Saturday, March 15, 2008

My own brush with real estate fraud

During recent house-hunting adventures, I concluded that a lot of realtors in Utah are, well, hacks. Time and again, I got no return call on a house I was interested in. Other agents seem to think that playing hard to get is a good strategy, especially on KSL.com and Craigslist. Square footage? Lot size? They don't bother to mention it, and I don't bother to call them.

My weirdest experience, though, involved an empty, pre-foreclosure house on which I made three offers over an eight-month period. Or tried to, anyway. I was mystified. The house needed major work and had been on the market for a year. I was pre-qualified. I could close in two weeks. Yet I never got a counteroffer. I never got a call when the house was relisted over and over. I never got any response to any offers, even the ones that said, "This is not my final offer," and "I may be willing to offer more than the listing price." The seller's agent actually encouraged me to buy another house. What the heck?

Finally, I found out what was going on. The agent was only pursuing offers from buyers that he lined up. He wanted two commissions, one now and one "on the back end": His buddy would buy the house, fix it up, and then re-list it with the same agent. By not forwarding other offers, the agent was deceiving both his client and the bank.

The guy outsmarted himself. The bank, fed up with three failed sales in a row, decided to proceed with foreclosure. Uh oh--the agent would get no commission on an auction. Suddenly, I was his best friend, getting a panicked phone call--I could get the house if I could close in three days and hurry, hurry, hurry! Right; like my lender wouldn't want an appraisal or anything.

The house went to auction. The homeowner now has an unnecessary foreclosure on her record, but at least her greedy agent got nothing. And I'm still in my starter house, which I might not have to leave after all. (Yea for falling-through development projects!)

10 comments:

Silus Grok said...

Have you thought of reporting this agent to the bank and the real estate commission?

If you don't, who will?

UtahTeacher said...

I 100% agree. I think stuff like you found goes on all the time.

Maybe feeling overwhelmed and under-informed when you buy your first house is inevitable, but it just seems like the whole real estate agent, mortgage broker, title company web is designed to be self-perpetuating by confusing everyone else.

I liked the real estate guy and mortgage guy I worked with, but I still felt a lack of control through the whole process. They decided that I needed "mortgage insurance" in case someone else had a lien on the house...even though the realtor's own purchase records showed nothing of the sort and I was getting a HUD home that had been foreclosed on. Some more savvy real estate person may be rolling their eyes and thinking "Of course you need mortgage insurance," but it didn't make sense to us. The lender, the government, had already made their claim and was selling the house on to us, so we deemed whatever "risk" they worried about as minimal. We showed up to finalize the financing, and the two of them had over-ridden our decision and included mortgage insurance because "the risk was to high." They couldn't explain to our satisfaction why the risk of an "unknown claimant" on a 1950's fixer-upper in a so-so neighborhood with a documented line of sellers and buyers was so high, but they insisted it wasn't safe. We were naively persuaded by their persistence, and also by the fact that we had a HUD deadline to close or we would lose our bid on the foreclosed home. They had the papers all ready and changing them would cause a delay.

We're OK because we fell in to a really fortunate situation overall, but I'm really looking to take my time and try to maybe, sort of understand the mass of financing and closing documents. I wonder if you can request a copy of that 2-inch stack of closing papers before you're all sitting at the conference table and everyone is staring at you, waiting as you read things. I read maybe 60% of the paperwork and felt like I was slowing them down.

Anyway, great post.

twclay said...

Report the agent. What they did was illegal.

I am a minor partner in a company that makes real estate agent software. Most of the agents I have met are concientious and honest. But you know what they say about lawyers (and real estate agents) 99% give the other 1% a bad name.

Palm Beach Foreclosure said...

I think your not the only one who experienced it. Someone like that agent should be reported to avoid for him to have another innocent victim

Anonymous said...

Utah Teacher - I think the decision made for you was good and that you might be being pennywise and dollar foolish.

Title Insurance is broken down into two parts 1) Lenders Policy this is absolutely required for you to get the loan and 2) Owners Policy (Which is to protect your interests) which is optional policy. It is typically less expensive than the Lenders Policy. (Usually around a couple hundred dollars.)

However, should a cloud be discovered on the title - how many THOUSANDS of dollars would you need to pay an attorney to defend your position of ownership in court?

What you may not understand is that anyone could cloud your title. Before the deed to your home is recorded with the county, A disgruntled child from a previous owner, the neighbor who is upset about a fence that may be encroaching on his yard could go to the county and "Claim" that they are the rightful owner. Therefore, creating a cloud that would need to be cleared.

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olivia Buswell said...

You’re not the only one who experienced it. I have a friend that also experienced it. But i believe that not all real estate agents do the same way. Some of real estate agents are honest.

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