Undercover Reporter Finds Rampant Fraud In UK
Many readers sent in this BBC report on fraud in the real estate business. “An undercover investigation reveals the secret world of estate agents’ dirty tricks. My boss congratulates me on getting an offer on a flat that has been overvalued by £60,000. The newly-wed young couple viewing the property are stretched to their financial limit. But my manager is happy.”
“He takes me aside and explains how to convince a surveyor that the flat in London’s fashionable Notting Hill is worth more than it is. He calls it ’slightly simmering,’ I call it cooking the books. The scenario is not uncommon, in fact the manager himself boasts: ‘This kind of s*** happens all the time, that’s why we estate agents are here.’”
“Under-performers are heckled and those who have done the most deals are applauded and given champagne and £50. Young agents in Foxtons exchange high-fives as they swap tales of gazumping and over-valuing. But I can’t stop thinking back to the hard-working young family who dream of getting on the property ladder and have wasted their money unnecessarily.”
“According to the Sunday Times Rich List, Jon Hunt is worth £345m. I soon discovered his mortgage brokers work closely with Foxtons’ agents. They openly discuss potential buyers’ budgets so they can squeeze as much money out of them as possible. In another Foxtons office, lettings staff jump up and down in delight after they successfully fake a signature on an absent landlord’s paperwork.”
“Faking documents is something of a habit in the St John’s Wood office, where Emma Clarke worked undercover in the lettings department. I was shocked when she played me her secret footage which showed staff cutting, pasting and gluing signatures onto contracts. They call it ‘chop chop.’”
“When we embarked upon the investigation, I would never have suspected that an estate agent would go to such lengths to make a sale. There are more than 12,000 registered estate agencies in the UK, and not all of them are as murky as the ones I came across. But during my eight-month investigation, I discovered a litany of dishonesty, deception, deceit and outright criminality.”
“The industry desperately needs better regulation and perhaps, like in the United States, estate agents should be required to have a qualification other than a sharp suit.”
“The industry desperately needs better regulation and perhaps, like in the United States, estate agents should be required to have a qualification other than a sharp suit.”
Uhhhhhhhhhhhhh…….. really? We are the standard for professionalism in real estate?
That’s scary.
I have posted on very similar actions by mortgage firms here in the US, but no major media have taken the time to investigate. I can’t say I have seen reports of realtors being involved; just loan outfits, bullied appraisers and a few bad apple appraisers. Just like with the S&L fraud, most won’t come to light until the tide goes out. Stories like this show how arbitrary the price increases have really been.
Major media won’t investigate. Too many advertising dollars at stake, and too few readers who are interested in the truth.
Upton Sinclair’s book, “The Jungle” comes to mind.
you mean “don’t want to know the truth”
no, you mean “can’t handle the truth”
Here is the link to the segment if anyone wants to watch it. It was on the BBC.
Click Here
Yeah, here in the U.S. we also require botox injections, DaVinci veneers on the teeth, fake boobs and liposuction. Realtors™ in the US also need to study the “new RE math” whereby 2+2=5. Plus a full command of RE euphemisms, such as: “it’s a win/win”, “RE never goes down”, “it’s not a crash, it’s a buying opportunity”. Etc.
Yep, we’re way more advanced than them sharp-suited limeys.
Have you seen some of the suits, though?
From now on, we should refer to Real Estate agents simply as ‘The Suits’.
New way to bet on real estate
I saw this as well. I worked as a commodities broker in the past. Derivative markets are highly leveraged and move quickly. I can see the purpose for intituttions who have over-exposed themselves but I worry about “Joe/Jane Six-Pack” trading futures contracts on their housing market. The last thing a strapped American consumer needs is a margin call or to lose a bunch of money when their options expire worthless. Derivatives are dangerous in the hands of novices. It will be intersting to see how this works and if these markets can affect actual sale prices. If anyone knows more about these new futures markets, please add to the discussion as I am curious.
Most people are better off paying their mortgage early or saving up a bigger downpayment while they rent.
Coming across the Atlantic to a bubble near you soon!
EA’s in UK make 1% ? under 3% in the whole transaction- take note
In the UK, it is unusual for buyers to have an agent working for them. Buyers generally directly contact the main agents for the area they are looking in, and the seller pays the agent. Around 1.5% to 2.5% is a typical fee range, although I negotiated a structured deal which meant I paid just 1%, when selling my last house in the UK. Agents cannot charge anywhere near the 5% or 6% rate typical ‘transaction cost’ in the US.
By the way, ‘gazumping’ refers to a seller abandoning a buyer at a late stage in the sale process but before contracts are exchanged, in favor of someone who jumps in with a higher offer (it’s not illegal, although it’s considered unfair).
at housepricecrashuk it looks like after 20 months UK is only off 5-8%
where’s the crash
and according to some realtor statistics, price have not declined at all. I think there was a minor crash for expensive, speculative properties in London and some other areas, that’s all (check with Tony Liar about that). Very similar to Netherlands up to now.
in the Netherlands a little above 1% is standard now (used to be around 2% in the good days); and for very expensive properties you can probably negotiate an even lower fee. I can assure you the agents make plenty of money this way, although they have to work a bit harder for it now that inventory and number of brokers are surging. I know one RE broker who made enough to retire in just 4 years, and I’m not even in the wealthy part of the country.
Of course, there are plenty of ways the Suits can improve their paycheck by all kinds of under-the-table deals, especially with expensive property. I heard about several deals where RE brokers purchased homes way below market price (they officially are not allowed to) by buying on title of their wife, uncle etc. and than quickly selling to another buyer and pocket the difference (sometimes more than 100.000 euro in one day).
I guess the number hitting and false reporting by sleazebag appraisers aka “surveyor’s” is a universal practice.
Like the regulators could give a crap…all they want to do is keep the Titantic afloat and appease the dirtbag mortgage and real estate lobby.
All will pay.
I am sure we are not going to be outdone in this regard.
Those sleezy agents, appraisers, brokers should be treated the same as 7/11 robbers and crack dealers.
Sadly, look at the Ameriquest ’settlement’. I didn’t hear of even one person being charged with so much as a misdimeanor.
Too many people have too much at stake financially to really prosecute. I mean, the people who could change the system own houses and so have a vested interest in seeing the fraud continue.
I think the problem is(similar with FNM and etc.) that the fraud is so pervasive it’s ridiculous to send people to jail because the consequences of bursting the market in that way they feel outweighs the punishment of these people.
and the guy in charge was promoted to ambassador in the very bubbly Netherlands. Let’s hope he gets stuck here when the bubble explodes.
Yes, they shoud get some jail time for sure. We are tired of these white collar criminals.
You know the saying ” Use a gun to steal, go to jail. Use your head to steal and go to the country club.”
And the poor people who trust their realtor , mortgage broker,appraiser and Country to regulate .
Last night on the radio I heard advertisement from the district attorney
for Tulare County Ca. Telling people they have developed a fraud unit for Real estate fraud and that anyone whom feels they have been defrauded to contact the district attorney’s Real estate fraud unit….Very intersting.
do you think that would help?
in my country many cases have been reported. Some have been taken to court. NO ONE has been really convicted, although the evidence in most cases was very clear; judges are totally NOT interested in this kind of crime and protect their own kind.
This whole housing boom is so EVIL…Thats right e-v-i-l.
Yes Wizard, you are correct.
Evil is it.
Putting a roof over your head is a basic tenant of life, more so than anything else except eating.
Bottom line is the standard of living in this country has been debased to the extreme because it now costs so much to secure that basic tentant
Lot’s of misery now with millions of FB’s, due to the corruptness and perversity of the money-changers.
Here is the link to the segment from the BBC
The secret agent
This bubble should have burst in late 2004 or sometime in 2005, however, its shit like this that has kept the scheme going for far too long. I know this happens in the US. Everyone on this board knows it happens in the US. Unfortunately, the main stream media is asleep at the wheel. Our governement (rep &dem) have no clue, or they are bought and paid for and look the other way. This is why the bubble has me coming here everyday, this is why in late 2004 I was looking for information on why this scheme was continuing; because everyone, except a few guys like Ben Jones, were asleep at the wheel!
Read about Homeland Security Employee Nabbed at Closing Table.
“Brinson Allen, a borrower allegedly using false qualifying information, including an income up to $62,000 a month, to purchase a property located at 320 Longvue Court, Duluth, GA 30097 for $3.3 million, attended the closing of multimillion dollar mortgage loans for this purchase yesterday. Although Allen intended to walk away from this loan closing with approximately $800,000 in cash, he departed in FBI handcuffs.”
If you can’t trust homeland security, who can you trust?
In a Democracy you get what most of you deserve. If the goverment is on the take it’s only because the majority of the voters are corrupt enough to allow it. Just look at what happened when FDR stole gold from the public in the US. The voters just sat around with stupid looks on their faces and voted for the thief again.
The mob votes to have government do what they’re too afraid to do themselves.
Ah, You know about the gold confiscation by FDR… Good for you! Most Americans do not know about this… Yes, they were idiots for allowing him to strong-arm them out of constitutional money.
Stephanie
http://www.deafdrummer.org
“The industry desperately needs better regulation and perhaps, like in the United States, estate agents should be required to have a qualification other than a sharp suit.”
- RealtWhore license?
- NAR membership card?
Realtors need a standard of ethics. Here’s a few regulations I’d propose:
1. Using “affordable” to describe a 600K home. If the mortgage payment, assuming typical 30 year fixed rate, 20% down payment, is more than 1/3 of the median monthly income for that zip, you cannot advertise a home as “affordable”
2. “Investment Property” Using same criteria as above, if rent does not exceed mortgage payment, this phrase would be illegal in home ads.
Right On Rallymonkey!
Here are my regs …
3. Structure descriptions must be accurate. Condo is an apartment you purchase, Townhome is a dwelling with common walls between multiple residences, Duplex, Triplex, and so on, are variants of Townhome or Condo, Single Family Residence is not a Condo, nor Townhome, it is not attached nor shares living nor garage walls with a seperately titled property.
4. Zero Lot Line properties must include the descriptive acronym, ZLL. For example, “Charming 1 bedroom 1 bath ZLL garage in one of Compton’s finest neighborhoods offerred to the discerning buyer for the discounted price of $500,000. Won’t last, hurry before you are priced out of this bargain area.FInancing available, FICO
Nothing new… this is just a shade of other tricks used.
Take for example recent Australian laws to stamp out fake or dummy bidding on real estate…After the laws were implosed phantom buyers disappeared from the buyers market. Courts imposed 25,000 fines for each offense. this hit the realtors right in the pocket book.
Auctioneers under the hammer
http://www.abc.net.au/worldtoday/stories/s323652.htm
Remember the escalation clauses used in almost every contract way back in 2005? I wonder how many agents made buyers overpay by falsely claiming other offers $100k above asking had come in? Tell me if I’m wrong, but I don’t think listing agents were proving to buyers that other had in fact come in. Buyers had to rely on the listing agents word “if they wanted the house.” What a shame.
I had this happen way back in 1999 in North Carolina. We looked at a house and there were already “4 other offers” on the house - “better decide fast”. We made an offer slightly less than asking nonetheless and “magically” ours was accepted immediately. I was pretty niave back then, but now that I’m a cranky old codger I’ll be asking for proof the next time some slick talking realtor tries to hoodwink me.
New Way to Bet on Real Estate
New way to bet on real estate
New financial instruments are being launched to let you wager on the direction of home prices in major cities.
By Les Christie, CNNMoney.com staff writer
March 22, 2006: 12:00 PM EST
NEW YORK (CNNMoney.com) - There’s finally going to be a viable way to cash in on the housing price boom — or to guard against its decline — without going through the messy business of actually buying and selling properties.
On Tuesday, the Chicago Mercantile Exchange and Tradition Financial Services, together with Fiserv Case Shiller Weiss and Standard & Poor’s, announced the launch of S&P CME Housing Futures and Options.
These derivatives will enable investors to take a position on the direction of home prices either for the nation as a whole or for 10 major cities to start, including New York, Los Angeles and Chicago.
Of the three major asset classes, the bond, the stock and the housing markets, only the housing market, which represents some $20 trillion in assets, cannot be speculated on easily, said Robert Shiller, the Yale economist and author of “Irrational Exuberance,” the 2000 book that foresaw the bursting of the tech-stock bubble.
“How can it be that we have no way of trading it?” said Shiller.
With his partner, Karl Case, Shiller started developing the Case Shiller Home Price Indexes about 20 years ago. The pair claim it is now considered the most accurate measure of the residential real estate markets. The S&P CME Housing Futures and Options will be based on the data accumulated in these indexes, so accuracy is crucial for building trust among potential investors.
Who will use them?
Shiller sees these derivatives mostly as tools that large, institutional investors can use to reduce risks. Mortgage bankers, for example, could hedge against falling real estate markets that would increase their exposure to delinquencies and foreclosures.
But John Labuszewski, of the CME, says, “Although the main customers will be institutional, there is a surprising amount of interest on the part of retail consumers.”
So how would an ordinary consumer employ these tools?
Shiller says there are several ways including:
By direct investment: Investors could buy futures in housing prices and profit if home prices continue to increase (if the investor goes long) or if they fall (if the investor goes short).
By locking in home equity: Home owners intending to sell within a year or two can go short in home price futures. If the price of their house drops, that can recapture the loss on the investment.
Such hedging strategies should get easier, according to David Stiff, economist at Fiserv Case Shiller Weiss. He thinks home owners will eventually be able to buy home equity insurance that will protect against loss from falling home prices. Homeowners already have fire or storm insurance to protect them against losses, why not protection against losses from home price decreases?
Linking the price of a home to the index: A seller could peg the price of the home to the index by making it a multiple of the index for the city. A nice house in a prime neighborhood in Chicago, for example, might be listed at a constant 1,000 times the Chicago index value of 500, rather than simply at $500,000. Then as the index goes up and down, the home price changes as well. Both buyers and sellers would have confidence that the selling price was fair at the time of purchase.
It’s perhaps ironic that one of the moving forces behind this product launch is Shiller, who has warned that housing markets are probably peaking and primed to fall. Might not these derivatives make the housing markets volatile?
“Real estate already is volatile and risky – like the stock market,” says Shiller. “And the risk is increasing. The impression that real estate market only goes up is wrong. We need hedging for both sides.”
TFS says it will start trading S&P CME Housing Futures and Options in April.
to John Law,
I clicked on your URL and then clicked on the listing of overvalued areas. Gee, that’s the first honest data concerning Salinas that I came across…84% overvalued. After living here for a year and a half I agree with that figure whole heartedly….thanks for making my day!
I vaguely remember an article a few years back in WSJ about the bubble in the UK. It mentioned a “home” underground which you entered through a trapdoor. It was front page, center column. Now, they have an inverted yield curve.