#279 A Billion Dollar Real Estate Scam

Yes… Billion with a capital ‘B’ don’t miss this episode to learn how to avoid this scam.

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Resources Mentioned in this Episode

https://www.keepingcurrentmatters.com/2019/09/25/are-you-ready-for-the-black-friday-of-real-estate/

https://www.cbsnews.com/video/better-business-bureau-warns-of-rise-in-real-estate-email-scams/

https://therealdeal.com/national/2019/09/27/the-purge-continues-weworks-head-of-real-estate-is-leaving/

https://www.reuters.com/article/us-wework-ipo/wework-throws-in-the-towel-on-its-ill-fated-ipo-idUSKBN1WF1NS

Show Transcription:

Eric Worral: (00:00)
Hey everybody, welcome back to another episode of Rent Prep for Landlords. This is episode number 279. I’m your host, Eric Worral, and today we’re going to be talking about real estate scams that are affecting people buying either their first home or maybe it’s a rental property. Something that you should definitely be aware of. If you are planning on buying more property because it has affected more than $1 billion in lost income just in the last year. So we’re gonna talk about that after this.

Voice Over: (00:35)
Welcome to the RentPrep for Landlords podcast and now your hosts, Steven White, and Eric Worral.

Eric Worral: (00:40)
So, before we get to our featured story from CBS news we are going to be talking about a few others in the news stories that you may find interesting as a landlord or real estate investor. So the first one maybe you’ve heard of this company, maybe you haven’t. The name of the company is called WeWork and what WeWork is, according to Wikipedia, is an American company that provides shared workspaces for technology, startups, subculture communities and services for entrepreneurs, freelancers, startups, small businesses, and large enterprises. So we work designs and builds physical and virtual shared spaces in-office services for entrepreneurs and companies. So kind of like these shared office spaces and they kind of have branded it pretty well and grown really fast. And you may have heard that they just had an IPO that did really poorly. But you may find this interesting because after the IPO did really pore, they’ve had quite the Exodus. So their chief real estate development officer resigned earlier this week and their CEO was demoted and they got a lot going on.

Eric Worral: (01:41)
The chief development officer, Granted is his first name. He said they, when he joined the company had approximately 2 million square feet of space and a number that is now over 50 million square feet and almost every corner of the world. His departure falls at a vice-chairman, Michael Gross, VP of operations and special projects and director of development, Ronnie Bahar and reports Thursday stated that 20 people aligned with the former CEO, Adam Newman would be leaving the company. However, two people disputed that this was a yet to be seen and associated with Newman if he’s leaving the company on his own terms. If you’re curious about the IPO basically what happened is they filed a prospectus and earlier in September and it said that we company or we company had cash and cash equivalents of roughly 2.5 billion as of June 30th. However, while revenue nearly doubled to 1.8 billion in 2018, it’s losses also more than doubled to 1.9 billion.

Eric Worral: (02:40)
I don’t claim to be any kind of investor in the markets or expert or anything of that nature, but you do see more and more IPOs either not happening or having really poor debuts. Now it seems like these companies that kind of working in the tech spaces are coming back a down to earth. We covered that in a previous week’s podcasts as well, how the markets have cooled in San Francisco. And I’ve actually not had seen any appreciation in the last year or any growth at all. Where that’s kind of indicative of the fact that the ad tech space is cooling a little bit. So we work, if you’re interested, I’ll link to this article from reuters.com along with the original article I was speaking about earlier from therealdeal.com. So, another quick story that you may find really interesting. This is from keepingcurrentmatters.com and the author’s name is, oh, doesn’t have one. And I don’t know why, they do that sometimes. Well, maybe it’s at the bottom unless you check it out and they just say KCM Crew. The title of this article though, says, “Are you Ready for the Black Friday of Real Estate?”

Eric Worral: (03:42)
So when I saw the title, you know, kind of seems clickbaity and I was like, all right, what’s it about? Well, it says, according to your new study from realtor.com, the week of September 22nd is the best time of year to buy a home, making it Black Friday for home buyers. So they evaluated housing data and 53 metros from 2016 to 2018 and realtor.com determined that the first week of fall is when buyers tend to find less competition, more inventory, and biggest reductions on this price. The report explains that during the first week of fall, buyers tend to face 26% less competition from other buyers and they are likely to see 6.1% more homes available on the market compared to other weeks of the year and early 6% of homes in the market wall. So see price reductions averaging 2.4% less than their peak. So it’s a, the article goes on and asks about like what’s the difference in the first week of fall. So it says basically the summer wines down in kids return to school and many families have pause in their home search and wait until the next season to start again. As seasonal inventory builds up and restores itself to more buyer-friendly levels, fall buyers will be in a better position to take advantage of the day’s low mortgage rates and increased purchasing power.

Eric Worral: (04:58)
So it’s an interesting story from keepingcurrentmatters.com and it’s also interesting as I was just recently reading up on the best time to buy a vehicle because my wife and I are going to be in the market for a vehicle as our family grows. And that was kind of similar in some ways, you know, of course, supply and demand. But if you’re interested on that what it said, it was typically after holidays it, while I was looking for a used vehicle when a lot of people buy new vehicles and when you see those sales for new vehicles that will, a lot of those people are going to be trading vehicles in and those dealerships that are getting those vehicles in a, if they can’t sell them, they have to kind of a solemn to auction and they don’t want to do that cause they take a bath on those.

Eric Worral: (05:42)
So I said like ironically enough cause you’re talking about Black Friday, but after Black Friday in that area after Christmas veteran’s day, anytime you see any of those big sales that you see advertised quite a bit for new cars, that’s great to actually buy a used car as well. That week following it as a supply of used vehicles will be very high and you may be able to score a good deal if you’re in the market for a used car. So just a little tidbit for you right there. And now this last section here, this is a news article, a video from CBSnews.com. I will link to it in the show notes and it’s saying that the better business Bureau Warren’s of arise in real estate email scams. I’ll have a, I’ll play a clip of it here and we’ll link to it again if you want to check out the original content here and then we’ll discuss.

CBS News : (06:29)
We have a warning for you tonight about an email scam that has hit home buyers. Hard losses have soared from $316 million in 2016 to one point $3 billion. Last year, Meg Oliver spoke to her victim who lost her money and her part of the American dream. So what’s it been like here? It’s rough. Dina Palmieri. Mary has lived in her parent’s basement saving money for eight years. The preschool teacher was about to close on her first condominium last spring. So excited it was, you know, everything was happening so fast. Two weeks before the move, she received an email, she thought was her attorney asking her to wire almost $11,000 for closing costs. They just popped up with your lawyer’s name, not the email. Correct. And when I double-clicked, that’s when I was able to see the difference after I found out that these were for a dealer, she lost her money and the condo. Better Business Bureau invest eaters. Steve Baker authored a new report highlighting the exploding number of similar real estate emails, scams, reports of real estate fraud attempts. Rose 1100%, between 2015 and 2017, 80% of businesses and other organizations have gotten one of these sorts of emails in the last year. Palmieri now has to start all over. It’s evil. And I don’t like to think that there is evil in this world because I naturally see the good in people.

Eric Worral: (08:02)
Well, I would definitely agree with her that that is pure evil. It’s sad that these things happened, but I wanted to make you guys aware just in case you happen to be in the market for a new home or you know, somebody who is, I mean, that’s no small number to sneeze out when you’re talking about $1 billion and a fraudulent activity. So basically if you’re right before closing what you do is you get an email that has your attorney’s name in the email itself saying that you gotta, you know, wire the money across to this link. And if you get that email, who knows how they’re getting it? That’s pretty interesting to, to know how they would know that maybe something is getting processed publicly right before closing. But I wouldn’t think that would be the case.

Eric Worral: (08:45)
So that’s pretty interesting how a hacker’s being able to get that information, but be very careful about wiring any kind of money at closing when purchasing a rental property or it’s even a home for yourself, a as the better business Bureau. Warren’s at this billion-dollar a fraudulent scam that’s happening with 1100% increase in size. I think they said 2015. And as far as how prevalent this scam is on a personal note, I’ve had a family member who actually got hit with one of those phone scams where somebody calling in and asking for money and this person was in their eighties. And it’s just sad to see these kinds of things happen. You know, and it’s always a numbers game. They may only get, you know, one in 5,000 people to, you know, fall for the scam, but they don’t care because all of it’s happening automatically with automation.

Eric Worral: (09:37)
So a to them, they, you know, they don’t care. They’re just getting their pockets filled. And it’s sad to see, you know, in this case, I first time home buyer being taken advantage of. And the case that I had happened in my family where somebody thought that their God granddaughter was in need and needed the money and that stuff just it makes you sick to your stomach, but you gotta be aware of it. And you know, tell people, let them know, tell them not to fall for these things. So that is it for that story because that is depressing me just even thinking about it by I share it with anybody. You know, because the more you know about this stuff, the less it happens and you can kinda just snuff it out before these things get really rampant. But that calls it for this week of REM prep for landlords. Looking forward to catching up with you guys next week. And if you have any questions, feel free to share in the Facebook group @ RentPrep for Landlords. And we always look forward to hearing your discussions and dialogues in there. And that’s a great place to connect with other like-minded landlords and real estate investors such as yourself. All right guys, until next week, good luck and take care.