WHEN IT COMES TO FRAUD, WHO SHOULD YOU BE PROTECTING?

Not only would the seller be subject to fraud charges. The buyer's agent would be subject to conspiracy to commit fraud. And let's not forget the RICO laws. But that's another can of worms.

Don't ever let your customer suck you into an illegal transaction. We stand to lose a lot more. Besides that it's just plain wrong.

Wow, these are all great comments.  I think that the comments in #60 seem to be a nice breakdown of what can and can not be done.  This agent though, is likely going to end up in hiot water at some point.  I do find it amazing that "one would not consider themself an expert"! 

I am absolutely amazed that any agent would even consider committing this kind of fraud!  With all of the education available out there about short sales, everyone should know better by now.

It is absolutely amazing that an agent would even consider this... the short sale process is complicated enough, but to throw a few bribes into the mix?  Geez..

Kimmie,

That's referred to as an "escalator clause"...if you have a supervising broker who has been in the business a while, I'm sure he/she can explain it to you. My understanding is most banks do not respond favorably to offers employing this tactic.

Wow ..what people do !!! 

She needs to learn how to negotiate better.  She could probably get at least $10,000 if she played her cards right. LOL

I would have reacted the same way. It's always amazing to me how people can take things too far. Letting her seller decide, and take her along for the ride, is definitely letting it go too far...

112 comments before mine. Great conversation in the comments. But personally, I'd run from it. Any way I look at it, it's fraud. And I like my license too much to lose it.

Paula, you are absolutely right about what you stated on your comment #4 in your blog, and for someone to suggest that doing something like that is legal is unbelievable.  I hope the person who suggested that looks good in stripe, because sooner or later they will be wearing them.  Just because they have not been caught yet does not make it right.

#93 I absolutely shared that email with the Asset Manager. They rejected it! The BA didn't think I would submit it but he didn't know me. I do agree with you that there maybe a time to use that clause. And who knows what the selling bank may have done if it had been submitted correctly. Like part of the contract and with the buyers signature. 

#112 Thanks Shannon, I have heard the term before but not in the last several years.  You are right though, the Selling Bank did not like it all or find it funny like the BA did. We started out with 12 offers, by the time we got down to the last 2 the bank didn't think it was funny at all, specially when we found out the buyer didn't know about. 

Paula-Great post.  An attempt to deceive any party (including the bank) is fraud--Pure and simple.

Kimmie (#90/#118)--Escalator clauses are commonly used where I am.  In fact, our MLS has an Escalation Addendum form specifically for that type of situation.  A buyer can state on the form that they're willing to pay $xxxx more than the next highest offer up to a specified maximum amount.  This is a great way to get a higher offer for your seller in a multiple offer situation without creating a back-and-forth bidding war.  I'm not sure why a bank would have a problem with this unless it wasn't presented to them properly.  I've had short sale deals close where the winning offer used an escalation addendum.  Also, our escalation addendum states that in order to be valid, it must be accompanied by a true and complete copy of the competing offer.

If I receive multiple offers on a listing, with the seller's permission I contact the other agents and let them know that there are multiple offers on the table.  I don't disclose the other offer amounts, and I don't disclose whether or not their offer is the highest.  I just ask them if they would like to revise their offer in light of the fact that there are other competing offers.  Usually they just send over an escalation addendum identifying the buyer's maximum price and and amount they'll beat the next highest offer by (similar to how eBay works with their bidding process).

Amazing what people will try to get away with. I can't imagine an agent wouldn't know the ONLY right way to handle that situation.

Misplaced loyalty does not excuse fraud and greed.

I wouldn't risk my license either. No way, No how. I always scratch my head when I hear of things like this. I just don't get it.

Paula

Your take on this is absolutely the right one to take. Kudos to you!

I sell quite a few short sales. All short sale approvals stipulate that the seller cannot realize any proceeds from the transaction. They also stipulate that any extra money goes to the bank. The disclosure is a non issue. You can't do it. If they want cash tell them to sell furniture on craigslist. 

Paula. If it's disclosed to the short sale lender and they approve it then it's fine. Of course the chance of that happening is slim to none. However I am closing on a short sale next week with Wachovia where they are allowing the seller to walk with $5,000. Wachovia even stated this in their payoff letter. 

As agents we owe a fiduciary duty to our clients to follow their lawful instruction.   Not only is this buyer's agent interferring with the sale of this property by offering a "bribe", it is her license and probable violation of federal and state consumer and securities (banking) laws.  If my agents were confronted with such an offer by another agent, I'd want them to tell me right away so that I could make a call to the other office's designated broker and put an end to this agent's actions before someone goes to jail.