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What you need to know about wire fraud in real estate

In 2017, close to $1 billion was “diverted or attempted to be diverted” from real estate transactions, according to an article in the Chicago Sun-Times titled Hackers scam homebuyers out of millions — and it’s getting worse.

That figure is so staggering, that it’s clear no one is immune. You need to know how to protect yourself so you don’t become part of the statistic. And the best way to protect yourself is to know how this happens in real estate transactions.

Hackers monitor the inboxes of real estate agents, lenders, title companies and, at times, you. They use scraping technology to pick out key terms that indicate a real estate transaction is underway. They then identify when, exactly, the closing will take place. Once they have that information, they create a fake email to the homebuyer or seller – that looks incredibly legitimate – with a change in wiring instructions.

Because of how legitimate the email looks, no one questions this change in the wiring instructions. They comply, which in turn sends hundreds of thousands of dollars to the wrong place.

How you can protect yourself from real estate wire fraud

Have all parties involved state their communication practices. From the start. This includes your real estate agent, escrow officer, and lender. That way if you receive something that doesn’t comply with these practices, you know something might be off.

Use safe internet lines. Wi-Fi at the coffee shop is convenient. But every time you hop on Wi-Fi without firewall protection, you’re opening yourself up to hackers who can easily capture your email passwords and other sensitive information.

Stay vigilant with passwords. Use strong passwords made up of various characters, and change them regularly. In fact, it’s a good idea to change your email password just before your wire instructions are sent.

Avoid sending personal information via email. Your Social Security number, bank account information, etc. should be provided over the phone or, if possible, in person.

Don’t open suspicious emails. These emails and their attachments can include malware that serves as a gateway into your computer system.

If you expect to engage in a wire transfer, let the title company or real estate agent know that the instructions should be sent via encrypted email (including attachments), via a landline Fax, USPS, or hand delivery.

Once you do receive your instructions, call the person/company who you are transferring funds to confirm you are wiring money to the right person. Don’t call the number in the email associated with the transfer instructions. It could be a fake number (if that email is fake). Use the number you already have on file.

In short, if you receive an email with a change in wiring instructions, be suspicious. Title companies rarely change wiring instructions.

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How Title Companies Determine if a Title is Valid

When you hire a title company during a real estate transaction, you’re hiring a company that specializes in confirming the legitimacy of a piece of real estate. Once the legitimacy is confirmed, that company will then issue title insurance for that property.

The goal of the title company is to provide a buyer with peace of mind that once he or she buys a piece of property, they are the rightful owner of that property. With hundreds of thousands of dollars at stake, you can see why title companies play such a pivotal role in every real estate transaction in Louisiana.

But not everyone is clear on how title companies determine a title is, indeed, valid.

Here at Clean Title of Greater New Orleans, we conduct a title search. During this search, we look for outstanding mortgages, liens, judgments, or unpaid taxes tied to the property.

We also research any existing restrictions, easements, leases, or other issues that could impact sole ownership.

There are times when we’ll require a property survey as well. This survey determines the boundaries of a plot of land that the home sits on. The survey helps us confirm whether the home does, in fact, sit within those boundaries as well as if there are any encroachments on the property by neighbors.

Before we issue title insurance, we prepare an abstract of title. This abstract of title is a summary outlining what we found during our search. In other words, it’ll go into detail about all past owners of the property.

We’ll then issue a title opinion letter, which speaks to the validity of the title.

Title insurance – what is it?

Once we confirm that the title is valid, we have the green light to issue a title insurance policy. This policy protects the lenders, or owners, against claims or legal fees that may arise from disputes over ownership of the property.

How do you choose the right title company for your real estate transaction?

Word of mouth is one of the most effective ways to start your search. Ask your real estate agent and friends who just bought a home. See if they have any recommendations.

Once you come up with a short list, whittle that list down by looking for a title company that has a solid reputation and proven track record. This company is your last line of defense as you look to buy (and own) a home.

You want only the best.

We here at Clean Title, LLC are proud of the reviews and recommendations our clients have offered. You can see many of these reviews on our Facebook page.

With a blend of personal flavor and professionalism, we ensure our clients know exactly what’s happening every step of the way, so that they can feel confident that when they sign on the dotted line, they’re signing to turn a house into a home.

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How does the new tax plan impact me as a homeowner?

Any talk of taxes is sure to anger some and confuse most. But with a new tax plan in place, it’s important to know how the changes associated with the plan impact you as a current, or future, homeowner.

Here is a clear and straightforward breakdown of how the new tax plan affects homeowners in Louisiana.

New (reduced) cap on mortgage-interest deduction

Owning a home is the American Dream. For many reasons. However, one of the perks of owning a home is your ability to deduct mortgage interest from your income. That’s a perk renters don’t benefit from.

With the new tax plan, the cap for deducting mortgage interest is now at $750,000. That’s higher than what the House proposed ($500,000), but still is worthy of being aware of.

However, most homes in the Greater New Orleans area do not exceed $750,000. In fact, the National Low Income Housing Coalition estimates that just 1.9% of mortgages from 2013-2015 exceeded $750,000. California and New York homes make up more than half of those mortgages.

In short, this cap likely doesn’t impact you if you’re in the market for a new home. If you already own a home with a mortgage greater than $750,000, this new law doesn’t apply to you. It only applies to new mortgages.

The cap on mortgage interest reverts back to $1 million in 2026 regardless of when the home was purchased.

Taxes

On top of the changes to the mortgage interest deduction, the new tax plan limits how much of your property and state/local taxes you can deduct – to a combined $10,000.

Again, this doesn’t have a tremendous impact here in Louisiana as it does in the North East, or California, where home prices and property taxes are high.

But it does mean you might face larger tax bills starting this year.

Keep in mind, however, that the new plan doubles the amount of standardized deduction you can take ($12,000 for individuals and $24,000 for joint filers).

In other words, taking the standard deduction will exempt twice as much of your income from federal taxation. And if you currently itemize, it may be worth your while to take the standard deduction, which, in turn, limits how much income is subject to federal taxation.

Home-equity debt

Starting this year, interest paid on home-equity loans will no longer be deductible. And, you won’t be grandfathered in, either. The only exception is if you have a home-equity loan or second mortgage whose funds are used to substantially improve your home. In that case, the interest may still be deductible.

In 2026, the law will go back toward your ability to deduct for interest paid on up to $100,000 of home-equity debt.

Capital gains exclusion

You’ll still be able to exclude up to $500,000 ($250,000 for single filers) from capital gains taxation when you sell your home, as long as you’ve lived there for two of the previous five years.

Does the tax plan hurt or help homeowners?

Unfortunately, that’s not an easy question to answer. It completely depends on your unique situation. Generally speaking, though, homeowners in Louisiana may see some changes in their taxes. But with the increase in standard deductions, it might be worth your while to go that route vs. itemizing.

As always, talk to your financial advisor or accountant to know how the tax plan impacts you, specifically. Still, in the end, it’s clear that owning a home isn’t just the American Dream.

It makes good fiscal sense.

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Title FAQs During the Home Buying Process in Louisiana

Buying a house is an extremely exciting time in your life. Not only are you making an investment toward your future; you’re also creating a home for you and your family.

But as you’ve probably already gathered by now, the home buying process can also be stressful. So many papers to sign. Inspections. Appraisals. Offers and counteroffers.

And what about the title? Who handles the title? What’s title insurance? And do you actually need it?

Here are answers to some of the most common questions buyers ask us during the home-buying process.

Where does a title company fit in the home-buying process?

In simplest terms, here’s what the home-buying process looks like:

  1. You, the buyer, wants to make an offer on a property.
  2. You complete a purchase agreement / sales contract.
  3. You and your agent (or the seller, in some cases) contacts a title company to schedule a closing.
  4. That title company conducts research to ensure the title is clean, and does all the legwork leading up to the closing.
  5. You, the seller, and agents meet with the title company to officially transfer the property title.

As you can see, title companies play a pivotal role in the home-buying process. That’s why you want to make sure you and your agent work with a company that has a proven track record for success.

When, exactly, does a title company start working on my behalf?

Great question. An escrow or sales contract kicks off the process by opening a title order that we then process. All relevant tax information, loan payoffs, surveys, inspections, as well as other legal papers are ordered and reviewed.

What’s involved during a title search?

A title search is an integral part of your home-buying process. During a title search, we search through public records (deeds, mortgages, liens, wills, etc.) and any documents that affect the property’s title. We verify the legal owner of the home and determine any and all debts owed against the property.

Do I need title insurance in Louisiana?

Nearly 100% of the time, your lender will require you to have title insurance. That’s because this coverage gives your lender the ability to sell the mortgage to its investors, which in turn allows them to keep more money to use toward other loans.

Where should I purchase title insurance?

Here in Louisiana, you can purchase title insurance from a title insurance company, or from an agent licensed to sell title insurance. Just make sure you find a company or agent legally able to sell title insurance in Louisiana.

It’s important to note you aren’t required to choose any one specific title insurance company or closing agent. Louisiana grants you the right to shop and choose for your preferred title insurance provider.

When shopping around for title insurance, make sure to ask companies what services and fees are included in the title premium, as well as what fees they separately charge for each of their services.

Is there more than one kind of title insurance policy?

Yes. There are 2 specific types of title insurance policies: owner’s and lenders.

Owners:
This type of title insurance protects you from the full price of your home, plus legal costs if any issues arise after you buy your home.

The policy is based on the cost of your home, and will cover you as long as you own a vested interest in the property.

Note: You are not required to purchase an owner’s policy.

Lenders:
If you borrow money to buy your home, you’ll likely need to purchase a lender’s policy. This type of insurance protects the lender if a title or ownership problem comes up after the property is purchased.

A lender’s policy is issued for the amount of the mortgage, and coverage decreases as you pay down your loan. Once the mortgage is paid off, the lender’s policy ends.

Still have more questions about the title of your property or title insurance? Call our team today and we’ll walk you through each step. With Clean Title, you’re never alone during this exciting, albeit stressful, time of buying a home.

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The Best Gifts Homeowners Can Give Themselves This Christmas

As a smart shopper and practical homeowner, these ‘gift’ suggestions aren’t just for you and your family… they benefit your home and better your investment. From our Best Gifts Homeowners Can Give Themselves This Christmas Greatest Hits List, may we suggest…?

An extra mortgage payment.
Everyone’s budget and circumstances are different. But paying even a few dollars more toward your house debt each month can put you on track to pay off your mortgage early. And that frees up a ton of cash. Never pay more than you can afford to, but never discount the benefits of a fully-paid mortgage!

A renovation.
Or a fresh coat of paint or some landscaping. Over the holiday downtime, plan a few winter projects with your family. A little bit of extra work can go a long way toward improving your property value!

Another home.
If you’re thinking about investing in more real estate, winter is a great time to shop for deals. Whether it’s a rental unit, a home you can flip, or a new home for you and your family, make sure to do your research. Take a look at price-per-square-foot and property values over time. Talk to locals about growth potential in the area of your choice. And as always, never buy on emotion!

A new front door mat.
Or a wreath. Or a pot with some seasonal flowers. If your budget is limited this holiday season, go for something small but big on potential. Nothing boosts your curb appeal and says ‘welcome’ like some well-placed color and accessories to brighten up the entryway.

Don’t forget a little extra for your stocking! Make sure you’ve got a team of real estate and title professionals close at hand who can help make your home-buying and owning experiences the very best they can be. Clean Title, LLC, works to ensure our clients feel confident that when they sign on the dotted line, they’re signing to turn a house into a home.

Don’t miss our popular Title FAQs for tips that will give you the peace of mind only a clean title can!

Come see us on our Facebook page and check out details of our services on our website. Or call 985-277-5095 to speak to one of our title professionals today!

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