It's the Rule - August 2006

by: President & CEO Terese (Terry) Penza, CAE, RCE, e-Pro

Inflated sale price – can it be justified?
Many agents seem to not understand the severity of adding on more money to the sale of a property than the list price. Granted, there are times when additional funds are legitimate and fully reported on the HUD 1 form, however, the bulk of the instances today are not legit.

The Illinois Association of REALTORS® put out on excellent article on this topic. “Mortgage fraud can occur in a number of ways. Some of these are loan application fraud, exaggerated appraisals, false income reports, and inflating purchase prices. It is the latter of these that a real estate broker or salesperson might most commonly see in their brokerage business.”
If that does not get your attention then how about this: If you lie on the HUD 1 form you can be sent to Federal prison!
If you get a call from a lender, appraiser, or attorney asking you to go into the MLS computer and raise the price of a property that has just been sold then a red flag should go up!

Of course anyone committing fraud and misrepresentation is alarming but what is even scarier is that illegal transaction compounds the problem by having comps at unrealistic prices and makes the entire market a fake. Also, the real estate taxes are going to be based on that fictitious price! The entire economy could collapse or at the very least make the savings and loan debacle of the 1970’s look like a picnic when the secondary market finds that it is holding loans that or more than the property is worth.