ILLEGAL KICKBACK SCHEME BY REALOGY EXPOSED IN CALIFORNIA
INDUSTRY NEWS, SHASTA COUNTY, TIPS FOR BUYERS, TIPS FOR SELLERS
August 11th, 2008
The Scales of Justice
Inman News reported August 7, 2008 that Californians that bought a Natural Hazard Disclosure (NHD) report when they listed their homes through Coldwell Banker, Prudential California Realty, RE/Max, Century 21 or ERA Real Estate could soon be entitled to full refunds. As a full-time agent here in Northern California, I suspected these real estate companies might be getting kickbacks when agents working for these company’s insisted on using their NHD provider when they sold one of my listings. In fact, they would right the name of the company, Property ID, right in the purchase agreement. I could have ordered the same report from another company for less than half the expense. They made it clear that their buyer would not accept a report from another provider, claiming the Property ID report was better.
Initially, I thought the brokers preferred the report because they were packaged with some free real estate forms. The report I could order for less than half the cost met or exceeded the law as it pertains to the seller’s legally required elements of disclosure. Now I learn these brokers may have been getting a monetary kickback! If it’s true, it’s a shame these brokers made their agents complicit in their possibly illegal activities. Maybe it’s even a crime! The investigation discovered these kickbacks were paid through “sham” affiliated businesses with broker’s receiving about $25/report.
I became more suspicious when agents working for these firms in Redding sometimes rejected the report I provided from a competing NHD provider, insisting I order the more expensive Property I.D. report. The standard of practice in this area is to allow the party that is paying for an inspection or report to select the service provider. The reports I ordered, which were the least costly at the time at $39, had to be replaced at the insistence of the selling agent from these real estate firms, by a report from Property ID, a report that cost my client, the seller, $99. Brokers apparently insisted, for obvious reasons, their agents do everything possible to make sure the NHD provider was Property I.D. Was it because the report was truly superior? Possibly. It was easy for the brokers to require their own agents to order the reports for in-house listings and sales, but for these brokers to have the audacity to require their competitors to dump the most competitively priced reports for one they get a kickback on is pretty low in my book. If Property I.D. did absolutely nothing wrong, why settle for nearly $40 million?
The question I have is how are my clients going to be reimbursed out of the $39.3 million set aside to compensate those that were duped by these real estate companies. In speaking with a representative from Property I.D. ’s legal staff, a third party will contact those that are due a refund, so the agents whose clients were involved in this scheme may never know. I am proud to have never worked for any of those involved while this scam was being perpetrated on the public. The public should take a hard look at the business ethics of these franchises that participated in this scheme. Of course, the way the settlement is structured, agents may never know if their clients were part of the kickback scheme unless their clients tell them. Expect Property I.D. to put a positive spin on this perhaps thanking HUD and the plaintiffs for bringing this to their attention so they can adjust their business practices.
Real Estate Professionals GMAC was never involved in this fraud. I am proud to have worked here since 1993. If I can answer any questions regarding this or any real estate matter, don’t hesitate to contact me:
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
Bravo!!!
And we’re glad to have you, Brad!!
Thanks for all your hard work all these years!!
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