The Attorney General of Rhode Island announced the filing of a lawsuit against a local real estate broker and other defendants, alleging they violated the Rhode Island Unfair and Deceptive Trade Practices Act (DTPA).
The allegations are that the defendants deceived homeowners with limited English proficiency by executing a "foreclosure rescue" scheme in which the homeowners believed they were refinancing their mortgage when in fact they were executing paperwork for the sale of their home for significantly less than market value.
The Attorney General is seeking civil penalties and injunctive relief, including voiding the sale and returning the home to the original owners.
The victims in this case are older Haitian immigrants with limited English proficiency who have resided in their Providence home for nearly 30 years. As of May 2023, they defaulted on their mortgage and owed roughly $61,000 to Wells Fargo. Their home had a market value of approximately $450,000. Had the home proceeded to a foreclosure sale, the homeowners would have received the surplus funds from the sale, or roughly $385,000.
However, in June 2023, an associate of the realtor texted the victims' daughter, proposing a plan in which she and Preferred Property Solutions, owned by the realtor, would add their names to the title, pay off the existing mortgage balance, develop a new mortgage payment plan, and then transfer sole ownership back to the victims.
The next month, the victims met with an attorney who was associated with the defendants and who allegedly presented the homeowners with a series of documents that the family believed to be a refinancing agreement. Unbeknownst to them, the documents fully transferred the title of their home only to Preferred Property Solutions.
Additionally, the defendants did not provide interpretation or translation services as allegedly requested. Once the realtor's company had the title, it listed the home for sale for $450,000. "Attorney General Neronha files lawsuit against real estate broker following deceptive "foreclosure rescue" scheme" www.riag.ri.gov. (Nov. 13, 2024).
Commentary
A review of the Preamble to the Code of Ethics of the National Association of Realtors® always merits review.
The term REALTOR® has come to connote competency, fairness, and high integrity resulting from adherence to a lofty ideal of moral conduct in business relations. No inducement of profit and no instruction from clients ever can justify departure from this ideal.
The fraud committed by this realtor, with the help of others, including a lawyer, speaks volumes about the depths to which greed can drive the unscrupulous professional. The outcome of the legal case against this realtor remains to be seen, but this serves as an example of the type of behavior that can best be avoided by following the ethical guidelines set out for this profession.
Although everyone likes a real estate bargain, there is a fine line between purchasing a diamond in the rough and later making a profit when it is sold, and making a profit by taking advantage of unsophisticated, weak-minded, or in this case, non-English speaking owners. The short-term rewards of fraudulent behavior may be dwarfed by the costs of litigation, as this case illustrates.
Get everything in writing. All transactions, understandings, and offers should be memorialized in a contract, a follow-up letter, or by email. The requirements of the Statute of Frauds in your jurisdiction should be observed, which often require a contract concerning real property to be in writing.
When dealing with buyers or sellers who appear to be confused due to age, dementia, lack of education, or who appear to be under the influence of third parties such as caretakers, family members, or organizations, extreme caution should be taken to protect your firm from future claims of fraud or undue influence. The video recording of meetings with the consent of all involved, urging that counsel or disinterested third parties be involved, or simply listening to that little voice inside and walking away from the deal is admittedly extreme. However, although it is possible you may lose the sale, you will certainly avoid an expensive future adverse jury verdict.
