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Just Say NO

You Said What

Have you ever been asked to compromise your reputation for the sake of closing a transaction? Or, do something you know is not lawful according to the contract and documents your clients are signing?

What would you say to an agent who told you “the seller can just give the buyer cash for repairs at closing”. Or… yeah, the lender and the title officer just leave the room and the seller pays the buyer for repairs. We can put it on an addendum and the lender won’t see it. WHAT?

When I hear stories like this, I assume these things used to happen on a regular basis and some agents just don’t know this is NOT legal. I prefer to believe this is an innocent request and not a blatant attempt at working the system. Of course, I tend to believe the best about people until proven otherwise.

Keeping it Legal

Whether you claim ignorance or stupidity, neither is a valid defense when facing a court or the possibility of losing your license and reputation. As agents, we must know how to protect our clients and ourselves. The only thing worse than having to face disciplinary action would be dragging our clients along. They expect us to protect their interest. Believe me; they are not interested in going to court.

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How does an agent know what is acceptably legal? Education and broker supervision! Of course there is our internal BS meter, which says this doesn’t sound right.

With the rampant changes in lender requirements, we must be aware of those who will try to navigate loopholes. When faced with a request to exchange money outside of the contract, remember these words:

If it’s not on the HUD-1, it isn’t done! It’s really that simple.

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Written By

Paula is team leader for The "Home to Indy" Team in Indianapolis . She is passionate about education and client care and believes an empowered client is better prepared to make good decisions for themselves. You'll find her online at Agent Genius,Twitter and sharing her insights about her local real estate market at Home To Indy.



  1. Matt Wilkins

    August 18, 2008 at 11:38 am

    I saw this happen a lot in 2006 when lenders would change their maximum allowable seller concessions midstream once a purchase agreement and repair addendums had already been ratified. Just a step in the mortgage industry shift.

  2. Mack in Atlanta

    August 18, 2008 at 12:22 pm

    Although it is not as noticeable from the educated agents that participate in this forum, there are many agents that just don’t know the difference. Of course you also have the loan officers who tell agents to put seller concessions on a separate agreement because the underwriter doesn’t need to see them. That alone should set off the internal BS meter.

  3. Seth Parker

    August 18, 2008 at 1:46 pm

    I’ve got one. I had a lender…from a bank(which is also the bank the seller does business with) offer this to me on a listing I had:

    “Seth, John Doe told me that he only needs to make $75,000 on that listing. I just approved a buyer for the list price (about $95K), but I have an idea. Let’s do this: Why don’t me and you buy the property together for $75K, then turn around and sell it to this lady for $95K and we split the profit.”

    Needless to say, going to a few posts back, when you say one thing, and think something else, here was my thought:

    “Banker, I just don’t believe that I would be fulfilling my obligations to the seller by doing such a thing.”

    What I really meant was: “Banker, are you $&%*@(! kidding me? That’s wrong on so many levels it’s not even funny! You mean to tell me you’ve been doing this for 25 years?”

  4. Michelle

    August 18, 2008 at 2:18 pm

    Amen sister!

    I’m always amazed at how completely casual and comfortable people are propositioning less-than-legal/ethical practices. It always makes me double-take!

  5. Paula Henry

    August 18, 2008 at 3:27 pm

    Matt – Oh yeah, the good ol days of 2006 – when everyone thought this housing mess woudl surely correct itself soon.

    Mack – The difference being educated. Loan officers have just as much culpability as an agent who knows and does nothing. I had an agent friend who told her seller that the buyer was a crook, as was the lender, appraiser and everyone else in the deal. The buyer was getting $100,000 toward repairs (on a home which needed no repairs) paid to a LLC, which the buyer was coincidentally the manager of . She had it in writing she recommended the seller not accept the offer. A year later she was investgated by the Real Estate Commissioner and cleared of any wrong doing. She is a great agent and easily could have been indicted with everyone else in the scheme.

  6. Paula Henry

    August 18, 2008 at 3:35 pm

    Seth – No morals, no ethics – who would really do such a thing to a client? Oh, need I ask? How does he sleep at night?

    Michelle – Me, too!

  7. Mack in Atlanta

    August 18, 2008 at 5:22 pm

    @Paula – I think a lot of the loan originator problems would be cleared up if they were required to be licensed just as REALTORS are. If they knew that they would loose their ability to feed, clothe and house themselves and their families they may well obtain an internal BS meter(BTW I really like that statement).

  8. Paula Henry

    August 18, 2008 at 6:09 pm

    Mack – Here in Indy, we do have legislation which requires loan brokers to be licensed and each brokers office must have a registered principal manager. All brokers and originators are required to have 6 hours of continuing ed and register with the Securities Division.

    I won’t say these issues are exclusively lender territory. I recently had a young agent who mistakenly thought I was a new agent. Not that it should matter. My license number would make one think I was new, but I have seven years experience, most in other states.

    After explaining that my seller can just give him $5000. at closing without the lender knowing, he says to me, ” I can tell by your license number, you are new, but this is completely legitimate. My broker wouldn’t sign it, if it were illegal”. I kindly explained to him, I am not new to the business and my seller will not be giving anyone money at closing. We worked it out legally!

  9. Melissa | Talk San Francisco Real Estate

    August 18, 2008 at 11:48 pm

    I am so glad you wrote this post. My advice; don’t get caught up in the money. I started real estate 5 years ago. It was, I think, my third client that I was about to close, and I was asked to advise my client to lie on her loan app by the lender that I referred my client to being that it was our in house lender. I refused to tell her to lie, and actually advised her to not do so. Needless to say, the transaction fell through. I never used the lender again, and got into a huge argument with her. My client was so grateful that I was honest, and did not try to sway her to do something wrong. I still worked with her in the end. Never do something that you know isn’t right for the sake of closing a transaction.

  10. Vance Shutes

    August 19, 2008 at 5:33 pm


    You are spot-on with this post! It takes years of diligent effort to build a reputation of integrity. It takes only a moment to destroy that reputation.

    The bottom line? Your title says it all. “Just say No.”

  11. Paula Henry

    August 20, 2008 at 4:36 am

    Melissa – Your client obviously knew she was working with an agent of integrity, It seems so casual to tell a little lie – yet the client’s signature indicates everything they submitted is fact. Your lender was obviously only thinking of “the money”.

    Vance – Thanks! We see celebrities and politicians fall from grace everyday and while we are not famous (well, most of us aren’t), our reputation within our community can make or break us.

  12. Steve Simon

    August 30, 2008 at 3:27 pm

    As an instructor for well over twenty years (that means I have attended a dozen Division of Real Estate Instructor Seminars:) ).

    There is very little mercy mentioned or administered for those they catch…

    I am still amazed at what is mentioned in the field (and online for that matter).

    Discussions with agents (when I am in my rare “Agent” mode) from a few companies in my area seem to be the most likely to have me withdrawing or disavowing any part of the discussion.

    These companies are the ones that litteraly hundreds of agents and usually one or two brokers!
    There are quite a few of these “Ant Hills” in my area. The lack of supervision is of course (in my opinion) the reason for the demonstrable lack of ethics or worse.

    There is one shop in particular that actually pays agents for bringing in other agents. I don’t mean a human resource finder fee, I mean an ongoing monthly income! Its as close to illegal as you can get without being illegal, as I see it. The organization rents an office or two the size of a small bedroom and then signs up a couple of hundred agents. Charging them a monthly fee and then returning parts of the monthly fee for each agent they bring in, until they bring in a few and then they start to get paid for each additional agent they bring! Its actually a “down line” concept like you would find in a multi-level marketing oufit… Evidently its legal because the money comes to the employing broker and is then paid out by the broker. Point is can you imagine the lack of supervision in these places?

    I had to tell a client we couldn’t deal with one of their agents because I felt the risk of Federal prosecution for various offenses was too high for me to advise her to continue…

    The fallout of this is evidenced in the size of the debacle we now face in the industry.
    I have posted (on my blog) that the answer lies in the same level of regulation that has been applied to trainee appraisers. New law in Florida, certified appraisers can only supervise a maximum of three trainees. It should be so in real estate, maybe not the number three, but certainly not an unlimited number making money off each others arrival!
    Just my opinion…

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