Why Have Some Agents Gone Numb?

This week we got a very powerful email from one of our readers. It was a list of questionable practices some agents, specializing in REO, are using at the expense of others. The following email is rich with information. Please take a read and let us know what you’ve seen. At RE-Insider, we believe that we can all benefit by sharing our experiences.

I’ve been tracking activities in my area for at least five years. I am unusual in that I work in, and am very familiar with, an area that covers more than three counties. My background as an engineer, and my experience in trends and forensics, makes it feel (to me) as though I can almost see these activities growing in practice before my eyes.

– MANY local REO agents have been, and still are, manipulating their sales by hiring buyers’ agents at a very low split compensation and then suppressing other agent’s offers in favor of their sub-agent’s offers. The framework of the team is only known to the brokerage, and not to the banks, since all the employees are 10-99 employees. This is out-and-out fraud, and I can name names, even.

– Other REO agents are continuing practices that are blatant RESPA violations. In the past two months alone, I have had two separate buyers told to pay title/escrow fees in SPITE of the fact that they were forced to use the Bank’s [Seller’s] own escrow company.

The agents use the trick this way: The buyer receives the bank addendum stating that they should “check one” of two boxes: either they will use THEIR chosen escrow company and pay the title insurance and escrow fees, OR, they may choose to use the bank’s RECOMMENDED escrow company and the bank will pay an escrow fee.

Once the buyer agent sends back the form and the buyer has elected their own title company, the selling agent then says, “I already put this PENDING, and if I have to re-write this form NOW, I will have to let it go back on the market, and you will have to hope we don’t get any more offers. OR, you can just check the box that says that you are choosing OUR escrow company.” <--- Violation Number 1 Then, AFTER ALL THIS, and the Buyer has been strong-armed into going with the escrow company that the Bank/Seller wants to use, the listing agent then provides a "disclosure" stating that the escrow company is in part or wholly owned by the bank. <--- Violation Number 2 Of course, the capper is that the Buyer ends up paying all sorts of junk fees to the pseudo-escrow company before all is said and done, so that the reality of the bank "paying" those fees is mitigated, and the buyer has basically paid them anyway. - Another insidious thing that agents are doing is that there are some agents who OBVIOUSLY never intend to work a short sale listing they get. It's quite transparent that they only took the listing in order to get buyer leads as long as they can. These days, there is NO REASON not to close nearly every short sale out there. I find it a sad state of affairs that everybody--the public and real estate agents as well--have completely gone numb to doing the right thing, and to being honest and accountable.

  • Emily

    The REO system needs to be changed. Buyers agents should be able to enter their offers into a system that goes directly to the bank like short sales. I have agents in my own office that give inside information where an offer needs to be so the offer is accepted. I am ready to give up this profession as I am quickly finding out we are not on a level playing field.

    • RE-Insider

      Some agents will always find a way to manipulate the system. It will take the good agents banding together and refusing to work with the questionable ones in order to level the playing field. Continue to monitor the people that you work with and report those that don’t play fair.

  • Gary Drake

    In response to “Why Have Some Agents Gone Numb?”: As an REO listing agent in a very heavily-impacted foreclosure area, having closed hundreds of REO transactions, I have not seen ANY of the questionable practices the writer addresses.

    We all know there are unethical agents out there, as there are unethical people in every profession. I am surprised that if these issues are widespread or even happening more than on an “occaisonal” basis or even as outlying exceptions, I have not come across at least one of them at least once.

    As far as the fees for buyers in utilizing the sellers choice of services, I have consistently found the fees to be at or below those of “retail market” sales where local escrow and title companies are used. I had one exception to this and when I called it to the attention of the asset manager and portfolio manager, the vendor manager for the disposition company got involved, slapped the escrow company and is no longer using their services.

    Perhaps because of my market area or perhaps because of the banks and disposition companies I work with, but my experience does not match that of the writer and I, for one, do not agree with the writer that these issues are becoming more commonplace.

    • RE-Insider

      Comments like this are great to get. It’s good to see examples of fraud being reported and dealt with quickly. It’s agents and companies like this who should continue to give the good agents hope that they can make a difference.

  • Alan

    You should NAME NAMES… get these sideways agents into trouble, they are ruining our industry and giving legitimate agents a bad reputation.

    Too bad the DRE probably won’t listen anyways, they never do until lawsuits arise… I give it 2 years before all of these “fraud” cases create more disclosure issues in this business.

    • RE-Insider

      Transparency is never a bad thing. It’s often the gray areas in between the laws that allow for fraud.

  • Darren

    I agree with your implications of the questionable practices by the REO Brokers. I do think, in many cases though, the Real Estate Brokers are encouraged by the banks they are working for. The agents that have the REO listings are at risk of jeopardizing their relationships with the banks if they do not use the services that the banks are requesting. I think that they may be discounts passed to the banks as well if the transaction has dual agency with the REO broker. In the same sense, many of the banks also offer discounts to buyers if they use the bank (owner of the home) for the financing which is all well but what the buyer does not understand is that if they use the banks (owners) financing they will also have to use the banks (owners) appraisal company. When this happens I feel there is risk of the Appraisals coming in at purchase price when they actually may be worth less (not always). The banks have their hands in every part of the transaction which does not bode well for checks and balances and protection for the consumer. They have control of Lending, Appraisals, Escrow, Title, and Real Estate Brokers.

    • RE-Insider

      The banks certainly need to be more helpful. They haven’t stepped up and assumed the role of industry watchdog – continue to encourage them to do so and provide feedback when you see questionable behavior.

  • EK

    Yes, I have experienced ALL of these issues you’ve mentioned. What can we do? report to Respa? Most brokers would not want to get involved because of lengthy process so they would say move on. I’ve been doing short sales since 2007 and have been fair to all agents who submitted offers to my listings because I know I’d get paid. I don’t need to double- end my transactions. I can name reo agents’ names in San Diego who practice the unethical ways when it comes to reo listings, too. I believe I’m not the only one who feel frustrated with these bad reo agents. We have to put an end to this problem.

  • Geoff

    I am an agent with REO accounts. I can proudly say that this article does not represent my real estate practices. I make every effort to be honest and transparent with regard to all real estate transactions that I am a part of. I communicate with the cooperating agent and provide timely communications regarding all aspects of the transaction. I will say that I have come across many agents in my chosen career field that are less than professional and under informed at best. It is important that, agents/Realtor, are informed and practice our trade in a professional manner to protect the general public and our own livelihoods. I hope that all of the unprofessional and unethical agents are identified and forced out of this business. Additionally, I would add that some people are just looking for reasons to criticize other agents because they don’t have REO accounts or because their clients offer was not accepted. Is it possible that they did not give their client the best possible representation? or their client was not capable of presenting the best offer? Keep in mind, just because a person voices a complaint, it does not mean their complaint is valid.

  • DW

    I would forward this to CAR attorney dept. I know this activity has been going on as well. Im sick and tired of the ‘top ‘REO agents! They are ‘top’ because they are crooked and dishonest. They have tons of listings because they are tied at the hip to the bank in more ways then one. They are cheaters and liars and im my opiniopn should have their licenses revoked and be fined or given jail time.

  • ADA

    Most banks like FNMA and Freddie have Fraud emails where you can turn in agent’s participating in any activity like this. Some banks are no longer paying dual agency to a Broker in order to prevent the hiring of the buyer’s agents by the listing agent.

    If you don’t have those emails, they can be found on their websites. I do FNMA listings and if you don’t have theirs email me and I will send it to you.

    The best thing you can do is turn agents in and tell other agent’s to do the same. Remember the broker has the listing agreement with these companies not the agent with the listing (unless they are the broker) and therefore if you can show they are consistently double ending their listings the bank will fire them. I know as that is how I get my business.

    • RE-Insider

      Great points. If you do see any fraud, whether perpetrated by a borrower, a lender, or another person or institution, report it. Most banks have contact info on their website to report anything suspicious. Here are some that I found at quick glance. Check with your bank for their info.

      Fannie Mae: fraud_tips@fanniemae.com
      Freddie Mac: mortgage_fraud_reporting@freddiemac.com

  • Donna

    Well seems like the norm these days. Look at what happened to subprime loans and all that. that was greed by the big boys. look at our government nothing but greed there too. All they care about nowadays is lining their own pockets and the hell with the people they represent. so why should this be any different? I know of people representing themselves as brokers and they don’t even have a RE license! there are no morals left or honesty it seems. We need to get things change. maybe if there was a consequence to their actions? maybe that would help.

    • RE-Insider

      I can understand your frustration. But not all agents are doing these things. Continue to monitor who you work with and only deal with agents who are above board with their approach.

  • CD

    Why don’t you name names………This pratice has been going on since the beginning of this market…at least when we were dealing with a real person a broker could go with the listing agent when the offer was presented…that way the greedy were a little more under control……..I have had agents tell me they would not accept any more offers even if mine was for a higher price or all cash…..some agents act as if they were the seller.

    • RE-Insider

      The ethical dilemma is that some agents work within the system and try to do right by their clients. The other agents are constantly trying to work outside of the system and tilt the board in their favor. Let’s continue to reward the agents that do things the right way.

  • Laura

    I totally agree with the above mentioned article. Not sure which area the writer is referring to but it is certainly happening in the Bay Area and I could also give you names as well. I’m glad someone brought this to your attention, as it needs to be addressed. The banks need to be involved since it is affecting them directly, their own REO agents (as well as short sale agents) committing fraud. REO agents owe a fiduciary duty to their client, the bank/investor but their actions are not in their clients’ best interest. What can we do as real estate professionals to put a stop to it or at least minimize it for all of us to have a fair shot in this market? We need to go back and revisit Real Estate Morals & Ethics.

    • RE-Insider

      The issue of banks getting involved is a commonly raised one. Banks would be ideal partners in helping to regulate these practices. Let’s all encourage them to get involved.

  • Mitch

    Yes, everything in this post is true. thank you!

  • Sean

    Thank you for this information. I have been working with a buyer and we have written numerous offers on REO properties and either we don’t here back from the agent or we lose out. Before writing the offer they say we have the first offer in and it looks great, a week goes by and no response or I receive an e-mail wanting highest and best because we now have competing offers. I think they are holding offers. I called Fannie Mae and they have no offers for my clients. Who do we report this to and how do we stop it. You would think these people would have learned a lesson by now.

    • RE-Insider

      To report fraud to Fannie Mae go here: Fannie Mae: fraud_tips@fanniemae.com

      Banks might be the key step. Reach out to them and encourage them to stay involved in monitoring the agents that they work with.

  • HY

    I strongly believe that these greedy agents should be reported. For those of us that are trying very hard to be ethical, moral and professionals are suffering the consequences of these so called “realtors”

    • RE-Insider

      They should be reported – see my comment a few posts up that will tell you where to report. While I certainly don’t believe that almost all agents are manipulating the system, it hurts the agents who do things the right way.

  • Todd

    The trouble is, sharks rule the waters these days. It’s going to take more than one harpoon to clean up the mess. Someone has to police the industry or can you ask a crook to play fair?

    • RE-Insider

      Between the banks, the government and other agents, we have resources at our disposal to out the questionable agents. Most of these practices go unreported because people feel the way that you do. All we can do is stay diligent and keep reporting fraud when we see it.

  • Sharon

    I have in the past (long before we entered the distressed market) and continue to encounter unethical agents both REO and not REO that have been manipulating the market for years. Only accepting the offer that they write “Dual Agency” on all their listings. They’ve been around forever and I too can name names. I have always wondered if their clients are aware of their practices. All I can do is steer clear of those “Bad Apples” and continue to practice real estate with the utmost integrity. I’ve lost listing opprtunities to agents who promise the moon and knowingly can’t deliver. I go into an appointment telling the truth as I see it, and the truth is often not what the client wants to hear so they go with the less honest agent ( the one who has magical powers with buyers and all mighty marketing opportunities) even when we work for the same company and have the same opportunities and the sellers get taken for a ride, the home accrues high market time and usually costs the seller in both time and money. Again, all we can do is continue to work with integrity…you can lead the horse to water but you can’t make them drink! Be responsible for yourself, your own actions and believe that what comes around goes around. If a seller chooses to list with an unscrupulous agent because they’re told what the want to hear instead of using basic common sense and it costs them, or a buyer wants to try and manipulate the offer process by trying to make a deal with the agent and loses, well…we reap what we sow.

    • RE-Insider

      Unfortunately, this seems to be a common response. The end of your comment is especially helpful.

      Be responsible for yourself, your own actions and believe that what comes around goes around. If a seller chooses to list with an unscrupulous agent because they’re told what the want to hear instead of using basic common sense and it costs them, or a buyer wants to try and manipulate the offer process by trying to make a deal with the agent and loses, well…we reap what we sow.

      We must all continue to work diligently to clean up the system – we can do this by being ethical in our practices and trying to only work with others who do the same. And report the agents when we witness wrongdoing.

  • MK

    I really want to know how are companies that are losing the business to this illegal activity ever going to be reimbursed for the huge loss of that business? In the meantime, some banks are directing the escrow and title business to their in-house companies earning that income as well, and the escrow and title companies that are following the rules lose big time.

    • RE-Insider

      It’s an incredibly frustrating process, I know. But the only recourse we have is to continue to report fraud when we see it and choose not to do business with those people.

  • Anonymous

    I read with some interest your article on agents ‘going numb’. I also note that this kind of behavior is almost mandatory. When everyone around you; the lenders, your own broker, your elected officials, even your clergy … is as crooked as a dogs hind leg – whether you are a Realtor or not, you basically have two choices.

    1) Join the thieves and try to grab a crust for yourself once in a while, or
    2) starve.

    My primary responsibility is to provide for myself and my family. I take that responsibility seriously, and will do everything in my power to ‘double end’ a deal if I can. I will comply with the law as often as possible – and be careful not to violate the 11th commandment. (Thou shalt not get caught.)

    • RE-Insider

      This is the most common response we got. An issue of “if you can’t beat them, join them.” I can certainly understand this mentality (and I hate to sound like a broken record), but the only thing we can do is continue to report fraud when we see it. If good agents join in on the bad behavior, then there will be no separating good agents from bad.

  • Santiago

    I’ve been in the business just 5 years and was hoping the crisis would have gotten rid of those human cockroaches that feed on the vulnerable, but where there is money they invade like flies to feces. It is obvious that our industry cannot oversee itself. Violations are rampant, they are reported and I can attest to flagrant violation I reported having resulted in nothing. The interest of a desk-paying, commission splitting realtor to a broker, and a dues-paying member of the association makes for a natural conflict of interest to rid ourselves of this cancer that puts us on the same level as used car salespeople (no offense intended to them who may be insulted by being compared to us). Where is the enforcement? Which authority has the teeth to make us what we refuse to be: ethical? In fact how is it possible that in just six weeks we can go from being Joe Q. Public to handling people’s life savings and not expect a lot of trouble. We must clean up our act.