For those of you who are just joining us and missed yesterday’s Daily Dose the subject was “fraud” and I am about to point out just how fraudulent these real estate transactions can be, so stick around if you will and maybe learn something.
What exactly is fraud...
First though before we have you start putting your signature on all these papers let’s first clarify what exactly constitutes “fraud” so there will be no misunderstanding as to the meaning. Fraud is the “deceit or trickery: specifically; intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right.” That’s right from the Merriam & Webster’s dictionary. It also lists as part of the definition, “ an act of deceiving or misrepresenting”. So, this pretty clear but I like this one best, and it is for English language learners also from M&W, “the crime of using dishonest methods to take something of value from another person”.
Just a quick side note here; I am guessing that “English language learners” would be people who are learning English as a second or third language possible even further down in the order. I find it very interesting that M&W doesn’t mention in the primary definition for us English as a first language users that fraud is crime.
Why do you think that is? That also begs the question of why point it out to the people who are just learning English? Could it be that if you are an English first language person that you don’t need to associate fraud with being a crime since there is so much damn fraud taking place here in the Western World that it is expected to encounter fraud and not consider it a crime?
Another take on might be maybe we don’t want foreigners honing in on just how lucrative fraud can be and have those folks competing for what is at stake in the arena of fraud? Here is a thought; it might even be considered fraud on the part of M&W for leaving the part about it being a crime out of the definition.
Seems like they really didn’t want the English first folks knowing that fraud is a crime, otherwise it would have been in the definition. I guess if we really want the true definition and are using M&W as a source we need to always go way down to the English language learner definitions.
Okay, so we established fraud is a crime and it involves deceiving others to get something of value from them. Get your pen ready.
Where do I sign...
We have a pretty crowed office and a small room so not all the people who are here for the closing can all be in the same physical space but just so you know. Mr. & Mrs. Home Seller are in another office just down the hall signing their portion of the papers and we have notary who will coming back and forth between them and you to notarize signatures so we can make sure all the forms are properly signed and nothing goes wrong with the closing.
Your bank that is serving as your lender isn’t here but we have been in contact with them and they are standing by to transfer the money to the seller once we have all the paper work finalized. These other folks are with title company and they prepared all the documents and did all the title searches to make sure that your new home doesn’t have any skeletons in the closet with regard to liens and back taxes and such.
The first papers you end up signing are the papers that really don’t have a lot of weight in the transaction and are not very lengthy in wording; this is done so they can get you loosened up with the pen and signing forms. So, yes, you can read them if you want and ask questions but you didn’t hire an attorney to come look things over for you so they will just tell you, “these are just the standard forms for these transaction” , there really isn’t anything special about them. When you look at your real estate agent, he gives you the approving nod of the head and the thumbs up and says go ahead and sign.
Deed restrictions...
Oh yea, that form called “deed restriction” that just tells you that the HOA for your subdivision takes care of the local park and swimming pool and that you will have to pay an annual home owners fee so that they can keep the place mowed and the water in the pool clean. Sign right here….. That is the first of many frauds that will take place.
The HOA can end up stealing your house from you but they didn’t tell you that, just fail to pay the home owners fees and they will have the sheriff selling your house on the courthouse steps some first Tuesday of a month.
They may have given you a copy of the deed restrictions but there just “standard things that all subdivisions” have, your real estate agent told you there all the same. That HOA will wear your ass out if you as much as have some grass growing in the cracks of the sidewalks in front of your house. These HOA love the fact that they can send you registered letters via the USPO and bill you around $25 to $30 a pop for them, since you are in “violation” of the deed restrictions. Once you get on their bad side, you become a target of theirs and an extra revenue stream for them.
Title insurance, fee simple... huh?
Another form that you sign early in the process is the notice of title insurance, that just tells you what insurance carrier is providing the insurance against any defects in the title to the property should you ever encounter any problems in the future. It is a good thing to have titled insurance and the lender isn’t going to fund your loan without it. One thing I might point out about the title insurance policy is that if you read it, you will probably see that the title policy lists the type of title as “fee simple” but the title you will be provide with won’t be a fee simple title, so there is a second fraud in this transaction and we only have signed two documents so far. That’s a great average wouldn’t you say?
You will have signed some other forms in the mean time and most of those have some errors and omissions in them as well but now it is time to get down to the nuts and bolts of the transaction.
The lawyers have prepared these solely for your transaction and you had to pay a pretty tidy sum of money for them to do it and so there is really no need to understand them; so you just give it a cursory once over look just to make sure that your names are spelled correctly and that the amounts of the sale price and promissory note are correct.
Where is my lender...
Way earlier when you first decided on purchasing this house you filled out a loan application with your bank or financing institution and you got word that you were approved for the loan, otherwise you wouldn’t be here today signing all these papers, so we are going to refer to your loan provider as the “lender”. The lender doesn’t have anyone here at the closing to sign saying your loan is approved or to get your signature on a loan contract, doesn’t that seem strange?
Easy as one, two, three...
This transaction seems like it would be a pretty simple one, the sellers sign some paper work relinquishing any claim to the property, you sign the deed and the mortgage note and the bank then transfers the money to Mr. & Mrs. Home Sellers bank account and everyone is shaking hands and smiling as Mr. & Mrs. Home Seller hand you over the keys to the front door of your new home….. that is what takes place, isn’t it?
How can this be...
Well to the untrained person that is what takes place, but some major fraud took place and you never even knew it. There is a real good reason the banks don’t have a loan officer there at your closing to get you to sign a loan contract, in order for them to do that it would involve them loaning you money and that never took place in the transaction you just went through. The “lender” as we referred to them is not lending anything to you is this transaction; you are led to believe they are, and that is fraud like you have never seen before.
It happens every day...
The fact that these transactions take place hundreds, if not thousands of times, a day each business day here in the USA doesn’t change the fact that fraud has taken place; it just means that we are some pretty ignorant people when it comes to how the banking and financial sectors work in this country.
So, if you are going to tell me that I am wrong and the “lender” really did loan the money to fund the transaction and I am full of crap then you might want to hold back until you read the Daily Dose for 08/04/18 when I go into money and banking and prove that what I have stated is correct. One more day isn’t going to kill you, and you may just learn something.
I will try and finish this up tomorrow and we can then move on to more joyful things.
