# Was I a victim of illegal bait and switch mortgage fraud?

My wife and I recently purchased a home and I think we were victims of bait and switch mortgage fraud and I wanted to find out of what happened to us was illegal, or just very strange. We were first time home buyers and new to the process.

We were pre-approved for a home loan through several lenders and banks. One bank offered us an interest rate of 4.35% in August 2018 which was the best one we received and we planned to work with them. Our realtor, however has a "team" of professionals he works with to help speed up the closing process. Throughout the process of finding a home, when he would bring up financing we kept telling him that we were not going to use his lender because there is no way he could match the rate we were given by the big bank. We received rates from other small lenders and they were all higher than the big banks rate.

Upon finding the home we wanted and our offer accepted, our realtor told us his lender would match the rate and we had to work with his guy to make the closing process as seamless as possible. We agreed to work with our realtor's lender based on the fact that the lender was going to match the 4.35% interest rate.

Prior to entering escrow we received our loan documents with estimated closing costs and the interest rate was as advertised 4.35% with zero points on the loan. Apples to apples all was the same as we were offered by the big bank. We thought everything was on the up and up. We paid our earnest money deposit and went into escrow with a closing timeline of 16 days. However once we were in escrow and received our final loan documents from the lender, the closing costs jumped up by $4,100. In the closing costs details it was noted that now we were being charged points (1%) of the loan amount to buy down our interest rate to 4.35%. As you can imagine I was furious and reached out to our realtor and the lender. The realtor told me that the reason we were being charged points was because once we entered escrow he found out that the home we were purchasing was technically designated as a condo instead of a townhouse. He said condos have a higher interest rate and the lender had to charge us the point or they weren't going to make any money on the deal. I tried calling the lender and he never answered his phone or returned my phone calls. I sent him an email asking some pressing questions and didn't receive a response either. After sending the pressing email to the lender I received a call from my realtor saying I was offending the lender and he was going to pull my loan if I kept pressing him with the line of questions I was asking. I am sure they had foreknowledge of the technical designation as a condo. It would have been listed as a condo on the MLS that our realtor has access to prior to escrow. With the tight closing deadline and my earnest money already paid (that I didn't want to lose), I was boxed into a corner. I had no choice but to sign the final loan documents as they were. Because of this problem our realtor told us he would forfeit$1,000 of his commission and he also got the selling agent to forfeit $1,000 of her commission as well (our home was being marketed as a townhouse on some websites and as a condo on others). After closing we received$2,000 from the realtors to go towards the point we now had to pay for the loan. So in the end we still paid $2,000 more than they advertised. I still have the pre escrow loan documents showing the closing costs and the post escrow loan documents with the increased closing costs. Is what they did illegal and if I file a grievance could I get the$2,000 back? I feel that our realtor was not being honest with us because he would have had access to the MLS prior to closing showing the home being officially designated as a condo. Any and all feedback is greatly appreciated. Thank you

• from the math (charged $4k, returned$2k) it seems you ultimately paid the same (it seems that you were expected to pay $2k in commissions). Also, what is your jurisdiction? Which state? – aaaaaa Nov 29 '18 at 22:40 • I am in southern California. We were not expected to directly pay commission to the real estate agents. They receive a percentage of the sale as their commission. Ultimately we paid$2,000 more for the loan than what was stated in the pre escrow loan documents. – Anthony Nov 29 '18 at 23:06
• Ok, i see. Then it does look like you overpaid $2000 due to agent's negligence/fraud. The "we'll forfeit commission" looks like doubling the price and then giving 50% discount. – aaaaaa Nov 30 '18 at 0:49 • Please make this incident public, including the names of the realtor and lender. Others have to be deterred from doing business with those guys. – mastov Nov 30 '18 at 13:50 • I fail to understand why a condo would have higher interest.... – xyious Nov 30 '18 at 17:15 ## 1 Answer A realtor has an obligation to be honest with you. The fact that you bought a property with a legal status different than what was represented opens that agent up to far more liability than just the$2000. You have a strong position to bring action again him/her.

• Are you suggesting the listing agent acted negligently or the buyer's? – Hart CO Nov 30 '18 at 0:28
• Yeah, I'd think this was more negligence on the listing agent's part. Buyer agents tend to rely on MLS and title search for this kind of info, I don't think it's normal for them to manually search property records looking for such mistakes. – iheanyi Nov 30 '18 at 1:44
• Yes, I meant the listing agent needed to be clear in what the property was. – JoeTaxpayer Nov 30 '18 at 2:13
• One theory is that our realtor and the lender strategized on how to close this deal (they are personal friends). Our realtor was very thorough and I think he knew it was technically designated as a condo prior to entering escrow. The listing agent marketed it as a townhouse and he used that to justify the upcharge. I think the lender was always planning to charge us for the loan and this was a lucky coincidence. He knew with the tight closing timeline that I wouldn't really be able to give much push back without missing the closing timeline and possibly losing the earnest money deposit. – Anthony Nov 30 '18 at 5:32
• @Anthony: "Townhouse" is a type of structure; "condo" is a type of ownership. It sounds to me that you purchased a townhouse condo, and that the real estate agent didn't disclose the "condo" part. – Codes with Hammer Sep 12 at 15:54