LESSON 8: OTHER REAL ESTATE MATTERS Flashcards
What is mortgage fraud related to flipping?
Flipping involves purchasing a property and reselling it at an inflated value with false appraisals, often through fraudulent loan practices. For example, buying a property for $400,000 and reselling it at $600,000 with a phony appraisal, leading to a foreclosure loss for the lender.
What makes buyer rebates illegal?
Buyer rebates are illegal if money is returned to the buyer, either at or after closing, without the knowledge of the lender. Examples include funds coming from the seller, agents, or third parties that aren’t disclosed in the contract or on the Closing Disclosure statement.
Who can be involved in mortgage fraud?
Nearly anyone in a home buying transaction could be involved: the seller, the buyer, agents, mortgage brokers, appraisers, or title companies. The lender is typically the victim.
What is buyer fraud in mortgage transactions?
Buyer fraud occurs when buyers provide false information on loan applications, such as overstating income or job history, which can lead to loan approval and, ultimately, foreclosure.
What are some red flags for mortgage fraud?
Red flags include inflated prices or appraisals, false financial statements, future improvement contracts, high broker fees, no title policy fee, unfamiliar title companies, or last-minute contract amendments.
How can mortgage fraud be managed?
Risk management includes documenting everything, disclosing all information to the lender, and ensuring accuracy on the Closing Disclosure statement. If illegal activity is suspected, withdraw from the transaction and advise the seller to seek legal counsel.
How much is lost due to mortgage fraud each year?
Mortgage fraud costs over $10 billion annually. States like New York, Illinois, California, and Florida experience the highest amounts of mortgage fraud.
What are the main types of mortgage fraud?
The two main types are fraud for profit (e.g., involving corrupt insiders) and fraud for property (e.g., borrowers inflating income or assets).
What is occupancy fraud?
Occupancy fraud occurs when a borrower falsely claims a property will be a primary or secondary home, when it is actually an investment property, in order to get better loan terms.
What is appraisal fraud?
Appraisal fraud happens when an appraiser intentionally inflates or understates the value of a property. Overstating the value allows borrowers to get more money, while understating it may lower the amount owed on a loan.
What is income fraud in mortgage applications?
Income fraud involves overstating one’s income, often by forging documents like W-2 forms or bank statements, to secure a loan they wouldn’t qualify for.
What is equity skimming?
Equity skimming is a fraud for profit scheme where an appraiser inflates the home price, and a straw buyer secures a loan under false pretenses, with the fraudsters skimming rent from the property before it goes into foreclosure.
How is identity theft related to mortgage fraud?
Identity theft in mortgage fraud occurs when fraud organizers steal someone’s identity to secure a loan, often with no intention of paying it back.
What are the different contracts in a real estate transaction regarding broker fees?
Four contracts are involved: the listing agreement (between seller and broker), buyer’s representation agreement (between buyer and broker), sales contract (between buyer and seller), and broker agreements (written or through MLS between brokers).
What happens with broker fees in a listing agreement?
The listing broker agrees to pay the other broker a portion of the sales price when the listing broker’s fee is received, which is typically split from the seller’s commission.
How are buyer broker fees typically handled?
In a buyer’s representation agreement, the buyer typically pays a commission, but the selling broker tries to collect it from the seller first. If not, the buyer is responsible for the fee.
Who does the FHA protect against discrimination?
The FHA protects individuals against housing discrimination, including families with children, disabled individuals, and those facing discrimination based on race, color, religion, sex, familial status, or national origin.
What are the rights of people with disabilities in federally assisted housing?
People with disabilities cannot be excluded from federally assisted housing due to their disability, and local governments cannot use zoning to block housing for people with disabilities.
What types of families with children are protected under the FHA?
The FHA protects families with children regardless of whether the children live with biological parents or other legal guardians. The marital status of adults in the family is not relevant under the FHA’s familial status protection.
What exemptions does the FHA allow regarding familial status discrimination for senior housing?
The FHA allows exemptions for senior housing to rent apartments to seniors, enabling landlords to restrict occupancy to those above a certain age.
What must a senior housing facility do to qualify for the “55 or older” housing exemption?
The facility must ensure at least 80% of units have one occupant 55 or older, publish policies to operate as “55 or older” housing, and comply with HUD’s age verification rules.
Does the “housing for older persons” exemption protect senior housing facilities from discrimination based on race, color, religion, sex, disability, or national origin?
No, it does not protect from discrimination based on race, color, religion, sex, disability, or national origin.
What types of facilities are eligible for the “housing for older persons” exemption?
Facilities under state or federal programs assisting elderly persons, those for persons 62 years of age or older, or those for persons 55 or older.
In George v. Bolen, what issue was addressed by the Kansas Court of Appeals?
The case addressed breach of fiduciary duty in an implied agency situation.
What did the Kansas Court of Appeals conclude in the George v. Bolen case regarding the agency relationship?
The court found an implied agency relationship existed, and the firm owed fiduciary duties to George, leading to a breach when the property was purchased by another firm.
What was the outcome of the jury’s verdict in the George v. Bolen case?
George received $180,000 in compensatory damages and $184,647 in punitive damages, though the punitive damages were later reversed.
What did the Kansas Court of Appeals rule regarding the fiduciary duties in the George v. Bolen case?
The court confirmed that the firm owed fiduciary duties to George and that the purchase of the property by M & S breached these duties.
In Smith v. Sullivan, what did the Supreme Court of Mississippi say about implied agency?
The court found that an expired agency contract could be extended by the broker’s actions and the principal’s acquiescence, establishing implied agency.
What did the Supreme Court of Texas rule in Cameron v. Terrell & Garrett regarding MLS error?
The court ruled that the listing agent was liable under the Texas Deceptive Trade Practices Act (DPTA) due to the MLS listing inaccurately stating the house’s square footage.
What did the court find in Cameron v. Terrell & Garrett about the MLS error and DPTA?
The court determined the buyers were eligible for a claim under DPTA, as the MLS error formed the basis of their complaint, entitling them to treble damages.
What must a person do to be eligible under the DPTA (Texas Deceptive Trade Practices Act)?
The person must qualify as a consumer who seeks or acquires goods or services by purchase or lease, and the goods or services must form the basis of the complaint.
