There are sharks in real estate water
Ralph Roberts is a real estate fraud expert. No, silly, he
doesn’t practice it, he studies it. He has co-authored a book
entitled
”
Protect Yourself from Real and Mortgage Fraud: Preserving the
American Dream of Homeownership.
”
There are sharks in real estate water
Ralph Roberts is a real estate fraud expert. No, silly, he doesn’t practice it, he studies it. He has co-authored a book entitled “Protect Yourself from Real and Mortgage Fraud: Preserving the American Dream of Homeownership.”
He suggests that about eighty percent of the current challenges of today’s market are firmly rooted in fraud, mostly perpetrated by real estate and mortgage insiders. Whoa, doggies. Talk about killing the goose that laid the golden eggs! These people scammed the system, and now are nowhere to be found, leaving you and me to pick up the pieces.
Some of the fraud was so in-your-face as to be beyond comprehension. Using the Internet, technology and insider information, scam artists created paperwork allowing them to get millions of dollars in loans for homes which they never even bought.
Most of it, however, was less obvious. The most common scenario was this: A hapless buyer would be given an adjustable rate mortgage with a very low starting interest rate. They were told they would pay a mortgage of, say, $1,400 per month. The buyer was not informed that after two or three or six months this payment would go up to $4,000 per month. Those buyers savvy enough to question the bigger picture were mollified by assurances they could refinance if the payments went too high for their budget. This was great while housing prices were surging upwards. Now, however, the air has been let out of the tires and prices are decreasing. Oftentimes the house is worth much less than the current mortgage. Add to that the tightened lending guidelines and you can easily see that many people are stuck in an untenable position. They can’t afford it, they can’t refinance it, they can’t sell it.
Roberts points out another common fraud situation. In this case, a buyer would agree to purchase a home at a certain price and then ask for cash back out of the deal. While it is not uncommon for a seller to agree to pay for a buyer’s closing costs, it is illegal to just hand over a chunk of change.
For ethical real estate brokerages like Intero Real Estate Services, this practice is flat-out not allowed. But it was common at some brokerages. In fact, the mortgage people and real estate agents would say, “Everyone’s doing it.” (I can hear my mother saying, “If everyone jumped off the Golden Gate Bridge, would you do it?”) The agents would imply you’d be a fool not to join in the party. The same agents were probably selling junk bonds in the 1980s or advising investing in www.wedonothing.com in the 1990s.
And, of course, there were buyers who were all too willing to fudge the numbers on their applications, and mortgage lenders anxious to process these … for a fee. Have to have the next big home, don’t you know?
Here’s what I don’t understand. The real estate industry has been a place where a man or woman with very little education or preparation can, with some innate intelligence, good people skills, a strong work ethic and a lot of determination can create a great business for themselves. Though it isn’t as easy as it might appear from the outside, it has provided a good life for many individuals. Why was that not enough? Why do some people have to take a good thing and warp it for immediate gratification?
This situation is not unique to this industry. I mentioned the bond market and stock market debacles. There is the Enron scandal. Martha Stewart went to jail for insider trading which netted her pennies compared to her fortune. Heck, you often hear about the soccer mom who runs off with the snack bar proceeds or the employee with a hand in the till. What’s up with that?
Greed. According to the Encarta Dictionary, greed is an overwhelming desire to have more of something such as money than is actually needed. It is one of the seven deadly sins, and it causes a world of hurt for a lot of people.
In closing I leave with a quote from Roberts for you to ponder:
“Of course, there is plenty of blame to go around. If consumers were not so greedy, using their homes like ATM machines whenever they needed an equity fix, perhaps the problem would not be so widespread and so deep. If fiscal conservatives were in charge of running the government at federal, state, and local levels, maybe we would not have a culture built around deficit spending. If politicians hadn’t agreed to ship manufacturing jobs overseas and open our markets to free foreign competition, maybe Americans would have more money to make house payments. If we had universal healthcare coverage, people wouldn’t end up in bankruptcy whenever they needed surgery.”
Ouch! That doesn’t paint a very pretty picture of us Americans, does it?
Be kind to your Realtor.
