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Grey Area?

D

DianneDachyshyn

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We met a person who has been buying and selling Real Estate for four years. He has a close friend who is a banker. The banker gives this person names of people who need to sell their houses fast and who have mortgages that can be assumed. The banker also provides a list of people who are looking for houses and who have been pre-approved for mortgages.

The guy approaches the owner, offers to assume the mortgage and pay a small cash value ($35,000 - $40,000). He takes the house for about $100,000 under value. He then sells the house to a person from the second list at a price that is higher than what he paid but still well below market value. He walks away with a good chunk of change each time. He claims to turn 5 or 6 of these deals per month. He pays the banker a $1000 finder`s fee (the banker has his own company).

Question: Is this legal, ethical, smart, good business? Is this a conflict of interest for the banker?

He wants to know if we want to work with him finding and selling these properties. We need some advice.

Thanks,
Dianne
 
Sure smells like fraud to me based on the facts as presented, by the person you met and maybe also by the Banker (at the least he is in conflict of interest with his employer).

"People who need to sell their houses fast" is code for people in pre-foreclosure or in foreclosure. This used to be somewhat commonly handle by the banks at the branch level, which led to this sort of behaviour, so the banks long ago took away from ther branches control of the foreclosure process so they would be handled according to the foreclosure laws. Those laws are designed to protect all parties involved - the lenders and the homeowners (who is this scenario are not realizing their full equity). Some may say they are adults and should be responsible for their own decisions but my arguement is that they are being manipulated by people with more power and knowledge than they have - a version of preying on the weak.


How would helping these guys in with your values?

Would you feel better by turning them in?

I know that is what I would do, of course after first checking with my lawyer on whether I am right about this being illegal. At worst I would report the Banker to his employer.
 
The banker in my opinion is suspect. The buyer paying the banker for information is grey.
Does the banker have the permission of the sellers to pass on there names to the buyer?
Obviously offering to assist someone with a financial problem is not wrong so I would have no problem with that.
The question I would want an answer to is whether the information regarding the sellers financial situation is available to the general public through any other sources or is it private information?
If there is any other legal way to find info on pre forclosures I would not see a problem but would need to somehow find a way to distance myself from direct contact with the banker if he is not working with full knowledge of the seller.

Worth investigating farther in my opinion.
Legal is the question that would concern me.
 
QUOTE (invst4profit @ Jul 11 2008, 12:54 PM) The banker in my opinion is suspect. The buyer paying the banker for information is grey.
Does the banker have the permission of the sellers to pass on there names to the buyer?
Obviously offering to assist someone with a financial problem is not wrong so I would have no problem with that.
The question I would want an answer to is whether the information regarding the sellers financial situation is available to the general public through any other sources or is it private information?
If there is any other legal way to find info on pre forclosures I would not see a problem but would need to somehow find a way to distance myself from direct contact with the banker if he is not working with full knowledge of the seller.

Worth investigating farther in my opinion.
Legal is the question that would concern me.

To be fair to the parties involved, I don`t know and that is why we plan to find out more information. It could well be that all of this is open and clear. If the sellers and buyers know what everyone is doing and if the information is public, then I don`t have a problem with it, especially if it is genuinely helping the sellers get out difficult situations. There`s nothing new about buying and selling properties in foreclosure. I am wondering how the banker can justify earning a finder`s fee for this service. That`s the part that has us thinking. The real estate buyer said that he has an advantage in all of this because the banker is his friend. That was the other questionable part of it. We are supposed to meet him today to look at a property and we will be asking lots of questions. If all of this is legitimate, it could be a good opportunity to flip some properties. It would all have to line up, though and be legal and fair. One other person involved in this is a police officer. That`s interesting.
 
Is this not in violation fo the privacy Act in Alberta. I think the Banker better be careful who this information is released to because without consent, I would think his bank is gearing up for some large fines and disciplinary action, if discovered and reported. Further, the $10,000 is a kickback to the banker on an individual basis and not to the bank. - appears to be underhanded at this point, but you just might need more information.
 
Just because someone is a police officer does mean that they are an ethical person.

We are all governed by a set of different values, and have the ability to make decisions based on what we believe to be right and wrong.

Fact number 1.
The banker is in vilolation of his/her financial institution`s code of conduct. The banker cannot collect a `finders fee`. This is grounds for termination form the organization. This is not my opinion, thi is fact. Check with any Financial Institution`s code of conduct.

I could not dream up a more `grey` scenario if you asked me to.

I would love to see comments from Don, Russeell, Peter Kinch, or Thomas on this topic.

Best Regards,
Neil.
 
The Banker is breaking the law plain and simple. He can`t hand out names of clients that are shopping for houses and have been pre-approved nor can he hand out names of people that are in arrears on their loans.

The fact that he is also receiving a kickback is icing on the cake. He should lose his job and be tried as a criminal.

Also, don`t believe what you hear about these properties going for 100k under value left right and center... The world of foreclosures does not work like that in Alberta. Very tough to lose your house here (compared to the US or Ontario).



QUOTE (Sarnia @ Jul 11 2008, 01:57 PM) Is this not in violation fo the privacy Act in Alberta. I think the Banker better be careful who this information is released to because without consent, I would think his bank is gearing up for some large fines and disciplinary action, if discovered and reported. Further, the $10,000 is a kickback to the banker on an individual basis and not to the bank. - appears to be underhanded at this point, but you just might need more information.
 
Personally I wouldn`t deal with these people on any level.
First of all with PIPEDA (Personal Information Protection and Electronic Documents Act), there`s no way the banker should be forwarding these people`s information without their consent.
Secondly, I agree that there is no way the bank would allow the banker to do these "side deals". They are using the bank`s info for their personal gain. I also agree that they are preying on desperate people for their personal gains. These guys WILL eventually get caught and I would not want to be associated with them when it happens.
 
Thanks for all of your comments regarding this matter. You were all correct and we have quickly discovered that the man who approached us is a crook of major proportions. It now appears that he was trying to scam as many people as he could in a short amount of time so that he could skip the country. I`m not going to give any more details right now, because this is under investigation (thanks, Garth, for the sugggestion, which I followed), but I wanted to say thank you to REIN for the excellent training that we receive. As we thought this through, I kept hearing Don say, "No grey areas!" and "Don`t chase money. If you chase money, you will never have enough." I also remembered him saying, "If I ever hear that you are involved in grey areas, I will personally come and revoke your membership."

Believe me, those principles helped us to see more clearly. This story is very involved, so once it`s over, maybe I will write a success story.

Thanks again, everyone!
 
Great to hear Dianne! You sought advice, thought it through and followed your values through this all the way. And then, rather than just walk away, you took action that most would have avoided.

Be proud of what you did - and do write that Success Story so others can learn from your experience.
 
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