I had an agent, “Pat,” contact me this week about one of my listings. Pat’s clients were interested in the house and considering putting in an offer. Pat proceed to ask me how “creative” my clients were. Being left-handed, I’m always open to creativity, so I asked for an explanation of what they had in mind.
Pat gave me some details about how the contract would be structured and then mentioned that the buyers would be looking for my client to cut them a check outside of closing in order to cover repairs on the house. The buyers were short on cash. I told Pat that they were welcome to submit an offer and we would review it. But something just didn’t seem right about Pat’s “creative” deal. Shouldn’t everything should be handled by the closing attorneys and documented on the HUD sheet?
When I got off the phone with Pat, I called a trusted mortgage broker that I use. After explaining the situation, he confirmed that what the agent was suggesting was indeed mortgage fraud. Any payments, credits, etc. need to be called out on the HUD so that the mortgage company knows about them. Anything done outside of closing is illegal because it implies that the house is not really worth the value that the mortgage company is loaning against.
The mortgage broker suggested that Pat might not know that the deal would be illegal. I pointed out the fact that the agent had been in real estate for 15 years, so I was fairly certain that Pat did know that their suggestion was questionable, at best.
The sad part about this situation is that there is likely a way to structure a mortgage so that Pat’s clients can afford the house, legally. If we do actually receive this offer I will be going back to my trusted mortgage person to determine how the deal can be funded so that they can buy the house, and no one is committing fraud.
It’s frustrating to see that this knucklehead is willing to risk their real estate license by playing these games. And how is it ever in your client’s best interests to suggest something illegal to them?