👋 Happy Friday! It will be a three-day weekend for many of us. While MLK Day is always observed on the third Monday of each January, this year, Martin Luther King Day will fall on Dr. King’s actual birthday of January 15. Our offices, along with banks and the U.S. Post Office, will be closed on Monday for the holiday.

1 big thing: AI Helps Scammers Commit Real Estate Fraud

AI-based real estate fraud is a growing problem. Owners and investors should be on the lookout.

Why it matters: Any real estate scam can interrupt deals, damage trust, and spell financial ruin for buyers and sellers.

  • Real estate fraudsters “never retire a successful scam,” said Sun Title CEO Thomas Cronkright, but their “social engineering strategies” have become much more sophisticated.

AI-generated real estate scams at this point tend to involve impersonating a property owner (to, say, ask a broker to divert the mortgage payoff to a different account) or sell someone else’s property using fake documents.

Seller impersonation fraud is particularly devious. Here’s one scenario:

  • Locate a property—preferably a vacant or unimproved parcel—on tax records and identify the owner. 

  • Create fake, government-issued documents like passports or driver’s licenses using the owner’s name and the scammer’s photo.

  • Solicit a listing to a brokerage. Wait for the brokerage to verify the identification.

  • Advocate for a remote closing, with paperwork signed before an out-of-state notary.

  • Collect the proceeds from the sale.

Yes, but: No market is immune.

  • People think no one’s going to target their $40,000 lot in some quiet rural area, Cronkright notes.

  • “Let me tell you: they absolutely will.”

You can protect yourself. Cronkright, the chairman of wire fraud recovery and prevention software firm CertifID, says the company is testing an “identity validation only tool that would allow somebody at the initiation of a relationship to confirm identity—not when money is about to transfer funds.”

Until advanced tools are everywhere, owners and investors should default to the following:

  • Recognize red flags: Look for non-traditional timelines to closing, multiple out-of-state documents, and voicemails from sellers with unusual payment requests. 

  • Double-check: Property details, seller information, notary seals, you name it.

  • Over-communicate: Get a strange request over voicemail or email

  • Follow up: Ask questions. Cross reference. 

The bottom line: AI has the potential to wreak havoc for owners and investors. Real estate professionals should remain vigilant.

2. Disasters leading to more mortgage defaults

Mortgage delinquencies in most U.S. cities fell or held flat yearly — 2.8% from September 2022 to September 2023. But areas inundated with excessive heat, flooding, wildfires, and other disasters were the exception. 

Why it matters: Americans are increasingly moving to disaster-prone areas— the very places insurers are abandoning in droves — taking on advanced risks.

Disaster-prone areas like California, Florida, Colorado, and Hawaii are a hot spot for property owners because they’re usually located in idyllic settings and can offer a good return on the investment.

But increasingly extreme weather means a home in paradise can quickly devolve into a FEMA tent in a parking lot.

  • Owners are still on the hook for their mortgage payments after a disaster, even if their property is uninhabitable.

  • Insurance may not cover every expense. It may not cover anything, giving many property owners no choice but to default.

Case studies from 2023:

  • Kahului-Wailuku-Lahaina suffered significant damage from wildfires in August. Subsequently, delinquency rates rose on the Hawaiian island by 3.5 percentage points to 5.7%, the highest year-over-year increase in the country. 

  • Cape Coral-Fort Myers and Punta Gorda saw serious delinquency rates (90 days past due) skyrocket in 2023, a year after being nearly decimated by Hurricane Ian.

Yes, but: Delinquencies of 30 days or more rose year-to-year in only 15 states. Moreover, South Dakota, the state with the most significant increase, only rose by half a percentage point. CoreLogic economist Molly Boesel attributes much of the state’s low overall delinquency rate to low unemployment possible because of no natural disasters.

Property owners can stay protected if they:

  • Establish contingency plans to cover expenses not met by insurance or government assistance if a disaster strikes.

  • Regularly maintain their properties, including building structures, easements, and other infrastructure. 

  • Stay informed about potential disaster risks, updates in the locality’s building codes, and changes in insurance coverage related to the area.

The bottom line: California, Florida, Hawaii, and other disaster-prone areas are teeming with potential investments.

  • But buyers in these places beware: One bad weather event can turn everything upside down.

  • Owners and investors should factor in climate risk from the start.

3. Catch up fast

  1. LoanDepot is the latest victim of a cyberattack this week, preventing some of their loan servicing customers from being able to pay their mortgages. Forbes, Bleeping Computer, and InfoSecurity Magazine

  2. Mr. Cooper, another large loan servicer, has been hit with a second class action suit consolidated into one large suit in Texas, because of a major data breach where a cyberattack of its systems exfiltrated the personal data of over 14.6 million customers in October and November last year. Mortgage Professionals of America Magazine

  3. First American assured everyone that the funds in its bank subsidiary were safe and unaffected by the cybersecurity attack on that company that happened before Christmas and hobbled the company until last week. Insurance Business Magazine

  4. Fidelity National Title disclosed that hackers stole data on 1.3 million customers from a cyberattack in November. Tech Crunch

  5. Detroit beat Miami for the first time — in home price appreciation — last month. CNBC

  6. Lots of agents but few or no sales for most of them. HousingWire

  7. Consumers’ optimism is increasing about mortgage rates. DSNews

  8. Buffalo will be the hottest housing market in 2024, and Orlando is number 8 on the list. Zillow

  9. The spring market will be so hot that it surprises you. HousingWire

4. Last Word

I received these mugs as a late birthday present from a vendor who effectively used a "celebration survey" to learn not only my birthday but that I'm also a huge Trekkie.

Filing the Florida annual report, the FinCEN BOI report, and many other business compliance reports isn’t that difficult.

Why it matters: Like many things that aren’t rocket science, you can do these reports on your own. But is that the highest and best use of your time?

What they’re saying: After last week’s newsletter went out, I got a few responses like, “why pay someone to do something I can do myself?”

The same question could be asked for a lot of things we face daily:

  • Changing air conditioner filters.

  • Cleaning the pool.

  • Mowing, weeding, and blowing the lawn.

  • Cooking meals.

  • Cleaning our homes.

  • Maintaining our website.

  • Writing a weekly newsletter…..

Yes, but: While a task may seem easy, savvy entrepreneurs consider every task before spending time to do it.

  • How long does it take them to do it?

  • How much time will they need to learn to do it?

  • What else could they be doing that they enjoy and are great at doing?

  • How much will it cost for someone else to do it versus how much their time is worth?

In other words: Savvy entrepreneurs focus on who and not how. They may understand the big picture of how to do a task or project, but they spend less energy and time finding the right person to do it instead.

The bottom line: Many of our clients have multiple companies and a lot of plates spinning at the end of a stick. The reason they have those is because they’ve spent a little energy to find the right “who” to handle the details, tasks, and projects so they don’t waste time figuring out “how” to do anything that isn’t the highest and best use of their time, energy, and focus.

👋 Happy Friday! It will be a three-day weekend for many of us. While MLK Day is always observed on the third Monday of each January, this year, Martin Luther King Day will fall on Dr. King’s actual birthday of January 15. Our offices, along with banks and the U.S. Post Office, will be closed on Monday for the holiday.

1 big thing: AI Helps Scammers Commit Real Estate Fraud

AI-based real estate fraud is a growing problem. Owners and investors should be on the lookout.

Why it matters: Any real estate scam can interrupt deals, damage trust, and spell financial ruin for buyers and sellers.

  • Real estate fraudsters “never retire a successful scam,” said Sun Title CEO Thomas Cronkright, but their “social engineering strategies” have become much more sophisticated.

AI-generated real estate scams at this point tend to involve impersonating a property owner (to, say, ask a broker to divert the mortgage payoff to a different account) or sell someone else’s property using fake documents.

Seller impersonation fraud is particularly devious. Here’s one scenario:

  • Locate a property—preferably a vacant or unimproved parcel—on tax records and identify the owner. 

  • Create fake, government-issued documents like passports or driver’s licenses using the owner’s name and the scammer’s photo.

  • Solicit a listing to a brokerage. Wait for the brokerage to verify the identification.

  • Advocate for a remote closing, with paperwork signed before an out-of-state notary.

  • Collect the proceeds from the sale.

Yes, but: No market is immune.

  • People think no one’s going to target their $40,000 lot in some quiet rural area, Cronkright notes.

  • “Let me tell you: they absolutely will.”

You can protect yourself. Cronkright, the chairman of wire fraud recovery and prevention software firm CertifID, says the company is testing an “identity validation only tool that would allow somebody at the initiation of a relationship to confirm identity—not when money is about to transfer funds.”

Until advanced tools are everywhere, owners and investors should default to the following:

  • Recognize red flags: Look for non-traditional timelines to closing, multiple out-of-state documents, and voicemails from sellers with unusual payment requests. 

  • Double-check: Property details, seller information, notary seals, you name it.

  • Over-communicate: Get a strange request over voicemail or email

  • Follow up: Ask questions. Cross reference. 

The bottom line: AI has the potential to wreak havoc for owners and investors. Real estate professionals should remain vigilant.

2. Disasters leading to more mortgage defaults

Mortgage delinquencies in most U.S. cities fell or held flat yearly — 2.8% from September 2022 to September 2023. But areas inundated with excessive heat, flooding, wildfires, and other disasters were the exception. 

Why it matters: Americans are increasingly moving to disaster-prone areas— the very places insurers are abandoning in droves — taking on advanced risks.

Disaster-prone areas like California, Florida, Colorado, and Hawaii are a hot spot for property owners because they’re usually located in idyllic settings and can offer a good return on the investment.

But increasingly extreme weather means a home in paradise can quickly devolve into a FEMA tent in a parking lot.

  • Owners are still on the hook for their mortgage payments after a disaster, even if their property is uninhabitable.

  • Insurance may not cover every expense. It may not cover anything, giving many property owners no choice but to default.

Case studies from 2023:

  • Kahului-Wailuku-Lahaina suffered significant damage from wildfires in August. Subsequently, delinquency rates rose on the Hawaiian island by 3.5 percentage points to 5.7%, the highest year-over-year increase in the country. 

  • Cape Coral-Fort Myers and Punta Gorda saw serious delinquency rates (90 days past due) skyrocket in 2023, a year after being nearly decimated by Hurricane Ian.

Yes, but: Delinquencies of 30 days or more rose year-to-year in only 15 states. Moreover, South Dakota, the state with the most significant increase, only rose by half a percentage point. CoreLogic economist Molly Boesel attributes much of the state’s low overall delinquency rate to low unemployment possible because of no natural disasters.

Property owners can stay protected if they:

  • Establish contingency plans to cover expenses not met by insurance or government assistance if a disaster strikes.

  • Regularly maintain their properties, including building structures, easements, and other infrastructure. 

  • Stay informed about potential disaster risks, updates in the locality’s building codes, and changes in insurance coverage related to the area.

The bottom line: California, Florida, Hawaii, and other disaster-prone areas are teeming with potential investments.

  • But buyers in these places beware: One bad weather event can turn everything upside down.

  • Owners and investors should factor in climate risk from the start.

3. Catch up fast

  1. LoanDepot is the latest victim of a cyberattack this week, preventing some of their loan servicing customers from being able to pay their mortgages. Forbes, Bleeping Computer, and InfoSecurity Magazine

  2. Mr. Cooper, another large loan servicer, has been hit with a second class action suit consolidated into one large suit in Texas, because of a major data breach where a cyberattack of its systems exfiltrated the personal data of over 14.6 million customers in October and November last year. Mortgage Professionals of America Magazine

  3. First American assured everyone that the funds in its bank subsidiary were safe and unaffected by the cybersecurity attack on that company that happened before Christmas and hobbled the company until last week. Insurance Business Magazine

  4. Fidelity National Title disclosed that hackers stole data on 1.3 million customers from a cyberattack in November. Tech Crunch

  5. Detroit beat Miami for the first time — in home price appreciation — last month. CNBC

  6. Lots of agents but few or no sales for most of them. HousingWire

  7. Consumers’ optimism is increasing about mortgage rates. DSNews

  8. Buffalo will be the hottest housing market in 2024, and Orlando is number 8 on the list. Zillow

  9. The spring market will be so hot that it surprises you. HousingWire

4. Last Word

I received these mugs as a late birthday present from a vendor who effectively used a "celebration survey" to learn not only my birthday but that I'm also a huge Trekkie.

Filing the Florida annual report, the FinCEN BOI report, and many other business compliance reports isn’t that difficult.

Why it matters: Like many things that aren’t rocket science, you can do these reports on your own. But is that the highest and best use of your time?

What they’re saying: After last week’s newsletter went out, I got a few responses like, “why pay someone to do something I can do myself?”

The same question could be asked for a lot of things we face daily:

  • Changing air conditioner filters.

  • Cleaning the pool.

  • Mowing, weeding, and blowing the lawn.

  • Cooking meals.

  • Cleaning our homes.

  • Maintaining our website.

  • Writing a weekly newsletter…..

Yes, but: While a task may seem easy, savvy entrepreneurs consider every task before spending time to do it.

  • How long does it take them to do it?

  • How much time will they need to learn to do it?

  • What else could they be doing that they enjoy and are great at doing?

  • How much will it cost for someone else to do it versus how much their time is worth?

In other words: Savvy entrepreneurs focus on who and not how. They may understand the big picture of how to do a task or project, but they spend less energy and time finding the right person to do it instead.

The bottom line: Many of our clients have multiple companies and a lot of plates spinning at the end of a stick. The reason they have those is because they’ve spent a little energy to find the right “who” to handle the details, tasks, and projects so they don’t waste time figuring out “how” to do anything that isn’t the highest and best use of their time, energy, and focus.

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By Joseph E. Seagle, Esq. 

Happy Friday! Today is both Bastille Day and National French Fry Day. Coincidence? I think not.

1 big thing: Legislators scrutinize lease-options

Land Trusts

The US Senate’s Subcommittee on Housing, Transportation and Community Development suggests that federal legislation should regulate alternative home financing to avoid abuses, according to a recent ProPublica article.

Why it matters: Many real estate investors use contracts for deed and lease-option agreements to sell properties to buyers who can’t qualify for conventional financing or whose religion prohibits them from paying or charging interest.

The discussion among the Senators suggests that they may draft legislation to enhance the enforcement of Truth in Lending laws around these agreements.

What they’re saying: According to testimony at the hearing from Sarah Mancini, co-director of advocacy at the National Consumer Law Center, such alternative financing arrangements are a “harmful detour from homeownership.”

  • The organization also estimated that over 50% of these transactions fail, and they said that estimate was conservative.

The hearing focused on such transactions in Minnesota, but these transactions and how courts treat them, differ from state to state. For example:

  • In North Carolina, leases with options to purchase are highly regulated by statute, requiring specific written notices to buyer-tenants before signing such agreements and recordation of notices in the public records when they’re in effect on a property.

  • In Texas, sellers must comply with numerous statutory requirements before a lease-option, lease-purchase, or contract for deed agreement may be signed.

  • In Florida, if a contract for deed or agreement for deed is used to finance a buyer’s purchase of a property, the seller must foreclose on the buyer.

What we’re seeing: First, in Florida, we would not agree with the NCLC’s statement that over half of these financing arrangements fail, nor are they typically designed to fail.

  • The investors who have worked with us over the years have expressed a sincere desire that the buyers complete the transaction successfully to become the owner of the home.

  • We’ve closed many transactions over the decades where the lease-option or contract for deed was exercised or paid off and the buyer ended up with the property.

The bottom line: Real estate investor associations should ensure their Senators understand how these financing alternatives are regulated already by their states’ laws and courts. Otherwise, more regulation may come down in a ham-handed manner from Washington in a one-size-does-not-fit-all format.

2. Bye bye Farmers Insurance

Land Trusts

On Monday, Farmers Insurance told Florida’s insurance regulators that it had seen a thing or two too often in Florida, so it would be exiting the state as an insurer.

Why it matters: Over 100,000 Farmers Insurance auto, home, and umbrella policies will not be renewed as they expire. And it’s the fourth insurance company to leave the state this year alone.

Yes, but: Bristol West, Foremost Signature, Farmers GroupSelect, Foremost Choice, and Foremost-branded policies — other brands of insurance run by Farmers — account for about 70% of Farmers Insurance customers in the state and will be renewed.

  • The company stopped writing new policies in February to “manage risk exposure.”

What they’re saying: Florida’s CFO, Jimmy Patronis, lashed out at Farmers, alleging that they are leaving the state because of mismanagement attributable to the company’s policies related to environmental, social, and governance issues (“wokeness”), but he had no concrete examples of how those policies — if they do in fact exist at the company — have had any effect on the company’s decision to leave.

  • Democrats blamed Republican legislators for giving insurers a “$3 billion handout” in the last special session with no guarantees that the companies would stay.

The bottom line: This latest exit will push more insureds to the remaining insurers in the state who may write the policies. However, if the remaining private insurers are unwilling to do so, the last resort is Citizens Insurance which is on track to reach 1.7 million policies by the end of the year.

  • Citizens is currently requesting a rate hike of 13.3%.

  • Floridians pay insurance rates that are three times higher than the national average rate.

3. Catch up fast

Land Trusts

  1. The hottest moving Orlando-area zip codes. Orlando Weekly

  2. A follow-up on that AirBnB crashing data discrepancy. Bigger Pockets

  3. Inflation dropped to 3%, getting closer to the Fed’s goal of 2%, but housing prices aren’t coming down. Politico

  4. What does the fix-and-flip market look like right now? HousingWire

  5. Home listings and sales have rebounded in the hurricane-devastated towns of Cape Coral and Fort Myers. The Title Report

4. Pic of the day

Land Trusts

In case you didn’t get the usual quick response from us to your e-mail, text, social media DM, Clio message, or phone call yesterday, we apologize. Most of the crew was out of the office all day, shooting a video to introduce us to new clients and re-introduce us to old friends.

When it’s ready, you’ll be the first to see it. Until then, here’s the song that was on repeat in my mind to keep me from collapsing in the Orlando heat and humidity.

We hope you found this helpful — any feedback is appreciated and can be shared by hitting reply or using the feedback feature below.

  • Have an idea or issue to share? Email us. 

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