A huge topic of conversation in yesterday's Professional Standards Committee Workshop in Phoenix was an inflated price scheme, basically mortgage fraud. Each month in Arizona our state Association publishes a magazine and in this month's issue this mortgage fraud scheme was the front page article.
While I couldn't find a way to link to the Arizona Realtor Digest (membership required), the article used in the Digest came from the California Association of Realtors. I found this link to that article, please read it.
In recent days the print media in Phoenix has been running articles that I'll link here.
The reason it was discussed at length in the workshop I attended yesterday is because more and more of these types of transactions were happening. Overall though, I'm willing to bet that the actual percentage of transactions held this way are minuscule but all efforts must be made to end each and every transaction of this type.
The bottom line, ANYONE involved in this type of scheme in a transaction can be found guilty of fraud. This means the Realtor, the lender, the appraiser.... and the buyer and seller of the property. This is why so much attention is being brought to this issue right now. Not everyone is aware of the legal implications.
Buyers should be aware of large sums of cash back offered by a lender and even a seller.
Sellers may like the increased offering price on paper. For example say if the property listed was on the market for $200,000 and the offer comes in at $260,000, looks good right?? There will likely be a 'secret' addendum asking the seller to refund the $60,000 back to the buyer at closing though, ending any perceived gain. If a seller was to close on such a deal and they had an agreement to pay the listing broker a percentage of the final sales price it would mean that more proceeds would go to the broker out of the transactions while not receiving the actual benefit of the higher sales price. And that ain't too groovy.
Realtors should be aware that if a situation appears to be 'too good to be true' that is probably means that it is. The first thing an agent should do when presented this kind of 'opportunity' is to talk to your broker. I know the state Association will be looking to throw the book at members who have complaints filed against them that are involved in such a scheme. Major brokers in Phoenix are severing agents that are involved in these transactions. Not only that, but these brokers are also turning over agents to legal authorities as well.
Personally I have never been approached to be involved in this type of scam. In fact I'm not aware of this practice in my area (that is not to say it can't happen or hasn't happened).
If you are a buyer or a seller and suspect this may be happening in a current transaction, contact an attorney right away. As I said earlier, it is possible that ANY party to this kind of fraudulent transaction could be guilty of mortgage fraud. Anyone, especially Realtors, that suspect mortgage fraud should contact the Department of Financial Institutions at 800-544-0708 or on the web at www.azdfi.gov.
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