Lately we’ve seen more than a few instances of lenders, brokerages and banks finding creative ways to rip off agents. So we thought we’d compile a brief and incomplete list to help agents sort out some of the creative scams that seem to be so prevalent these days. Each of the following questionable practices may be a violation of RESPA, so RE-Insider strongly suggests avoiding all of them if you want to protect your real estate license.
1. Rent-a-Desk – As we’ve detailed previously, agents are sometimes forced to use settlement service providers simply because they share office space.
2. Pre-Qualifying Buyers with In-House Lenders – Agents are sometimes forced to present an offer to a buyer that is “pre-qualified” by an in-house lender. These lenders may not be reputable or reliable but are used because they are paying rent or partnered with the broker.
3. The Non-Recoverable Costs in Bait-and-Switch – Brokerages tell buyers that they have qualified for one loan only to get 17 days into a transaction to find out that their lender didn’t vet their qualifications properly. Sometimes this is simply a lender fishing for an exception to their guidelines, but it puts the buyers’ deposit at risk and can add to the non-recoverable cost of appraisals, inspections, credit reports and more.
4. Builders Preferred Lenders – Agents sometimes must deal with home builders that have “preferred lenders” that just happened to be owned by the builder.
5. Bank Loan Recapture Programs – Some banks have recapture programs with their REO listings and require buyers to pre-qualify with their origination branches.
6. In-House Escrow – Some larger, national chain brokerages have in-house escrow (or an affiliate escrow company) that must be used by the agent.
7. Double Commissions – Some agents have extra incentive to get the deal done by any means necessary because they don’t want to lose two commissions – both the buyer and seller.
This is only seven of seemingly endless practices that agents should be on the lookout for. Please help us continue to grow our list and send us any other clever scams that you have come across. Help us continue to educate agents and clean up the real estate industry!