The Associated Press reported in a story today that real estate “buyers are demanding cash payments and other incentives that may be artificially propping up sales prices, suggesting the real estate market downturn could be even more pronounced than has been reported.” A Realtor -registered trademark- from Prudential California Realty told the reporter that he had been approached three times in the past few months by cooperating agents from other offices, about securing cash back at closing without informing the lender. An agent proposed having a home with a $539,000 asking price reappraised and sold at $600,000, with the seller to pay back $60,000 in cash to the buyer, thereby hiding the kickback from the lender. “‘Because the market is changing right now, I think people are trying to be a bit more creative,” said the Realtor – registered trademark.
There is just one small problem with such schemes. They are felonies. But rather than calling the “cops”, the broker just told the reporter that he warned his sales people to “stay away from gray areas.” Gray areas? Here we have a Realtor – registered trademark – who had been solicited to participate in a criminal act, and nowhere does he say anything about notifying regulatory authorities or law enforcement.
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As a former real estate broker, mortgage broker, and appraiser (not at the same time), I can tell you that this kind of fraud, along with all kinds of other schemes, run rampant among a small but not insignificant group of people in the real estate “profession.” Most of those committing those acts are Realtors – registered trademark – who supposedly adhere to a “Code of Ethics”. I guess the “Code of Ethics” doesn’t include not screwing the lender, and ultimately the taxpayer who may pay to bail out the fraudulent loans. All we have to do is look back at the early 90s if you don’t think there’s a cost to you and me for that kind of misbehavior. That bailout ultimately cost taxpayers hundreds of billions following the widespread excesses of the 1980s real estate bubble. How quickly we forget.
While the percentage of bad actors committing the frauds is relatively small, the real problem is the people like that Realtor -registered trademark-, who was invited to be a party to fraud and did nothing to stop it. Looking the other way is endemic in the industry. I guess we could extend that to corporate America as a whole, but that’s a different story.
The buyers and sellers who willingly participate in these schemes are just as culpable. Some are acting out of desperation, but sometimes desperate people end up wearing orange jumpsuits. Sometimes unwitting co-conspirators do too, along with the greedy and knowingly guilty. The day will come when some will be brought to justice. Most will not. The jails aren’t big enough.
Eventually, society as a whole will pay a steep price for the degradation of ethical and moral standards in business. The problem is, there are none. Most people don’t even have a clue anymore what’s criminal, let alone unethical. The Realtor- registered trademark- who proposed the scam was a crook. The seller may have been committing the crime out of desperation. The buyer was probably an unwitting co-conspirator.
The other Realtor- registered trademark- whose behavior in my experience would be typical of the vast majority, was guilty of being grossly unethical simply by doing nothing about the fraud. It is not OK to look the other way, and most Realtors -registered trademark- and appraisers are far too willing to look the other way.
Sadly, the majority of those so called “professionals” don’t even know that they are looking the other way, because they have no moral compass. They may sense that there might be something wrong here, but they aren’t terribly bothered, at least not enough to do something about it.
So, no, not all Realtors -registered trademark- are crooks. Most just don’t know any better. It’s a symptom of our culture of expediency and irresponsibility, and eventually, it’s going to cost all of us.