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Real estate and mortgage brokers who are offered a warehouse line of credit are advised to be on the lookout for imposters who have scammed victims out of hundreds of thousands of dollars overnight and gained access to borrowers’ sensitive personal information.

Some victims are unwittingly lured into the scheme with promises of hefty commissions if they become “account executives” for the sham lender and help sign up mortgage brokers for fake lines of credit, the California Department of Real Estate warns.

“The account executives then proceed to solicit mortgage brokers to begin using the scammer as their primary funding source by offering the mortgage broker a warehouse line of credit” — typically $1 million to $5 million — regulators said.

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The mortgage brokers who are recruited by the account executives are required to pledge 1 percent of the line of credit, leading them to wire amounts ranging from $10,000 to $50,000 to the scammers.

After completing a fake virtual training session, the mortgage brokers are invited to submit loan packages to the scammer which include borrowers’ addresses, dates of birth, social security numbers, bank account information and other sensitive information.

But the loans never fund, and there is “no communication from the scammer, email addresses are disabled, phone numbers are disconnected, websites are taken down, mortgage broker training and submission portals are closed, and the scammer absconds with the mortgage broker’s pledge money,” regulators said.

“This fraudulent scheme is not just financially disastrous to legitimate licensees, it damages their livelihood and their reputation,” the California Department of Real Estate warned. “Additionally, it is hugely distressful to consumers who anticipate closing their mortgage loan after a long process and who have their [personal information] at risk and who had entrusted their transaction to their mortgage broker.”

Warehouse lines of credit can be a vital tool for mortgage brokers, allowing them to fund loans to homebuyers more quickly and have more control over the underwriting, funding, and closing process. Having a warehouse line of credit can also help brokers resell mortgages they originate at a profit.

Warehouse lenders are typically banks or other depository institutions that provide lines of credit to independent mortgage banks that don’t have any customer deposits to lend against.

Before working with a warehouse lender they’re not familiar with, mortgage brokers are advised to ask for licensing information, which should be thoroughly vetted by contacting the Department of Real Estate, the Department of Financial Protection and Innovation, the Consumer Financial Protection Bureau, U.S. Department of Housing and Urban Development (HUD), Veterans Affairs (VA), “or any other state regulator that may have jurisdiction over the licensing and activities of the lender.”

Brokers should request references from warehouse lenders, and contact mortgage and related trade organizations to gain their insight.

Mortgage brokers who fear they may have been a victim of such a scam are advised to contact their local, state, and federal law enforcement agencies. Brokers can also contact the California Department of Real Estate at 877-373-4542 or file a written complaint online at www.dre.ca.gov.

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Email Matt Carter

Whether it’s refining your business model, mastering new technologies, or discovering strategies to capitalize on the next market surge, Inman Connect New York will prepare you to take bold steps forward. The Next Chapter is about to begin. Be part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.

The average down payment for U.S. homebuyers has reached unprecedented levels, outpacing elevated home prices driven by the current market conditions, according to a Redfin analysis released on Wednesday.

In June, the median down payment soared to a record $67,500, a 14.8 percent increase from $58,788 the previous year. This marks the 12th consecutive month of year-over-year growth in median down payments.

Down payments have grown faster than home prices, which were up 4 percent year over year in June. This trend is likely due to current market conditions, including the likelihood of higher-priced, move-in-ready homes in desirable neighborhoods to sell more often as well as the increased frequency of buyers putting down a larger percentage of the purchase price upfront.

“Investors continue to make all-cash offers on homes needing renovation, while traditional buyers are increasing their down payments to reduce mortgage costs,” Annie Foushee, a Redfin agent in Denver, said. “Many of these buyers are also getting financial support from family to afford larger down payments.”

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According to Redfin, the typical U.S. homebuyer’s down payment hit the highest level in over a decade in June, at 18.6 percent of the purchase price, up from 15 percent the previous year. Nearly 60 percent of homebuyers were putting down 10 percent of the purchase price upfront, an increase from 56.6 percent the previous year.

Among the 40 largest U.S. metros, San Francisco had the highest median down payment, equating to 25.8 percent of the purchase price, according to Redfin data. Conversely, down payment percentages were lowest in Virginia Beach, Florida, at just 3 percent of the purchase price.

Redfin attributes the rise in down payments to increasing home prices, elevated mortgage rates and increases in home equity.

Home prices

The median-priced U.S. home climbed to $442,525 in June, up 4 percent year over year.

Elevated mortgage rates

Higher mortgage rates have incentivized buyers to make larger down payments to reduce the amount borrowed. The average mortgage rate of 6.92 percent in June pushed buyers to increase their down payments in order to lower their monthly payments.

Increased home equity

Homeowners who sold their previous property for more than they paid were able to use the extra equity for larger down payments on new homes. All-cash home purchases have also seen a slight increase, while FHA loans have dropped to their lowest level in nearly two years.

In June, the share of cash purchases rose to 30.7 percent, up from 30.4 percent the previous year.

“The percentage of all-cash sales typically mirrors the fluctuations in mortgage rates. When rates are low, all-cash sales decline, and they rise when rates go up,” Redfin Senior Economist Sheharyar Bokhari said. “We might see all-cash purchases stabilize now that mortgage rates have started to decrease from recent highs.”

Pittsburgh, Pennsylvania, saw the largest increase in all-cash home purchases, with 28.6 percent of homes bought with cash, up from 19.2 percent in 2023. New Brunswick, New Jersey, followed with 36.8 percent of cash purchases, up from 31.1 percent the previous year.

FHA loans made up 13.7 percent of mortgaged U.S. home sales in June, the smallest share since August 2022, and down from 14.9 percent a year earlier. Redfin attributes this decline to near-record-high home prices and rising mortgage rates, which have made affordability more challenging for buyers who typically take advantage of FHA loans’ more favorable and affordable terms.

Email Richelle Hammiel

Whether it’s refining your business model, mastering new technologies, or discovering strategies to capitalize on the next market surge, Inman Connect New York will prepare you to take bold steps forward. The Next Chapter is about to begin. Be part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.

It has long been clear that digital, sci-fi-esque renderings of human beings are no longer the stuff of fantasy. But, as with any technology, digital avatars needed to pass through an awkward — or uncanny, in this case — realm of being almost but not quite advanced enough to be useful.

That has now changed. Digitally rendered avatars that are genuinely lifelike are available on the open market for the first time, and real estate brokerages may just be among the beneficiaries.

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How so? Digital avatars are one more means of communication — and an effective one, at that. Brokerages can simultaneously enjoy the heightened engagement of human or human-like communication and the practical convenience of digital platforms. Such communication can have manifold applications, of course, but here are four of the most glaring opportunities digital avatars present to real estate brokerages.

Customer service representatives

Online customer service portals can be quite lifeless — and with good reason. The vast majority of customer issues are resolvable via answers to frequently asked questions (FAQs), and cannot justify the full-time attention of an employee. Still, navigating issues with the selling or buying process can be frustrating for clients, and can lead to business losses if the process is not seamless.

With digital avatars, customer service can be made personal without the time and energy costs of employing a representative. With tools like D-ID, brokerages can develop virtual agents for their customer service portal. These avatars can then be empowered with generative artificial intelligence (AI) to provide preset or customized answers to written questions from the customer. These virtual agents have the added benefit of being on call 24 hours a day, even when the office may be closed.

Presenters

Presentations are another case where a labor-intensive process—agents physically presenting or filming ahead of time — can only be avoided by sacrificing the engaging human element. Mere on-screen text or voiceover cannot compete with a face when it comes to the emotional impact a good presentation is meant to have on the audience.

This is why presentation platforms like PowerPoint and Canva are already accommodating virtual presenters that offer natural-looking personability with the convenience and transmissibility of an email attachment. These avatars can be equipped with stock voices — available also from D-ID — or even with custom audio.

Companies like ElevanLabs have developed realistic large language model voices that can perform text-to-voice transcriptions. Agents can even clone their own voices, allowing the avatar to quite literally speak on their behalf. 

Instructors

Learning without an instructor is generally a dreadful process, as many real estate agents who have been digitally onboarded will be able to attest. Long, unengaging documents followed by faceless examinations are not exactly conducive to the emotionally driven human learning process. Once again, however, employing staff to consume and reissue information in a palatable and case-specific manner is very costly indeed.

An avatar instructor solves this problem by delivering content the same way a human would, without requiring preparation or compensation. Brokerages can use this sort of avatar for onboarding new agents to the firm, for instance, by converting written policy into video. Such instructors would be duplicable and could accommodate a diverse range of language options at the push of a button to reduce the cost of instructional content creation.

Social media personalities

In today’s digital marketplace, it is difficult to effectively market without making use of social media. In order for social media marketing to work, though, quality content must be produced and posted prolifically. This poses a significant challenge for real estate professionals, who rarely have time to film marketing content daily or even weekly. 

By utilizing a digital avatar clone, agents can eliminate the bulk of time and effort required for content creation. Softwares like HeyGen allow agents to carefully construct an avatar that closely resembles themselves both visually and audibly. When this one-time design is finished, they can begin to upload scripts, sit back, and watch the software generate content for their social media platforms.

Until recently, digital avatars were a promising work in progress that might one day be of real use. Now that day has come, and those who ignore the opportunities that technology can provide do so at their peril. Real estate brokerages have a chance to reimagine their sales, marketing and instructional processes, bringing the human touch to their content without the costs it would usually require.

The firms and agents who can harness this vision may just find themselves — or their avatars — at the forefront of tomorrow’s market.

Curtis Williams is a land investment professional with National Land Realty, the nation’s fastest-growing real estate land brokerage. Connect with him on LinkedIn.

Whether it’s refining your business model, mastering new technologies, or discovering strategies to capitalize on the next market surge, Inman Connect New York will prepare you to take bold steps forward. The Next Chapter is about to begin. Be part of it. Join us and thousands of real estate leaders Jan. 22-24, 2025.

New transaction forms created after the National Association of Realtors’ proposed settlement of multiple antitrust lawsuits are largely incomprehensible to the average homebuyer or seller and contain language that seeks to avoid terms of the settlement, according to a new study released Monday.

The study, “Report on Buyer Representation Agreements Post NAR Settlement: Terms Buyers Should Be Aware Of,” is authored by University of Buffalo contracts law professor Tanya Monestier, who earlier this summer also wrote reports for the nonprofit Consumer Federation of America on transaction forms created in the wake of the NAR deal. The latest study is Monestier’s work and not affiliated with the CFA.

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Under the NAR deal, listing brokers will no longer be able to make pre-emptive offers of compensation to buyer brokers through multiple listing services and buyer agents working with buyers will be required to have written agreements with those buyers before touring a property with them.

Because of those changes, private real estate brokerages and local and state Realtor associations have been revamping their forms, particularly their buyer representation agreements and seller listing agreements, with sometimes controversial results. The report anticipates that there will be hundreds, if not thousands, of new transaction forms promulgated due to the NAR deal.

“I have reviewed several dozen of these new forms,” Monestier wrote in her latest report.

“By and large, they are all very complicated and will not be understood by the average buyer and seller. Many of these contain terms that would come as a surprise to a buyer or seller, and terms that signal how [R]ealtors plan to circumvent the NAR Settlement,” the latter of which “ultimately harms consumers by keeping commissions high.”

In particular, the report details ways in which buyer contracts allow buyer agents to collect more compensation than agreed-to with the buyer, which the settlement prohibits, as well as terms that are either confusing or that appear designed to “scare” buyers to behave a certain way.

Regarding buyer agents asking buyers to modify their original contracts so that the buyer agent can get paid more, Monestier warned that, not only do such requests violate the NAR settlement, but buyers may feel pressured to agree or may not understand the full implications of agreeing.

“In almost all cases, a buyer will be all too happy to sign a modified agreement after a guarantee of payment for the buyer’s agent has been secured,” Monestier wrote.

“After all, it’s: a) not his money; and b) failing to sign a modification could lead to an awkward or acrimonious relationship with the agent going forward. With respect to (b), it’s important to realize that the agent’s request for a modification to the compensation comes at the same time the agent is submitting and negotiating an offer for the buyer. Why would a buyer want to alienate his agent at this pivotal moment in the process?”

Monestier also stressed that such amendments put the agent’s financial interests over those of the client. “If an extra 1 percent is on the table, why should that money go to the agent?” she wrote. “Practices like this where [R]ealtors scoop up ‘excess’ funds result in the maintenance of the commission structure that the NAR Settlement was intended to dismantle.”

In her report, Monestier does not touch on specific forms created by brokerages, but she does single out forms from 19 Realtor associations. The report identified issues in the forms of all the associations except the Rhode Island, Massachusetts and Utah Realtor associations:

• California Association of Realtors
• Texas Realtors
• Florida Realtors
• NC Realtors (North Carolina)
• New Mexico Association of Realtors
• Northwest Multiple Listing Service
• Colorado Association of Realtors
• Tennessee Association of Realtors
• Western New York REIS
• Georgia Association of Realtors
• Oklahoma Association of Realtors
• Pennsylvania Association of Realtors
• Minnesota Realtors
• Oregon Real Estate Forms
• Northern Virginia Association of Realtors
• Rhode Island Association of Realtors
• Massachusetts Association of Realtors
• Utah Association of Realtors
• South Carolina Realtors

“I do not claim that the forms are a representative sample of all the forms out there — but have reviewed enough of them to be able to identify patterns and problems,” Monestier wrote.

According to the report, one of these problems is that most of the forms are not understandable to the average homebuyer or seller.

“You should not need to hire a lawyer to understand a listing agreement or buyer representation agreement,” Monestier wrote.

“These forms do not need to be this complicated. Lawyers and [R]ealtor groups have made them this complicated. They then claim that it’s the buyer’s or the seller’s responsibility to read the forms and that consumers are fully capable of figuring out the terms.

“Assertions like this fly in the face of common sense and everything we know about consumer contracting.”

She also highlights terms in the contracts that she believes buyers should be aware of, including:

1. Terms written in fine print or legalese that require buyers to pay their agent if a transaction doesn’t close due to the buyer’s breach. “Some of these forms can be read to require the buyer to pay their agent even if the transaction does not proceed owing to failed contingencies,” the report said. Moreover, Monestier stressed that she’s not saying a provision requiring a buyer to pay commission if they breach a contract is unfair or inappropriate but that a buyer is unlikely to expect that such a provision exists and therefore agents must be required to make sure the buyer understands exactly what they’re agreeing to. “Most buyers understand that if they breach a contract for purchase and sale, they will forfeit their earnest money deposit; they do not anticipate that they will also have to pay tens of thousands of dollars to their agent,” the report said. “An obligation of this magnitude should not be buried in the fine print.”
2. Provisions that include the possibility of modifying an agreement to allow an agent to get paid more than agreed to in the original contract with the buyer. “The NAR Settlement Agreement states that the compensation figure may not exceed that which is agreed to in ‘the agreement with the buyer,’” the report said. “This refers to the agreement in Section H.58.(vi) that the [R]ealtor has already ‘enter[ed] into . . . before the buyer tours any home.’ This provision clearly contemplates that the agreement that sets the cap on broker compensation is the one already entered into prior to the buyer touring the home—not a subsequently modified contract.”
3. In that same vein, some contracts contain clauses that allow agents to collect “bonuses” from sellers. “Certain sellers—particularly sellers of new home construction—offer very enticing bonuses to agents to get buyers to purchase their properties,” Monestier wrote. “One builder in Florida recently advertised an 8% bonus!” In addition to being prohibited under the NAR deal, “allowing agents to collect these bonuses means that they will continue to steer their clients to these bonus-eligible properties,” the report said.
4. Terms that allow a buyer agent to charge the buyer an extra fee if the seller is unrepresented, such as with a For-Sale-By-Owner (FSBO) property. “A buyer likely will not understand what this term is all about and what a fair number would be,” the report said. “This provision seems intended to discourage buyers from purchasing property from sellers who have not hired a listing agent,” the report added. Monestier pointed out a “highly deceptive” provision in Northwest MLS’s buyer contract that, if left blank, could obligate a buyer to pay double the commission if the seller is unrepresented. “This is contrary to the expectations of anyone who leaves a provision blank and is the type of provision that I believe could successfully be challenged as being unfair and deceptive,” Monestier wrote. NWMLS’s listing agreement contains a similar provision, according to the report.
5. Clauses that allow for the buyer’s agent not to credit compensation they get from the seller to the amount owed by the buyer. Minnesota Realtors’ form contains such a provision, according to the report. “In effect, buyers could inadvertently be committing themselves to paying full compensation to their agent and permitting their agent to collect cooperating compensation as well,” the report said.
6. Confusing holdover terms that mean buyers might not fully understand when they are still obligated to pay their former agent. “It is reasonable for buyers’ agents to extend their right to compensation for a period of time,” the report said. “But many of these holdover provisions are a choose-your-own adventure muddle.” In addition, Monestier points to at least one term she called “unconscionable” in the Oregon buyer contract. “Imagine a buyer being committed to paying an agent for six months after termination—even if the agent had absolutely no involvement in the process,” the report said. “One could easily envision a hapless buyer getting stuck in a situation where they owe two commissions.”
7. A provision that creates a range of compensation — notably not allowed under the NAR deal —  with the minimum being what the buyer agrees to and the maximum being what the seller provides. The report pointed to the Georgia Association of Realtors’ form as an example.
8. Another provision that seems to allow the buyer agent to be paid whatever the listing agent is offering. The report pointed to Western New York REIS’s draft buyer agreement as an example. “The provision is confusing and seems on its face to violate the NAR Settlement by allowing for the possibility of collecting an amount exceeding the agreed-to fee,” the report said.
9. Terms designed to “scare” buyers into action or inaction through the use of all caps and bold. For instance, Minnesota Realtors’ form warns in all caps: “CAUTION: BUYER’S ACTIONS IN LOCATING A PROPERTY MAY AFFECT PAYMENT OF COMPENSATION BY SELLER(S) AND MAY THEREFORE OBLIGATE BUYER TO PAY ALL OR PART OF THE COMPENSATION IN CASH AT CLOSING. FOR EXAMPLE: THE ACT OF GOING THROUGH AN OPEN HOUSE UNACCOMPANIED BY BUYER’S BROKER …” Monestier notes that the provision regarding open houses is also inaccurate: “A buyer who has signed a representation agreement may attend open houses; they do not need to be accompanied by their broker to each and every open house,” she wrote. “A provision like this keeps the buyer wholly reliant on their agent in their home search.”
10. Other potentially problematic provisions such as clauses that prevent buyers from suing if there is a dispute, provisions where a buyer pre-authorizes dual agency, terms that allow extra fees such as “junk” fees, and provisions that bind a buyer to an agent for longer than three months. Monestier also pointed to a provision that is often lacking in the contracts: “a statement that the agent may or will receive compensation for referrals to third-party service providers.”

Monestier also created a buyer’s guide to signing a representation agreement and a seller’s guide to signing a listing agreement, which explain the NAR settlement, consumers’ options regarding compensation, and “sneaky” things to be aware of, such as the contract terms included in her report.

“I would ask regulators and those drafting these forms: Do you think your mother or father would understand this?” Monestier wrote. “Would you want your son or daughter to sign these forms? If the answer to either of these questions is no, then it is time for a do-over.”

Email Andrea V. Brambila.

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