Ethics

The Fraud Witch-Hunt Will Begin Soon. Are You Safe?

“Fraud”

“Fraud” is a powerful yet, often overlooked word by some real estate agents and brokers. The crazy thing is that one of the greatest fraud witch-hunts is about to being and one (or many) real estate agents and brokers WILL be made an example of by the government/FBI.

“You’ve been reading too many books!”

No…not really. A few months ago, the two FBI agents heading the Northern Virginia white-collar crimes division of the FBI gave a presentation at my local Realtor association. They made it very clear that the FBI has started to investigate mortgage and housing fraud in Northern VA and across the U.S. And it’s just begun based on what they and other sources are saying.

Are you safe?

Maybe, maybe not. And here’s why… The FBI will be holding 3rd parties (aka real estate agents and brokers) fully responsible for and prosecuting them for fraud even if they didn’t know, but should have known there was fraud.

Here’s an example…

Let’s say your seller client, who hired you to sell their house as “short-sale”, gets audited and the bank and/or the FBI finds out that they lied about their income or financial situation during the short-sale negotiations (fraud). You may easily find yourself as a defendant on trial for fraud/conspiracy to commit fraud. Did I mention those are federal charges? 

As the agent/broker, you will have to prove to the court that you did not nor could have known that they lied to the bank (and cross your fingers that you’re not going to be made the example). Even if you get off, imagine what your court fees will be along with the time, stress and slam on your reputation involved.

(I’m not a lawyer and this is not legal advice nor based on experience – I am simply sharing what has been told to me by the FBI, various lawyers and sources)

It’s bound to happen so C.Y.A.

After such a huge housing and economic collapse that involved a lot of shady lending and many cases of fraud (or possible fraud), it’s almost guaranteed that the government/FBI will come after all those that were or could have been involved. The witch-hunt will start as soon as the dust settles, if not sooner.

So make sure you’re careful and stay far away from any seller (or buyer) that you get even the slightest hint of possibly being involved in any type of fraud. I know the market is tough and that sellers and buyers are scarce, but one commission check is not worth being on trial on federal charges of fraud (IMHO).

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6 Comments

6 Comments

  1. Missy Caulk

    February 26, 2009 at 8:58 am

    We had the FBI in 2 years ago in Ann Arbor. It was a great learning experience.

    My daughter last year got a referral, she met with them, talked to them. She felt like it was fraud. We called our attorney, he put us in charge of the FBI division to report.

    We told them the whole story, no contracts were written yet.

    Here is the issue: She had to come forward publicly for them to move forward. No way to keep her identity hidden. So we said no.

    A few weeks ago she ran into the guy who referred them to her. She apologized and said “I’m sorry, I just was not comfortable working with them.” She gave no reason.

    He said, “don’t worry they are in jail.”

  2. Matt Stigliano

    February 26, 2009 at 9:40 am

    Danilo – Federal charges makes it even scarier. I guess the government has to show they’re doing something about it and if they get some of the “crooks” then its a good thing. I do fear the idea that not knowing something can still lead you to trouble…especially when it comes to your short sale example. Its a double edged sword…we’re not tax accountants and can get in trouble for giving financial advice in many respects, but not reviewing someone’s finances can get us in trouble too. Its a fine line at times.

  3. Kim Wood

    March 4, 2009 at 9:01 pm

    What is it they say? Ignorance is no excuse….. It is scary out there sometimes – we have a lot we have to keep informed about. Read, read, read – and if you don’t understand – ask !

    Thanks for the reminder – and good to see you this week 🙂

  4. Beth Levine

    November 15, 2009 at 11:41 am

    Matt is spot on, Kim is living in “LaLa Land”. There are THOUSANDS & THOUSANDS of NEW Federal Rules and Regulations that even most real estate attorneys are not familiar with; just too many, not unlike the tax code. Read, read, read? Yes, a good thing. But if one thinks that will keep them safe from the long arm and ambiguity of the Federal Rules and Regulations, then my friend, I hope you never find yourself on that end of the stick. The ONLY protection you may have is to maintain an ongoing relationship with a real estate attorney. Ask for a discount as you will have him check and give his Legal opinion of all of your tranactions, IN WRITING. If the Feds ever come knocking, then you will at least have what is referred to as an Affirmative Defense; you relied on the advise of expert counsel. This is the ONLY way to protect ones self in this day of the Federal Witch Hunt. Some may be guilty, many are not, they just did not know. It is just as Matt said and there are people sitting in Federal prison today, with LONG sentences; people like you who just didn’t know. Don’t judge too quickly or take this too lightly; you may be next and crying “fowl” when it is at you back door-Good luck to all in the industry today!-Beth

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