Today, we’re looking into a case where a mortgage broker produced fraudulent pre-approval documents, resulting in disciplinary actions.
RECO, the Real Estate Council of Ontario, sent its members a letter entitled, Falsifying Documents Result in Disciplinary Action. Unfortunately, fraudulent documents have become more common.
Increasing Frequency of Fraudulent Documents in Real Estate
We’ve discussed the increasing frequency of fraudulent documents with rental applications during KT Confidential, the real estate podcast, but this particular case is related to a new construction purchase. During the COVID-19 Pandemic, when many purchasers were requesting closing extensions due to changes in home equity and mortgage approvals not coming through, builders started looking for more security.
The Coles Notes
Two real estate agents from the same brokerage are involved in this specific scenario; we’ll call them agents A and B. Real estate agent A is also a licensed mortgage broker, who’s otherwise not involved with the transaction, and real estate agent B represents the buyers in purchasing a new construction condo. The condo developers sought a pre-approval letter from the buyers to confirm the purchase. So, Realtor B introduced them to Realtor A to obtain a mortgage pre-approval, which was provided. However, it was not on bank letterhead and included several inconsistencies, causing the developer to deny it, insisting on something formal from a financial institution.
Realtor A then produced a new letter, this time on bank letterhead. However, when the person representing the developer found multiple errors, such as an incorrect phone number and staff name of the employee at the financial institution, they called out Realtor A for producing a fraudulent document.
Realtor A was found guilty of falsifying and submitting a mortgage pre-approval letter, resulting in a $25,000 fine and a mandatory intensive ethics training course.
Quebec Real Estate Agents & TV Stars Found Guilty
In another case, two Quebec agents are under investigation for allegedly having people they know submit fake offers on homes they were selling to drive up the price. While all real estate agents must be licensed, a license clearly doesn’t guarantee service, competency, or ethics. So, be sure to do your due diligence when hiring one.
Questionable ethics exist in all industries; it’s just that when you’re buying real estate, the stakes are high. You want to ensure you’re hiring a reputable realtor to represent you. Whoever you choose to work with should have a process that ensures everything is in order before you start your house search, whether buying a new or existing property.
