Best house inspection articles


Did Your Real Estate Agent and Mortgage Company Dupe You Into Committing Loan Fraud?

Have you ever wondered if your agent and loanseller is looking at losing the proceeds from
officer are doing something that could getthe sale. So, they have you sign a side
you  into  trouble?agreement. The seller supposedly will give
you a check after close for the furnace or
You  should!have  someone  replace  it  after  the close.
Buying a house is a complicated process andThis happens all the time. The agents and
many times your lack of insider knowledge canloan officer involved in the transaction
get  you  in  hot  water.would sooner cut off their right arm then
lose a commission because of a faulty
Shouldn't the agent and loan officer befurnace. Here is what could happen to you
putting  your  best  interest  first?,the buyer, when a side agreement goes wrong.
Of Course!.....but unfortunately, it does not1. The seller never gives you any money for
work out that way. The deal/transaction getsthe furnace or they give you a check that
put first.....the part where the agent andbounces.
loan officer both get paid. Once the agent
and loan officer have started working on a2. The furnace is installed after the close
transaction, they don't want anything to getby the seller's choice of contractors. Of
in the way of the commission when it closes.course they will want to get the cheapest
It may be in your best interest to get out ofcontractor they can find because it isn't
the contract and not buy that home but thetheir house anymore. The furnace get
agents and loan officers are lazy and don'tinstalled incorrectly or during installation
want to do the right thing. They want to dosomething else in your new home gets
the easy thing. In this case, the easy thingdestroyed and you have to pay for that since
is  fraudulent  and  unethical.it  is  your  house  now.
I know while you are out looking at houses3. The lender finds out about the side
you have a million things to think about. Inagreement and now calls the note due and
my experience, the inspection is somethingpayable.
that can really be confusing if you don't
know how to handle it. More importantly, youIf running the risk of depending on the
will be committing loan fraud without theseller and the agents for money isn't bad
proper  counsel.enough, think of it from the lender's side.
They are the ones lending the money for your
Usually, after you write a contract on a homenew home. They have a right to know that the
and it has been accepted, you as the buyercollateral is not what is represented in the
have a home inspection done. The inspectioncontract. Even though the inspection is not
is different than the appraisal. Thea part of the mortgage process, the lender
appraisal is done to establish the value ofdoesn't contract to lend on a house that
the home. Appraisers will inspect the homeneeds expensive repairs. Not only did you
also. The appraiser will measure rooms tooverpay but the lender get cheated too...it
verify square footage and note the conditionis  called  loan  fraud.
of the home while they are in there. If they
find any major problems that affect theJust because I mention the agents most of the
soundness of the home, they will report thattime does not mean the loan officer is off
in the appraisal. The appraisal is submittedthe hook. They are supposed to protect the
with  the other loan documents to the lender.lender from any fraud and in the case of side
agreements. What they are basically saying
Even though the inspection is not ato the agents is, "I don't want to know about
requirement for the loan, every buyer shouldwhat you are doing just get it done so we all
get an inspection. You as the buyer need tocan get paid". The loan officers are just as
know if the property is in satisfactoryguilty  as  the  agents.
condition and therefore worth what you are
going to pay for it. You also want to makeThe Maine Creditor Update which is the
sure the seller isn't hiding anything fromnewsletter for the Office of Consumer Credit
you. Buying a house and then having to spendRegulation has an article in it from its
hundreds or thousands of dollars fixingSeptember  2004  issue.
things the seller didn't want you to know
about is not the dream of home ownership mostIt states, "Buyers and sellers of residential
people  think  of.real estate will sometimes agree to "side
deals" in which money changes hands to cover
So, if the inspection report is not a part ofthe cost of needed repairs or defects
the loan process....how could you commit loandiscovered on the property. However, if
fraud?these adjustments are substantial enough to
affect the value of the residences being used
If there are problems identified from theas security for loans to the buyers, and if
inspection the buyers can either decide theythe side deals are not reflected in the HUD-1
do not want the property in that condition orclosing statement, then all parties to the
request the sellers fix the problems beforetransactions (including the settlement agents
closing. The agents must have the buyer andand the real estate agents) should carefully
seller agree in writing on any repairs insidereview their participation to determine
the contract. Unfortunately, the agents likewhether legal or ethical principles are being
to have what is called "side agreements". Aviolated.
side agreement is an agreement that is not
part of the real estate contract. TheIn any FHA-insured loan, the buyer, seller
contract should be agreed upon by all partiesand settlement agent each sign statements
and should have all information true andattesting to the accuracy of the figures
correct. With a side agreement, there isbeing used. Knowledge of a substantial side
information that is withheld from some of theagreement not reflected in the HUD-1 would
people involved in the transaction. Thealmost certainly violate these
lender who is loaning you the money to buyrepresentations. Maine law does not contain
the home and the title company who isspecific provisions prohibiting undocumented
supposed to be the gatekeeper for all theside agreements, such as the one enacted in
documents to transfer title correctly are theAlabama which states that a real estate agent
one  left  out.may lose his or her license for
"misrepresenting or failing to disclose...the
Let's say there was a problem with thetrue terms of a sale of real estate" (Ala.
furnace on the home you were under contractCode, sec. 34-27-36(a)(21). However, parties
to buy. You tell your agent you want theto Maine transactions should not assume that
furnace to be replaced because the inspectionthe absence of a state law here means that
report says it is unsafe. Your agent alreadysuch deals are permitted on mortgages headed
knows the seller does not have the money tofor the secondary market, especially when the
fix the furnace until after they get theloans will be held or guaranteed by
proceeds from selling the house. How doesgovernment  or  quasi-government  entities."
your agent know that? Agents talk to each
other all the time without you knowing it.If you are going to agree to anything you
Most agents technically work for the seller.always do it in writing in the contract.
That means they share information with theThat is what contract amendments are for.
seller's agent all the time. They workReal estate is all about the contract. You
together to get the deal done and if it iscan't un-ring a bell. Even though the only
not  in  your  best  interest, then so be it.thing the lender saw was the appraisal and it
didn't uncover a faulty furnace, the problem
The seller does not have the money to makeis now out in the open and you have to deal
the repairs before the close. The agentswith it. You are ultimately going to pay for
will have the you and the seller sign a sidethe home and keeping a level head about right
agreement  stating  either:and  wrong  is  important.
1. the seller will write you a check afterDo not let anyone talk you into signing a
the  close  for  the  repairs  orside agreement. You now know that it is not
in your best interest and it is unethical and
2. the seller will hire a contractor for thefraudulent.
repairs  after  the  close
Tips
The problem with these side agreements is
they always favor the seller and more1. Always get your inspection done early.
importantly,  they  are  loan  fraud.Make it one of the first things you do after
your contract has been accepted. The agents
For example, the inspection states theusually try to push this one until the end
furnace needs replacing. Your agent isbecause they are already afraid something
supposed to present the seller's agent with awill be wrong and they figure the farther you
contract amendment stating the seller willare down the road, the more you will agree to
have a licensed contractor install a newthings that are not in your best interest.
furnace before closing. The seller willGet  it  done  as  fast  as  you  can.
either agree to that and sign the contract
amendment so it becomes part of the contract2. Don't use the agent's inspection company
or not agree to that and you now have aor anyone they suggest. Find one on your
decision to make. Do you want to buy a houseown. If you now know that agents will use
that it supposed to be in good working orderside agreements not in your best interest,
at that price when you know now from thethen you also should know that they will use
inspection  it  isn't?inspection companies that won't deliver a
true picture of the problems with the home
But like we discussed earlier, the agentsjust  get  the  deal  done.
both know the seller does not have the money
to pay for the furnace. The agents areGood Luck in your House Hunting!
looking at losing their commissions and the



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