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 Fraud Ahead
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Reducing Risk: Hot Topics Heading into 2020

Sometimes a bogeyman seems to be hiding in every dark corner. At NAR’s November convention, General Counsel Katie Johnson listed five specific dangers hanging over brokers’ heads today – and specific steps that can be taken to mitigate those risks.

SAN FRANCISCO – Sometimes a bogeyman seems to be hiding in every dark corner. At the National Association of Realtors®’ (NAR) November convention, General Counsel Katie Johnson listed five specific dangers hanging over brokers’ heads – and specific steps they can take to mitigate that risk.

Wire fraud

Victims of real estate wire fraud generally send a deposit or, more often, final payment to the wrong account. In most cases, a criminal hacks a title company’s email address, though it could be a Realtor. They monitor transactions as they progress and, a day or two before closing, email wiring instructions to the buyer via the title company’s email account.

Tips to reduce risk of wire fraud

  • Alert homebuyers about wire-fraud risks at the outset of the transaction. Many brokers require signed disclosures.
  • Instruct homebuyers to call the wire recipient using an independently-verified phone number before sending any money.
  • Don’t send wire instructions (or any sensitive financial information) via email.
  • Use a secure transaction management platform to share documents and information.
  • Use good email security practices. For example, never open unsolicited links or attachments, keep operating systems and anti-virus updated, use strong passwords and two-factor authentication, purge regularly, and avoid using unsecured wifi.
  • Create an e-mail rule to flag email communications where the “reply” email address is different than the “from” email address shown.
  • Immediately report suspected fraud to the bank from which the funds were transferred.
  • Get to know your local FBI field office and contact them immediately if fraud is suspected.
  • Report fraud incidents to www.ic3.gov.

Wire fraud resources

Texting and calling laws

Some plaintiff lawyers have a lucrative business model: They file class action lawsuits alleging real estate companies violated the TCPA (Telephone Consumer Protection Act) and DNC (Do Not Call) laws by sending text messages and making phone calls without the recipient’s consent.

The TCPA requires prior express consent before using autodialing equipment to send telemarketing messages to wireless numbers. Because the TCPA defines autodialing equipment broadly, it’s likely that all text messages sent by a business will fall under the TCPA. Prior express written consent requires a signed agreement clearly and conspicuously disclosing the text recipient’s permission to receive text messages from the sender.

DNC laws prohibit individuals from contacting phone numbers contained in the DNC registry.

Tips to reduce TCPA violation risk

  • Obtain written consent before using an autodialer to send a commercial message. Consent should be clearly stated, well documented and preserved.
  • Include language on consent forms stating that recipients who submit wireless numbers agree to receive text messages from or on behalf of the sender.
  • Allow recipients to easily cancel or opt-out (e.g., by responding “STOP” or “UNSUBSCRIBE”)
  • Set email alerts to document when subscribers opt-out.
  • Upon receiving an opt-out request, promptly remove the person from your messaging lists.
  • Record the opt-out date and date when person was removed.
  • Talk to your vendor about compliance and indemnification.

Tips to reduce DNC violation risk

DNC resources

Independent contractor status

An inherent conflict exists between common law independent contractor status and the traditional classification of real estate salespeople as independent contractors. However, most state real estate statutes expressly address the unique status of real estate agents, permitting classification as independent contractors despite the required control and supervision the broker has over the licensees. In recent years, there have been several attempts by salespeople against brokers to challenge this conflict.

Risk reduction tips

  • Know your state law regarding independent contractor classification of real estate licensees.
  • Statutes protecting this classification are the strongest defense to a legal challenge.
  • Always have a written independent contractor agreement and consider including a mandatory arbitration and class action waiver provision in such agreements.
  • Don’t mandate meetings, administrative office duties, or use of certain tools.
  • Allow salespeople to work where, when, and how they deem best.

 Resources

Copyright infringement

To avoid risk of copyright infringement, brokers should ensure they’ve obtained the rights in the photographs that they assert to have when sharing photos in the MLS, public portals and other venues. Brokers should also be able to document that chain of title.

In addition, compliance with the Digital Millennium Copyright Act (DMCA) Safe Harbor Provision for IDX displays should greatly reduce brokers’ and agents’ risk of liability regarding third party photos.

Obtain ownership or broad exclusive license for photographs

Comply with the Digital Millennium Copyright Act

ADA website accessibility

Website accessibility claims are on the rise regarding the Americans with Disabilities Act (ADA) – a 177% increase in website accessibility lawsuits filed from 2017 to 2018, and a 131% increase in between the first quarter of 2019 and the first quarter of 2018.

Businesses in all industries, including real estate, have seen an increase in demand letters and litigation, alleging that the business operates an inaccessible website in violation of the ADA.

While the ADA is silent on its application to electronic spaces, an overwhelming body of case law has developed holding that a business’ ADA obligations extend to their electronic spaces. Despite the fact that the DOJ issued notices of proposed rule-making in 2010 and 2016, however, it withdrew proposed rule-making after nearly eight years of review. That suggests that DOJ is unwilling to issue additional guidance any time in the near future.

ADA and websites’ risk reduction tips

  • Ask your website provider about your site’s accessibility and indemnification in contracts.
  • Consult a website accessibility expert to create a plan for addressing website accessibility issues.
  • Include an accessibility statement on your website, along with contact info, where individuals with disabilities may report difficulty accessing the website and seek additional assistance accessing information or services.

Resources

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