Don’t Be A Party To Mortgage Fraud!

[Author – Tim ODwyer]

Last week I received this email:

“Tim,

I was wondering if you could help me with a strange clause. A woman wants to purchase a property for $500,000. She wants to get extra money from the banks to cover deposit, so this is what she proposes:

Contract Price: $670,000
30% deposit (deposit is not physically paid, but sellers acknowledge that the deposit has been)

Then at settlement, she pays the $500,000.

This means that the property appears to have sold for $170,000 more.

My question is whether this is legal as it seems to be misrepresenting the true contract price?

Regards,
Damien“

With no questions asked, my reply was short and sweet:

“Mate, people have gone to jail for this sort of fraudulent conduct.”

I then referred Damien to these Blog posts:

Tame Lawyers Help Real Estate Fraudsters
Beware Of Property Fraudsters
Mortgage Fraud

I’ve since shared this exchange with some legal colleagues and my (few) friends in real estate. One Queensland solicitor replied:

“I note the question was ‘Is this legal?’  Good grief! Surely you don’t need a lawyer to tell you that lying to someone (the bank) is not right!

I wish I had a dollar for every time this idea has been put to me.“

Another asked:

“Are you going to warn consumers about this? I’ve had similar queries.”

A solicitor mate from South Australia sent a report on a crooked conveyancer who had pleaded guilty to four similar counts of “jacking up”:

“The Institute of Conveyancers suggested that he should have his registration removed and be prohibited from working in conveyancing.  The licensing authority, the Office of Business and Consumer Affairs, made the same submission.  Regrettably, the Court accepted the submissions of this crook’s solicitor (who has since himself been struck off the Roll of Legal Practitioners). He was suspended the registration for 3 years but no orders were made barring him from working in conveyancing.  Of course, he did exactly that during his suspension and, 3 down the track, he is now re-registered and practising again.”

One agent remarked frankly:

“I can’t believe that someone would even ask that question!!!!!!!!!!”  

Solicitors and agents alike particularly asked about Damien (who later appeared from my “googling” of his full name to be a real estate agent):

“Who’s is this? Surely not a solicitor or agent?”

Another solicitor remarked:

“Are you going to warn consumers about this? I’ve had similar queries.”

The warnings from the posts I sent Damien should first of all be obvious for real estate agents, finance brokers and for every solicitor (or conveyancer) corruptly tempted by “an important source of work to his practice”, to use the words of the jailed solicitor’s barrister. He had cutely suggested to the Judge his client’s main failing was that he “couldn’t say no to an important client.”

Property buyers should always be wary of sellers’ agents keen to help with your finance and conveyancing. Sellers on the other hand should ensure that your agents focus on selling your property rather than organising buyers’ financial and conveyancing services. Consumers must be aware that, even in the straightest deals, agents always expect bonus benefits to follow their friendly referrals.

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