license status will also show that person’s Broker and the Broker must provide DRE the information that the Salesperson is working under him/her/them.

To do so, go to the website for the California Department of Real Estate at https://www2.dre.ca.gov/PublicASP/pplinfo.asp. Type in the name of the individual in all capital letters, last name first, comma, then first name. You can also enter the License Number to find the status of a license. The page you bring up will show whether the license is valid, expired, or suspended. It will also tell you how long that person has been in the business in California, the business entity of that person, and any possible disciplinary actions taken against that licensee. If that person works on the mortgage end, you need to see that person’s NMLS (Nationwide Multiple Licensing System) Number which is a separate credential tied to a federal system that adds another layer of protection for consumers seeking mortgage financing.

KNOW YOUR BROKER AND KNOW THE BEST

Selling too quickly to just anyone can leave you with crumbs or even nothing at all. You need a real professional, one that has a track record of getting results. Many new real estate Salespeople start advertising and realize that they’re spending more for advertising than what can maintain their desk fee at their Broker’s office.