Buyers Pay High Price for insider trading on homes

MonkeyWrench

From the Indo

'IT seems as if it can't get much worse for mortgage brokers.

The home loans market is in the doldrums with a sharp drop in mortgage business, and each day house prices and confidence in the property market continue to tumble.

Now mortgage brokers are to be investigated by the Financial Regulator over allegations that some of them broke the law by revealing their clients' details to estate agents.

The move comes some 20 months after an RTE 'Prime Time' programme exposed collusion between mortgage brokers and estate agents to artificially inflate prices.

The ruse works like this: a broker gets a customer in the door, takes down their financial details and arranges for them to get mortgage approval with a lender.

Once the approval comes through, the broker will then know how much the buyers can afford to spend on a property.

This information is passed on to the estate agent who is acting for the vendor of the property.

The fact that the estate agent has this information is illegal, as personal financial information cannot be given to a third party without the consent of the prospective house buyers.

But the information is a godsend to the estate agent. He now knows how much the buyers can afford to spend, so he can arrange to have the house price go right to the sum the buyers have been approved for.

The illegal sharing of the buyers' loan approval details is akin to seeing the hand of an opponent in poker -- you will know whether it is worth betting the house if you know what your opponent has compared with you.

This dirty link-up between estate agents and brokers is one of the reasons thousands of people who bought houses during the boom will have paid too much.

And many of these people are facing the appaling prospect of negative equity -- where they owe more money on the property than it is worth.

Problem

This is a real issue if they want to sell, or they have a problem meeting monthly mortgage payments. Even if the house is sold there will still be a bill to be settled with the bank.

The pity of the situation is that there is not much that can be done for homeowners hit by this scam.

Having signed up for their houses, they now have few options apart from taking expensive legal action.

Mortgage brokers are being investigated by the regulator, but there is no regulator for estate agents.

The much-promised National Property Services Regulatory Authority has yet to get up and running. It needs legislation to be passed before it can begin to operate.

In the meantime, Sean and Mary homeowner can only hope that their financial details were not shared around in a move that meant they were forced to overpay for their property during the boom.'

Nothing new as such as this was well known after the Prime time slot 20 months ago but its good to see that finally the ball may have started to roll on this...hopefully some legal action will be taken without the buyers having to empty their pockets again.

aoraki

I wouldn't be surprised if it was a widespread practice, I'd say there was all sorts of shenanigans going on. The prices were going up and up and up and I'd say at least some of the increases were manufactured by estate agents/brokers so that they'd get a bigger slice of the pie. I've even heard rumours of estate agents bidding buyers off other would-be buyers, the only problem being that the other would-be buyers didn't actually exist.

The whole period was nuts. Greed greed greed. Short-sighted narrow-minded cute-hoorism at it's very worst, as only us Irish can do it. A big massive pyramid scheme where a few people made a shed load of money at the expense of the vast majority. The grim reality is that this country is up sh1t-creek now because of it.

jetski

Any estate agents / brokers found guilty of these crimes should be made pay on a case by case basis the higher end of the probable amount scammed from each customer and then 6 months in mountjoy. i would absolutly crucify someone if i found out they had taken advantage of my family in such a vunerable situation.

aoraki

I completely agree JetSki. However, I'm not wholly optimistic that a whole lot will come out of this, judging by the way justice is dispensed in this country.

However take solace in one thing - while these gobsh1tes were raking it in for a few years, they have completely f&cked things up for themselves now. VERY FEW people are buying property at the moment, and estate agents and brokers are facing a good few lean years ahead... very lean indeed. Couldn't happen to a nicer bunch of people if you ask me...

EKRIUQ

People here seem to forget that sellers are the people getting the money for the house, If the price goes up by 10,000 an estate agent on 1% gets an extra €100 not really worth the time to the estate agent to go trying to find financial details from mortgage brokers.

Its normally the seller banging down the phone to the Auctioneer demanding they ask for another €10,000 from the buyer that gets the price rose higher, All the eatate agent wants is to get the property sold and is not going to chance losing the sale for €100.

The above practice happens very little, its just a reason for a journalist to write a story as the propety market decline is topical at the moment.

EKRIUQ

<double post>

jetski

Namesco wrote: »

People here seem to forget that sellers are the people getting the money for the house, If the price goes up by 10,000 an estate agent on 1% gets an extra €100 not really worth the time to the estate agent to go trying to find financial details from mortgage brokers.

Its normally the seller banging down the phone to the Auctioneer demanding they ask for another €10,000 from the buyer that gets the price rose higher, All the eatate agent wants is to get the property sold and is not going to chance losing the sale for €100.

The above practice happens very little, its just a reason for a journalist to write a story as the propety market decline is topical at the moment.

But what happens if the the house is sold for an extra 50k, that means 500 euro and thats if their charge is 1% which is not allways the case. now multiply €500 x every house they sold in that period and you have an idea of the money their making on top of everything else.

aoraki

People here seem to forget that sellers are the people getting the money for the house, If the price goes up by 10,000 an estate agent on 1% gets an extra €100 not really worth the time to the estate agent to go trying to find financial details from mortgage brokers

I'm not forgetting that, of course the sellers are getting the majority of the benefit from the prices going up. However, that is moving away from the central point, that estate agents used privileged information unethically to get the maximum price possible. Estate agents are going to go for the best price they can get, because it keeps their client happy, they get an a bigger slice, and of course it's in the estate agents interest that the trend of house prices go up because they can get bigger commissions down the line. Even if it is the seller that is pushing for the price increase, if the estate agent knows what the buyer's spending power is it gives the agent/seller a hell of an advantage wouldn't you say. A very unfair and illegal advantage at that. Hence the investigation.

But we'll see what, if anything, this throws up.

jetski

hope a few names are mentioned, definitly another nail in their coffin :pac:

johnnyskeleton

jetski wrote: »

Any estate agents / brokers found guilty of these crimes should be made pay on a case by case basis the higher end of the probable amount scammed from each customer and then 6 months in mountjoy. i would absolutly crucify someone if i found out they had taken advantage of my family in such a vunerable situation.

Most fraud cases over €7k in value are prosecuted on indictment, so they could be looking at a number of years imprisonment.

Patrickof

aoraki wrote: »

...... and of course it's in the estate agents interest that the trend of house prices go up because they can get bigger commissions down the line.....

Hmm, not necessarily. In the boom years as prices rose more people set up as EAs and fees actually came down due to competition.

In fact, in a lot of sales of new developments the EA is on a fixed fee per house, rather than a percentage.