RYB :: SoundBiteBlog.com

Purchasing a home should be one of life’s simplest and most rewarding experiences.  The process itself represents a right of passage into a world of responsibility tempered by the emotional and financial comfort of homeownership.  The place where you choose to live, after all, is much more than an investment.  Potential buyers, already pressured and rushed, can find themselves unprepared for the uncomfortable questions that often arise before closing.  Regular readers might remember a post that I contributed to this site two months ago.  I graphically recounted the personal behavior that led to my incarceration in a federal prison after many years of working in the title industry.  It’s my intention, through a series of posts, to share consumer-oriented advice that can’t be found elsewhere.  Feel free to contact me with questions via email at edr@rybconsulting.com  or to visit a title industry blog that I host.  Title-opoly deals honestly with a wide spectrum of real estate issues and many of it’s readers are consumers, government regulators, or professional educators.

You’ll find that most of my opinions are very conservative since they were shaped by unique experiences.  For example, most real estate pundits blame consumers for a startling increase in reported fraud statistics and subprime foreclosure rates.  I don’t, and point squarely at the real estate industry and more specifically at it’s self imposed and very complex culture.  Most people working in other careers simply lack the time and ability to learn enough about the system to mastermind a fraudulent deal. Real estate crime requires a great deal of planning and coordination among numerous insiders or others with knowledge and contacts; it takes a team. Consumers blindly following the recommendation of licensed professionals sometimes find their integrity or sensibilities compromised. 

Former Secretary of Housing and Urban Development, Mel Martinez, sought sweeping reform of real estate settlement practices after closing on a home in the D.C. area.  Secretary Martinez, a seasoned attorney and the nations’ top real estate regulator, found himself  both confused and concerned after spending an hour at a table with unrecognizable documents strewn in front of him.  I can’t keep that from happening to you, but I can arm you with an intimate understanding of the pitfalls of any housing transaction and their possible consequences.  I’ll describe the criteria that you need to consider when selecting a real estate agent, loan officer, or title/escrow agent.  You’ll learn enough about the proper progression of events from contract to closing to stop and ask poignant questions when something doesn’t seem right. And, if an unspeakable situation does present itself, you’ll know enough to recognize it as such and will have an exit strategy in place that protects your interests.  A community-based approach to fraud prevention presents opportunities for consumers to avoid exploitation, especially when it’s initiated by industry insiders.

An informed and concerned community of consumers is the fraudster’s worst enemy!

Posted in Guest Writers | 2 Comments »

Tags: bremerton real estate, poulsbo real estate, real estate fraud, silverdale real estate

A Position of Trust

I walked the 900 block of N. Belnord Avenue last summer.  It was my first and only time there.  Located in the abandoned core of Baltimore City, it’s both ghetto and waste land.  Most readers wouldn’t stand where I stood that morning.  I’m no longer afraid; I’ve been to hell and back.  I went to visit one of the foreclosed properties that led to my incarceration in a federal prison.  Most properties on the block have windows and doors covered by boards.  There’s graffiti on walls and artistic memorials honoring dead gang-members.  The place was a community once; a place where families thrived.  Now it’s a market-place for drug dealers.

The 900 block of N. Belnord Avenue is a place far removed from a life I once knew.  I was the owner of a title company, Liberty Title, with a house in the suburbs; another at a ski resort; another on the Chesapeake Bay.  I first learned of the investigation, my investigation, some time during the month of January, 2000.   There was an interview with an FBI agent on my car’s radio while I drove home from work.  The justice department was investigating reports of abuses in Baltimore’s real estate markets.  I didn’t know it then, but I had become the target of a major criminal probe involving federal prosecutors, a grand jury, HUD police, postal inspectors, a secret service agent, FBI agents and others.  What happened?

I once was the friend of a real estate broker who had a number of offices in and around Baltimore.  His name is unimportant; I’ll refer to him as Bill.   I did a great deal of business with Bill and many of the agents in his offices.  Bill had contrived a scheme that involved buying properties in the name of straw parties.  The straw parties were women who were paid to assume false identities and sign loan documents at closings.  Bill had enlisted the assistance of several mortgage brokers, and their processors, to fabricate credit, employment and banking histories for borrowers who didn’t exist.  Bill owned the properties that were purchased by the straw parties.  Some were bought and sold by Bill on the same day, most were not. All were sold at inflated prices substantiated by a single appraiser.  The properties were used by Bill as rental units; regular payments were made for awhile; eventually every loan was defaulted and every property foreclosed.   The company I owned did the closings.

The media recklessly portrayed property flipping as the reason for my criminal charges.  My attorney strongly advised against publicly disputing the claims.  I was, in fact, indicted for abusing the position of trust that accompanies a professional license.   The investigation revealed a number of serious problems with the business practices and the corporate culture at Liberty Title.  Most notably:

• I had abused my notary privileges.  On a number of occasions, I allowed Bill to take lender packages for signatures.  Though he was a notary; I affixed my own notary seal to the documents.  The notary practices at Liberty were sloppy overall in regards to requiring proper identification and maintaining a notary log.
• I allowed Bill, and other sellers, to pay buyers closing costs without obtaining the lender’s consent.  I did this by writing 2 checks to the seller who would sign the appropriate check and return it to me for deposit. 

These were my crimes; I will regret them for the rest of my life.

Following a presentation that I recently gave to a group of attorneys, I was approached by a member of the audience and told sarcastically: You’re no Frank Abagnale!  That’s the point!  There’s nothing exciting or glorious about my story.  Movie rights aren’t being negotiated.  My greatest sin was cowardice, not greed.  Real estate fraud is accomplished in secrecy through a series of minor actions that sometimes seem justifiable, yet always veiled by deceit.   An occasional breach of judgment gave way to a pattern of disturbing behavior on my part.   My complacency became anticipated and expected.  My actions created an environment that did nothing to deter wrong doing.  Even though I knew that it was the right thing to do; the only thing to do; I failed to confront this man and use the word “No” only because he was an important and predictable source of business.  

Lessons learned:

• Keep your private life private:  Relationship business is not about creating friendships.  A professional needs to appropriately distinguish between personal time and career activities.  The two are not the same.  By making your life an “open book”, you increase the odds that your personal qualities and vulnerabilities will be studied by those who are ruthless and pathetic.  Bill was aware of my two greatest weaknesses: Children with learning disabilities and father-son relationships.  He took advantage of both and manipulated a friendship.
• Chose your clients selectively:  In his book, “The Brand You 50”, Tom Peters said it better than I can.  He wrote:  “So choose – and reject – clients with the utmost care.  Yes, you do have the power to choose … and to reject … That is … professionally … I am those whom I serve … That is, I am professionally defined by those with whom I do business … Yes … defined …It’s as obvious as the end of your nose … when we’re talking about who your 14 year old son hangs out with.  And it should be equally obvious when it comes to your client list … I could go on … and on … I’m who I do hang with.  And who I don’t hang with.  (And I fervently believe that bigness achieved by acquiring dreary clients is a losing proposition of the first order.)”
• Say yes when the answer is yes; say no when the answer is no:  Patterns of improper behavior originate from singular, sometime innocent, acts.  In the context of a real estate transaction your actions are proper or improper.  Dispel any notion of a gray area between the polarities of right and wrong.  Your decisions as a real estate professional have lasting and serious consequences.

Take the time to anticipate the effects of your professional decisions.  There’s much more at stake than dollars and cents; it’s critical that you integrate moral and ethical principals into your decision making model.  You are unable to say that you didn’t understand, you can’t recall, you didn’t know.  The burden of accountability bears the weight of serious obligation and consequence.  Real estate fraud is not “victim-less” as so many would like to believe.  It’s easier not to think about it. 

I walked the 900 block of N. Belford Avenue knowing that I had contributed to the hopelessness and desperation of the place.  It hurt!  It hurt a lot!

Posted in Guest Writers | 12 Comments »