“The first and worst of all frauds is to cheat oneself”... Philip James Bailey
Let's just deal with this. Moral fraud might be the hidden crime that nobody knows how to address in the real estate industry.
In real estate circles legal fraud is often associated with predatory lending and the misleading tactics of banks in persuading investors and potential homeowners to purchase bad loans. Fraud is defined as an intentional deception made for personal gain or to damage another individual.
In order for an act to be considered fraud under common law there are certain criteria that must be met.
Basically, a fact is presented and then proven to be a false claim. Many people make false claims in ignorance, but the difference in a fraudulant claim is that speaker of the claim acknowledges the fact to be false and intends for the other party to see it as truth for the personal gain of the speaker. The speaker takes advantages of the others ingnorance AND reliance on the speaker for truth. In business, this is basis of illegal activity and the reason why CEO's end up in the slammer.
Basically, fraud is a lie...a stretched truth, a purposely hidden fact, a false statement, a false impression, an inaccurate claim. The lie is used to persuade someone to make a decision that will give the lier some type of advantage for personal gain.
When was the last time you stretched a truth, purposely hidden a fact, made a false statement, given a false impression, or made an inaccurate claim lately?
The public depends on professionals in the real estate industry for one word- TRUST. They trust us with their greatest investment for the safety and security of their families, their homes. Real estate professionals are not in the business of just buying and selling homes. Real estate professionals are in the TRUST business. If that was just about who could buy and sell the most homes, fraud would run rampant in this industry (OR does it?).
Realtors defend the profession against stereotypes of being "used car salesman." The reason why this stereotypes exists is because of HOW the public TRUSTS those in the profession. It has NOTHING to do with how hard Realtors work, how many hours of training they have, how hard it is for someone with no experience to do their job, how seriously they take their job, and it is not even about the product they are selling. (Even though these are typical topics listed in the Realtors defense against such a "horrible" claim.) Again, it is about TRUST.
I recently had a discussion with a Realtor about her listing. She "specializes" in short sales and has just over 20 current short sale listings. I asked her about a particular repair issue on one of her listings that was brought to my attention by an agent that was showing the property
. The issue concerned an outside balcony deck that presented a major safety hazard in selling AND showing the property. The deck was not secured to the wall and I asked the agent about their plan to address the issue. The Realtor said that she was not aware of the issue and there is no plan to fix it. I told her that if she was not aware of it (which I highly doubt), she was now, and at the very least, should be disclosed as a hazard. She said, and this is her words, "I am not an inspector, I can only disclose what I know. I am representing the seller. Besides, the new buyers can get an inspection."
Even though she thinks she is legally protected by the potential homeowner's right to have the property inspected, is she still "morally" obligated to point out the "potential" problem.
Not disclosing potential problems and hiding repairs issues might be obvious legal issues, but what about strongly suggesting a house to a client only because of it's commission, hiding a better offer because you want to double end your listing, not presenting all offers to the client, misrepresenting the listing on the MLS to other agents... the list is endless.
We have ignored the distinction between legal and moral fraud, says Francis Talyor Piggott in his book Pricniples of the Law of Torts 'I am of the opinion, said Bromwell, L.J., in Wier vs. Bell, "that to make a man liable for fraud, moral fraud must be proved against him... in truth we are discussing a legal aspect of a moral question, and, as we have seen, the common law does practically adopt the same standard of morality... to take advantage of his agents fraud is in itself a moral fraud.
He goes to say that Morality is a general term like the words "cattle" and "horses" and under this false idea of morality to a minister is one thing, a teacher another thing, to attorney another, a business man another. It is high time for earnest teaching to correct these errors in the public mind. Morality is like TRUTH. It has no varieties. It is the same thing in every place in every relation, whether it appears in the pulpit, in a business transaction, in the court of justice, in the homes, or political affairs.
... Simplifying the legal standard, it may be easily understood that the law considers questions of morality as governed by the golden rule.
The Golden rule... isn't that what it always boils down to?
instead of worrying about what is legal as you build your real estate business, ask yourself, "Is this morally right?" Chances are, if you think it is morally wrong, it is likely legally wrong as well.
"The first and worst of all frauds is to cheat oneself."... Philip James Bailey
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