In March we reported that a wave of earnest money deposit scams had reappeared and warned brokers and buyers to be vigilant. Here in June, these same scams are still occurring, and the perpetrators are absconding with even larger deposits.
This type of scam does not involve cybercrime, email phishing or identity theft. It’s an old-fashioned scam that appears to follow the same basic format. An agent claims to have a listing for a short sale (or probate or other distressed property), but the property cannot be shown. After acceptance of an offer, the buyer makes an initial deposit usually in the $5,000 to $10,000 range, but as high as $40,000, into the listing broker’s non-independent broker escrow.
As with most short sale or probate properties, the process can take several months, and the buyer’s agent is assured that the listing agent is working towards lender approval – it is just taking more time. Then the communication slows down, the selling agent begins to get concerned and calls the listing broker’s escrow. There is no answer, no return call, no other number to contact, and the earnest money deposit is gone.
This scam is nearly the same as a series of scams that appeared in the Los Angeles area about two years ago. The Los Angeles County sheriff eventually arrested the wrongdoers but only after millions of dollars had been lost.
Don’t Fall Victim to Groundless Independent Contractor Litigation
C.A.R. recently learned that some members have received solicitations from lawyers regarding the independent contractor status in real estate. These lawyers are attempting to instigate groundless litigation and creating a false impression that just following the licensing law – such as required supervision and salespersons only working for one broker – creates an employment status. Don’t be fooled by such uninformed messages from those trying to create litigation.
For over half a century, salespersons have overwhelmingly chosen the legal option of being independent contractors and running their business under California’s real estate licensing law. The licensing law has provided this option for decades.
Moreover, the real estate licensing law reiterated the validity of real estate licensees as independent contractors with amendments that went into effect January 1, 2019. These statutes specifically reiterate the independent contractor as a lawful choice between a broker and salesperson.
As recently as the current legislative session, AB 5, which is pending in the legislature, again refers to existing code sections making clear that existing law supports the independent contractor business model. The licensing law and other laws require independent contractors to have certain protocols including some specific contractual language such as that included in the C.A.R. Independent Contractor agreements and it is important to follow those practices.
Brokers and salespersons can be rest assured they don’t need to choose between being an independent contractor or losing their license to practice real estate.