When the real estate market is hot or highly competitive, agents often have to get creative in order to lure clients to list properties with them or to help them with a purchase. Promising buyers that their home will qualify for a mortgage amount that matches their offer or quoting a seller an unrealistic price could be a way to stand out from the competition.
Unfortunately, if you can’t follow through on those promises, the end result may be damage to your reputation, rather than business growth. Some people who work as real estate agents or in adjacent professions may engage in questionable practices that they feel work better for their clients.
In some cases, these practices could constitute mortgage fraud or appraisal fraud and lead to white-collar criminal charges.
An appraisal should reflect reality, not your wishes or the buyer’s needs
Appraisers depend on a constant stream of work from real estate agents, and they are often eager to make agents happy in order to secure a repeat customer. Appraisers might ask an agent what price they need to secure in order for the buyer to receive approval on a mortgage or for the seller to break even on a property.
Inflating the price of a property in order to help a seller get the mortgage they need or the offer to ensure that a seller can walk away without losing money on the deal is not a victimless crime. Such actions potentially inflate the prices of other properties nearby, making it harder for people to buy into the same community. Additionally, they put the lender at a disadvantage in the event of foreclosure, as the property may not be worth nearly the amount that they financed.
Lenders can hold professionals accountable if they misrepresent a property
If a financial institution or government organization has reason to believe that an appraiser or similar professional misrepresented the value or condition of a property for a kickback or the promise of continued work from a real estate agent or lender, that individual could face criminal charges, as could anyone involved in the transaction with knowledge of the intentional misrepresentation.
A conviction won’t just involve a slap on the wrist. Instead, it could very well mean the end of your professional career, as maintaining or regaining the necessary licensing may be impossible after a conviction for fraud.