Problem

Unethical real estate practice


Experimental visualization of narrower problems
Other Names:
Real estate fraud
Housing fraud
Mortgage fraud
Land fraud
Real estate corruption
Malpractice in the property industry
Professional misconduct by property valuers
Embezzlement by land brokers
Criminal involvement in the property sector
Rigged property auctions
Bribery of real estate agents
Unfair property dealings
Temptations of real estate practice
Nature:
There are four principle ways in which agents cheat customers: failing to tell sellers of higher bids when lower bids provide the agents with more commission through mortgage and insurance needs; switching second bidders to other properties when buyers are in short supply; selling unnecessary insurance or the wrong types of mortgages because they offer better commissions; and leaking to potential buyers the lower price to which sellers are ready to agree. Forms of fraud include systematic frauds, valuation abuses and major frauds in which the perpetrators disappear. Solicitors play a key role in the latter form by ensuring that multiple mortgages are taken out in fictitious names, or on fictitious properties. In cases involving systematic status abuse, the fraudster purchases a number of properties through nominees (possibly employees), rents them, and may also claim tax relief or local authority grants. In valuation frauds professionals sell properties to each other and use grossly inflated values to obtain mortgages. There may be some complicity on the part of lenders, whether banks or building societies, who relax their vetting procedures, especially in competitive lending situations.
Incidence:
Following the property boom in the 1980s in the UK, mortgage fraud had risen to record levels. In 1991 over 1,000 cases were being investigated involving £500 million losses for banks and building societies. A 1993 UK study estimated mortgage fraud accounted for over £1 billion in damage over the previous few years. The most alarming growth in fraud was reportedly amongst professionals, usually estate agents, solicitors and even building society managers colluding together.
Problem Type:
D: Detailed problems
Date of last update
14.05.2000 – 00:00 CEST