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Andrew Caton is passionate about two things - Real Estate and the Greater Hamilton, Ontario area including Hamilton Mountain, Stoney Creek, Ancaster, Dundas and Waterdown. Through the blog we hope to share the best of our city as well as provide timely and helpful real estate advice - whether you're buying or selling a home.
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Ethics in Real Estate

Ethics in Real Estate

Ethics in Real Estate - Does it really matter?

Real Estate is a fun, exciting, frustrating, emotional, hectic and rewarding industry.  It's also a HIGHLY regulated one when it comes to licensed professionals. Despite this fact, sometimes people in this industry will act unprofessionally, unethically, fraudulently, or even criminally.  What can you do to protect yourself?  

Your first line of defense is to always USE COMMON SENSE. I recently heard of a situation where a couple wanted to buy a larger home. Every single bank they approached for financing declined them. It wasn't just one bank, but several. Contrary to what some might say, the bank doesn't want to decline your mortgage. The bank makes money through selling mortgages so declining someone is a lose-lose situation. However, undeterred with several banks' refusals, this couple sought out someone who would get them what they wanted. They were put in contact with an Agent who has a less then stellar reputation in the industry and is well known for his questionable business practices. The couple even felt after their meeting with him that the Agent was "sketchy".  However, this Agent promised to "do what it took" to get them the mortgage - including telling them he would "fudge the numbers" so that they would be approved.

What a dangerous game!

Why is taking this road such a bad idea?

First, if you need to "fudge" the numbers on a mortgage approval then the reality is, you probably can't afford the home. You might be able to "get the house you want", but will you be able to make payments? Second, both the Real Estate and the Mortgage industries are HIGHLY REGULATED. Why would someone assume that if an Agent is willing to "fudge the numbers" (which could easily result in a disciplinary action including fines or license suspension), that the Agent would be honest or trustworthy when it came to his dealings with them, the client? Third, and most importantly, lying on your mortgage application in order to secure financing is one thing- FRAUD. If and when the house of cards collapses, this couple could very easily lose more then just their home. They could lose their ability to EVER buy a home again, be fined, or even spend time in jail.

The more I learned about the situation, the more I realised how one sided this transaction would be. The "number fudging Agent" could get them their mortgage, but ONLY if they bought the house through him and sold their house through him. I started to notice a lot of wins for the agent (3 commission cheques - regardless of what happens 6 months in the future), and very few wins for the couple.

What can we learn?

1. Tied selling (ie. providing a product or service on condition the customer purchases a product from the same or related company) is unethical and usually illegal. You should ALWAYS be suspicious of anyone who says "I can get your financing, but only if you buy/sell/switch all your accounts to me".

2. If someone is willing to act dishonestly, unethically, or criminally the odds are very high that you will suffer somewhere in the process.

3. If it sounds too good to be true, it probably is.

There are honest and ethical agents out there, in fact the majority are. Work with someone who looks out for YOU, not themselves.

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