South Dakota homes

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Good morning. We noticed our in-box was filling up with fascinating (to us, at least) stories about real estate fraud. So we made an executive decision: This is Real Estate Fraud Week at L.A. Land.

First out of the box, a good one. Kate, the voice behind the quirky, Valley-based blog ‘May 5 & Everything After,’ writes about an agent who was determined to give her $40,000 cash back at closing -- even though she didn’t want it!

Read the whole thing here, it’s worth your time. Kate describes her conversation with an agent about a house in Sherman Oaks -- a house Kate feels is worth about $725,000.

‘Me: You want me to write an offer for $800k, and take back about $40k, so I am giving the seller only $760k.

Agent: Yes! Yes!

Me: But I pay 5% commission on that higher sales price?

Agent: Well... yes but you are getting cash back for your closing costs and improvements...

Me: Again, I am paying 5% commission on $800k instead of $760k, and my property tax basis will be $800k instead of $760k?

Agent: Well, the property tax is only 1.25%

Me: Every year.’

So what did Kate finally tell the agent? ‘Trust me, I know how it works: You get a bigger commission and you get to delay the inevitable price crash in your little pocket neighborhood. The sales data for the area will reflect artificially high prices so honest people with decent incomes and good credit scores who used to be able to afford the area no longer can. And what do I get? A $40k loan that I don’t want or need. As a bonus, I will not only pay interest on this wholly unnecessary $40k loan but I will pay an additional $2,000 sales commission to you and my agent up front because that $40k is being treated like purchase money. But that’s not all! No! I will also have to pay an additional $500 in property taxes every year I own the house because the records will reflect an artifically high purchase price.’

You go, Kate.
Send us your stories of fraud, shady deals and unethical behavior. E-mail story tips to lalandblog@yahoo.com
Photo Credit: May 5 & Everything After