 FRAUDSTERS are impersonating property owners to illegally sell commercial or residential property. Sophisticated fraudsters are using the real property owner’s Social Security and driver’s license numbers in the transaction, as well as legitimate notary credentials, which may be applied without the notary’s knowledge.
Fraudsters prefer to use email and text messages to communicate, allowing them to mask themselves and commit crime from anywhere. Due to the types of property being targeted, it can take months or years for the actual property owner to discover the fraud. Property monitoring services offered by county recorder’s offices are helpful, especially if the fraud is discovered prior to the transfer of money. Where approved by state regulators, consumers can purchase the American Land Title Association (ALTA) Homeowner’s Policy of Title Insurance for additional fraud protection. WATCH FOR RED FLAGS CONSIDER HEIGHTENED SCRUTINY OR HALT A TRANSACTION WHEN A PROPERTY ■ Is vacant or non-owner occupied, such as investment property, vacation property, or rental property ■ Has a different address than the owner’s address or tax mailing address ■ Has no outstanding mortgage or liens ■ Is for sale or sold below market value CONSIDER HEIGHTENED SCRUTINY OR HALT A TRANSACTION WHEN A SELLER ■ Wants a quick sale, generally in less than three weeks, and may not negotiate fees ■ Wants a cash buyer ■ Is refusing to attend the signing and claims to be out of state or country ■ Is difficult to reach via phone and only wants to communicate by text or email, or refuses to meet via video call ■ Demands proceeds be wired ■ Refuses or is unable to complete multifactor authentication or identity verification ■ Wants to use their own notary CLOSING ATTORNEYS TAKE PRECAUTIONS DUE TO SELLER FRAUD ISSUES INCLUDING SOME OR ALL OF THE FOLLOWING: CONTACT SELLER USING INDEPENDENT SOURCES ■ Contact the seller directly at an independently discovered and validated phone number ■ Mail the seller at the address on tax records, property address, and grantee address (if different) ■ Ask the real estate agent if they have personal or verified knowledge of the seller’s identity MANAGE THE NOTARIZATION ■ Require the notarization be performed by a vetted and approved remote online notary, if authorized in your state ■ If remote online notarization is not available, the title company should select the notary. Examples include arranging for the seller to go to an attorney’s office, title agency, or bank that utilizes a credential scanner or multifactor authentication to execute documents VERIFY THE SELLER’S IDENTITY ■ Send the seller a link to go through identity verification using a third-party service provider (credential analysis, KBA, etc.) ■ Run the seller’s email and phone number through a verification program ■ Ask conversational questions to ascertain seller’s knowledge of property information not readily available in public records ■ Conduct additional due diligence as needed USE THE PUBLIC RECORD ■ Compare the seller’s signature to previously recorded documents ■ Compare the sales price to the appraisal, historical sales price, or tax appraisal value CONTROL THE DISBURSEMENT ■ Use a wire verification service or confirm wire instructions match account details on seller’s disbursement authorization form ■ Require a copy of a voided check with a disbursement authorization form ■ Require that a check be sent for seller proceeds rather than a wire Info from www.alta.org Now more than ever, consumers need to be aware of potential scams and how to best protect themselves. Real estate agents and attorneys must also play a key role in educating both homebuyers and homeowners about the need to remain vigilant. If the closing attorney is asking for extra precautions to verify a home seller, it is the duty of the agents involved to educate their clients about why this is necessary.
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 The Foreign Investment in Real Property Tax Act (FIRPTA) was established in 1980 to ensure that foreign owners of U.S. property pay their share of taxes on the profit when they sell. It requires the buyer of real property from a foreign seller to withhold a portion of the sales price and remit the tax to the Internal Revenue Service (IRS). FIRPTA also applies to the sale of U.S. real property held by foreign-owned corporations, partnerships, trusts, and estates. If you are representing a foreign seller or your buyer is purchasing property from a foreign seller, it’s important to understand the obligations of the buyer and seller with regards to FIRPTA. This is a discussion you should have with your sellers before listing the property.
It is the buyer’s responsibility to withhold the tax, but the tax charged comes from the sales price. If the buyer fails to comply with the FIRPTA withholding requirements, they may be responsible for the tax owed in addition to any interest and/or penalties. It is an estimated withholding (about 10-15% of the selling price) depending on the sales price and if an investment property. GAR has included new verbiage in the seller brokerage engagement agreement requiring sellers to complete a FIRPTA Affidavit (F101 & F104).
FIRPTA Solutions can also help your client navigate through any FIRPTA issues. https://www.firptasolutions.com  If your buyer discovers unpermitted structures or renovations during their due diligence, they need to do some investigation before moving forward with their purchase. It’s possible that the appraiser will not be able to give value to the unpermitted structures in the home.
Unpermitted work refers to construction or renovations done without obtaining the necessary permits from local authorities. Cost is among the top reasons people skip obtaining permits for renovations. Not only the price of the permits but also not having to pay for the increased property tax assessment. Besides a surface-level inspection, how does the buyer really know that the area in question was built properly and is structurally and operationally safe? What about obtaining insurance? Calls to the local building department must be navigated delicately and could set off an investigation with possible fines levied against the seller. A building inspector isn’t going to simply go out and put his seal of approval on unpermitted work without further investigation. They will likely want walls opened up and structures torn apart to inspect. Legalizing non-permitted work typically involves retroactive measures to bring the construction or renovation into compliance with building codes and regulations. Legalizing home improvement projects usually starts by filing an application with the relevant building department or permitting authority. Depending on the jurisdiction, individuals may be required to pay fines or penalties for nonpermitted work before it can be legalized. Hiring a licensed contractor or a qualified professional is often recommended to ensure the work meets safety standards and the proper building code. Detailed documentation of the existing structure, including plans, drawings, photographs, and descriptions, may be required during the legalization process. Inspections and evaluations by building inspectors and other relevant professionals are commonly conducted to assess the quality and safety of the construction projects. Additional steps, like securing approval from homeowner associations or community boards, may be necessary for certain types of remodeling, such as illegal additions or alterations. Timeframes for legalizing work can vary depending on the project’s complexity and the permitting authorities’ workload. Once the necessary approvals are obtained and any fines or penalties are paid, local authorities consider the formerly nonpermitted work legal and officially recognized. If the buyer decides to move forward with the purchase without addressing the unpermitted work, they will likely need to address these issues when it’s time to sell the property.  Kick-Out Clause Explained A kick-out clause is when there is a sale (or lease) of the buyer’s property contingency, but it allows the seller to market the property. If another buyer makes an offer to purchase the property that the seller wants to accept, the seller gives notice of the offer to the first buyer who must then timely submit an amendment to remove certain contingencies and possibly the Due Diligence Period from the agreement and in some cases pay additional earnest money to the seller. If the first buyer does not do these things within the pre-agreed time frame, the seller can then “kick-out” the first buyer, terminate that contract, and sell the property to the second buyer. If the buyer meets the pre-agreed requirements of the kick-out clause, then the original contract remains in force subject to the terms of amendment signed by both parties. If the Kick-Out Clause is Exercised If the kick-out clause is exercised, the seller must give the buyer written notice that they have received an acceptable offer, and the buyer has the pre-determined amount of time to submit an amendment removing the specified contingencies. Whether all contingencies and the due diligence period get removed or just some of the contingencies and the due diligence period is a matter of negotiation between the parties. In the event the buyer does not deliver the amendment and the additional earnest money (if referenced in the kick-out clause), the agreement shall terminate, and the buyer shall be entitled to a full refund of the buyer’s earnest money. A couple of things to remember:
A general Notice form (F816) can be used. Example verbiage for notice: Per Exhibit (C), paragraph 7, Seller is hereby providing notice that he has received an acceptable offer and is executing the 72-hour kickout clause. Buyer has 72 hours to remove the contingencies set forth in Exhibit (C). Verbiage for Amendment Removing Contingencies: Amendment to Agreement (F701) should be used. Example verbiage for amendment: Buyer agrees to remove the contingencies set forth in Exhibit (C) to include the sale or lease of buyer’s property contingency and the due diligence period.  Every real estate negotiation or transaction is unique by nature of the individuals involved and the property itself. Therefore, Special Stipulations are often needed to customize the transaction to the situation.
The Georgia Real Estate License Law does not require that any specific contract forms be used, only that they are written by legal counsel. About forty percent (40%) of Georgia Real Estate Licensees are members of the Georgia Association of Realtors® and as members they have access to the GAR® Contract forms. They do provide many Special Stipulations that address common contract issues. However, not everyone uses these forms and not every situation is common. In those cases, the real estate Licensee must create a Special Stipulation for the specific situation. Although a Licensee is not authorized to practice law and draft legal documents, the Licensee in Georgia is allowed to write Special Stipulations for a contract that is written by an attorney. Consider the following tips for writing a Special Stipulation:
Article From Dec 2023 GREC Newsletter |
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