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October 02, 2008

What regulatory reforms are needed to protect real estate consumers?

Bill Wendel | 10:01 AM in Change Agents, Dual Agency Detective, Real Estate Consumer Bill of Rights, RECALL: Real Estate Consumer Alliance | Permalink

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I would like to bring to your attention the fraudulent use of the MLS and have it added to your list. As a consumer I would like all consumers to have access to all information provided in a MLS including archived data. I was involved in a purchase of a condo in Arkansas. The purchase was done under dual agency. I purchased the property from the Broker of this agency. Unknown to us he was in the process of buying this property from an elderly couple but never disclosed to us OR his own agent (who was acting on our behalf) that he did not own it at the time he sold it to us. But the real issue here is that he hid the lower price (of his purchase) from our agent by not entering the data into the MLS until after we signed our contract (and after our agent had done her due diligence regarding comps in the area. He did this by gaming the MLS. Both sales were in the MLS at the same time but he was real cute in the address by switching the condo number from A-1 to 1-A so the system did not know it was the same property.

This same broker is also building condos. We have found in our investigation that he hid the lower selling prices from consumers by also hiding the lower selling prices from the MLS (all under Exclusive Rights to Sell) until after the condos were resold at a much higher price. What is interesting is that the original purchasers of these four condos all had a combination of the same last name (all sales were handled by this same Broker and the same Title Company in town). When they were resold the prices jumped from 40,000 to 80,000 dollars (this was within a few months). The thing is that the original purchases and resales all happened either on the same day or a few days later. Suddenly all the condos prices have been inflated on an average of over $50,000 dollars. All four resales were to out of state buyers. All four original sale and resales were handled by the same title company. But all eight transactions were closed on either the same day or a few days later. Again he gamed the system by having two MLS in the system at the same time on the same property by playing with the address. So in all four of these cases the second buyer never new of the lower selling prices on these new condos.

So what he really did (and in my opinion with the help of others) artificially over inflated the prices of the condos. This is a small town and on average real estate gains between 4 to 7 percent a year. Does anyone have a comment or can you help me to understand how this can be legal? These same properties were listed on realtor.com so it wasn’t just local buyers that were fooled but also buyers from out of state.

Posted by: Debra Proto | Nov 13, 2008 12:20:43 PM

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