Property ID Refunds Fraction of Money Taken In By Kickback Scheme
INDUSTRY NEWS
July 22nd, 2009
Apparently, you can come out ahead ripping off the public with kickback schemes. That is especially true if you are a natural hazard disclosure (NHD) firm in cahoots with real estate companies. These disclosures are required in California for most real estate transactions. Inman News recently reported the final outcome of a lawsuit that settled in January 2009.
Property ID is mailing out $5.5 million in refunds to California consumers that were victimized by the scheme from 1996-2006. The attorneys that brought the class-action suit pocketed nearly $10 million. Less than one out of six victims successfully filed claims despite efforts using direct mail campaigns and newspaper advertising to locate those duped in the scheme . Nearly $40 million had been earmarked to compensate victims in the January settlement.
Here’s how the alleged scheme worked: Property ID partnered with real estate brokerage firms to profit from the sale of NHD reports. The reports were priced at $99-$114. Property ID deducted $50 to cover expenses to prepare the report then split the remainder with the real estate brokerages using sham “affiliated businesses” to funnel the profits to the real estate firms participating in the scheme. The real estate firms named by Inman News include Coldwell Banker, RE/MAX, Century 21, Prudential California Realty and ERA. Realogy is the parent company for these real estate firms. Some of these franchises are independently owned and operated and had nothing to do with the scam. Property ID and the real estate brokerages involved closed down the sham “affiliated businesses” , denied any wrongdoing and settled the lawsuit to “avoid further disruption of their business and bring to an end a protracted and costly court battle”.
More than 330,000 California homeowners were believed to have overpaid for reports, yet only about 50,000 filed claims that were accepted by Property ID. That means the other quarter million potential victims that were not located will not be compensated and the scammers can keep those funds, minus attorney fees.
Let’s see, that’s 250,000 reports at $50 profit apiece, or $12.5 million. Not bad, Property ID/Realogy! Considering the total liability could have exceeded nearly $120 million, according to the lead attorney for the alleged victims, paying out 1o cents on the dollaris smart business. Moving forward, Property ID and Realogy now acknowledge that NHD’s are considered settlement services and RESPA guidelines must be followed.
Personally, I find this whole scam disgusting. It gives the real estate industry a black eye. I go out of my way to inform real estate agents that still use Property ID about this scam. Regardless if any local brokers were involved or not, everyone should question the corporate philosophy of Property ID and Realogy considering they concocted such a scheme to secretly glean additional profits from homeowners and referring agents that seek their services. Shameful!
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
CORNER OF COURT AND PLACER IN REDDING
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
SHAMEFUL ISNT JUST ENOUGH TO SAY AND I HOPE THEY CAN TRACK DOWN THE LENDERS USING INSURANCE COMPANIES AS WELL THE SAME WAY
MANY LENDER WHO PROSTOLITE AGENT CLIENTS TO THEIR OWN AS A BROCKER AGENT AND LENDER . WHAT A CONFLICT ACI
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