Ethics and Deceit..........Can anyone confirm???

Real Estate Agent with Century 21 307024

I'm involved in a transaction currently in the state of GA. Binding agreeement was Jan 8th.......due diligence done on Jan 20th. One of the special stips of the contract is that the loan had to clear underwriting, which it did before the end of due diligence as they could not give committment without underwriting approval. Another stip is it has to appraise at purchase price or higher. HOWEVER, in the process the loan broker changed companies and took the loan with him! We're way past due diligence and the terms of the loan have now changed with the new contract calls for 100% conventional loan, now they're doing a 97% FHA and want to utilize NEHEMIAH program. I'm sure you all know that means that we now have to appraise at 3% higher than purchase price for seller to contribute to the program. BUT, I'm not amending the sales price until the appraisal comes back because that would give the buyer the OUT of the contract if it didn't appraise. Of course if it doesnt appraise so that they can contribute they can't buy the house but at least my seller will get the earnest money which is really no consolation after a month off the market in this slow market.

Now that I've run around robin hoods barn to make my point I have two questions..........

1. Is it not unethical and deceitful what the broker did by moving the loan? Can I report him to the division of banking and finance of our state?

2. If it doesn't appraise to allow for NEHEMIAH contribution, is it illegal for the sellers to actually contribute and then ask the buyers to repay them in payments secured by a lien on the house since this wasnt actually the original deal on the contract and we're out of due diligence? This would allow them to avoid 'suit to perform' because I want to make them throw the loan back to the original lender so this all goes away......

Any insight or advice would be greatly appreciated. I cannot be objective cause I'm so angry and fighting for my seller and may not be thinking clearly.


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Kelle Sparta
Sparta Success Systems - Somerville, MA
Real Estate Trainer and Coach

I'm not familiar with the Ethics statues in your state per se, so I can't help you on the first one, but I can help on the second. 

Here it is stated very simply.  If you do ANYTHING that is not disclosed to the lender (making a side agreement to repay the downpayment) it is not only illegal, it's fraud - punishable by a $10,000 fine and up to 10 years in prison.  Now here's the rub.  I doubt that the lender would go for it.  They are already financing 100% of the property value.  Where is the equity to put up against more?  Moreover, your sellers shouldn't go for it because they would be second on the note and there's no equity to cover their lien - so therefore the lien is useless.

The fact that they've changed the type of loan has put them out of contract and their deposit is forfeit if you don't close.  It's on their heads to figure out how to make it happen.  Work with them, but don't sacrifice your seller to do it.  I'd remind you that the mortgage officer has a commission on the line - the front end is almost certainly 1% and he could have as much as 3% on the back end (there could be more, but with this type of loan, I doubt it).  He screwed it up, let him fix it.

Feb 06, 2008 12:38 AM #1
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Tina Thimlar

Southeast Georgia Real Estate
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