Today, the Arizona Republic reported on a series of indictments alleging real estate fraud against five people who work in the real estate industry. These criminal charges may signal some fallout from the once high-flying real estate boom experienced in Arizona these past few years. The Arizona Republic recently reported on several fraudulent schemes which have been used to inflate real estate prices and add to profits of agents and escrow companies.
In January, the Arizona Republic reported on scams involving mortgage fraud where a prospective buyer enters into a contract for sale of property and inflates the sale price but by separate contract receives money back at close of escrow for non-property improvement purposes. The mortgage comany may not become aware of the separate cash back at close of escrow nor does the multiple listing service report the real sale price after adjusting for the returned cash. Failure to account for the real price leads to inaccurate information and an imperfect market for real estate prices in a particular neighborhood. Often the purchaser does not even pay the mortgage and the property reverts to foreclosure leaving the property and property values in disarray.
Do you believe real estate professionals who receive fees or commissions should be held accountable to victims of fraudulent real estate sales if they knowingly assist in completing these bad deals? Should real estate professionals be required to take precautions to prevent fraudulent real estate deals? Should professionals take affirmative steps to investigate a possibly fraudulent deal if it looks bad? I think so and am interested in hearing your thoughts on what obligations real estate agents and escrow officers should have in a consumer real estate transaction.
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