What About the Bad Apples? As noted earlier, there are always a few bad apples. (Remember, the vast majority of agents are hard-working people who strive to do a good job and are usually competent.) On the other hand, the bad apples are agents who either are outright crooks or are so unaware of real estate laws that they can cause you harm in a deal. How do you avoid these? Fortunately, in most cases the bad apples don’t last long. After a few deals they often mess up so badly that there are letters of complaint to the state real estate regulatory body, which either revokes their license or disciplines them. The danger is that you might run into one of these bad apples before they get thrown out. How do you protect yourself? I wish I had a surefire answer. However, the tips here are the same ones that are given when picking any person whom you give your confidence to when it comes to your finances:

Avoiding the Bad Apples   Find out how long the agents have been in the business. Even if the salesperson has been in business only a few years, the office

should have been around a long time. Try to do business only with an agent or office that has a long track record five years at the least.   Work with a national franchisee. While earlier I stressed that this is no guarantee you’ll get an active agent, it does give you some assurance of at least minimal quality in terms of procedures. Besides, if the agent should be truly incompetent and negligent, you can always appeal to the national office of the chain.   Ask to see the agent’s real estate license. In all states, agents must be licensed, and that license must be prominently displayed in the agent’s office.

Agents will be pleased to show it to you. In truth, most buyers are going to consider only the above three suggestions (plus recommendations of friends). However, if you’re really concerned, here are some additional steps you can take to find out about an agent’s background:   Check with the local better business bureau or (in an extreme case) the local district attorney’s office to see if there are now pending or have ever been any complaints against the agent or the office.   Call the state real estate department and ask if the agent’s license has ever been revoked or suspended or if the agent has ever been disciplined. (This is public information to which you are entitled.) Quite frankly, few buyers will ever take these last two steps. In most cases, we tend to accept a friendly smile and a solid handshake as evidence of competence and honesty. And in most cases things work out just fine. Remember, however, we are now considering those very few bad apples. The worst thing that you can do is to find out you’ve been dealing with a bad agent after something has happened after you’ve made an offer that has somehow gone awry and has resulted in a money loss to you or the threat of a lawsuit from the seller or some other injured party. A few calls may suddenly tell you that this agent has been in hot water since she got her license.

Then you’ll say to yourself, “If only I had investigated first!” Remember, it takes only one or two phone calls and perhaps 15 minutes of time talking to the right people to get a minimal background check on the person who is going to advise you on what is probably the biggest investment you’ll make in your life. Unfortunately, the truth is that you can seldom be completely sure about an agent (or any other person with whom you deal financially). I recently learned of a very unusual case, an agent who was falsifying loan documents. This person was telling buyers they could obtain financing that they obviously could not qualify for, and was getting it! We’ll call him Jim (obviously not his real name). Jim was securing false verifications of employment (which your employer fills out, giving your salary) and false verifications of deposit (which a bank or an S&L fills out, giving the cash on hand that you have for a down payment). Both these verifications are what a lender bases a loan on. Since most loans today are sold in the secondary market to government agencies, to falsify them can be a federal offense investigated by the Federal Bureau of Investigation or the Treasury Department. Fraud is a serious offense. Jim was blandly falsifying these documents for buyers, telling them not to worry, it was done every day, it was just a formality, and they’d never have anything to worry about. The interesting thing is that Jim had been falsifying documents successfully for more than three years! He was considered a successful member of the real estate profession. He might have gone on for more years, but circumstances eventually did him in. As it turned out he was doing more and more deals with more and more people who couldn’t really qualify for mortgages, and the lenders never suspected fraud until there was a downturn in the economy. Since in Jim’s case the vast majority of mortgages he was placing involved people who were just marginally able to handle the payments, when things got rough and the borrowers lost their jobs, they couldn’t pay and stopped. Many of their mortgages went into foreclosure.

What finally happened, apparently, is that one day, a secretary for one of the secondary lenders was going through paperwork and happened to notice that a lot of foreclosures in the area involved borrowers who had originally purchased homes through Jim. An investigation was quietly launched. It was a simple matter to go back several years and check on the verifications of deposit with banks and S&Ls and the verifications of employment with employers. It quickly became clear that outright fraud had been committed. As a result, Jim had his real estate business shut down. Even worse, the buyers were likewise charged with fraud. That meant that they were personally subject to any losses that the lenders incurred in the foreclosures as well as subject to civil and criminal penalties! The moral of this story is that even a bad apple once in a great while can appear to be a shiny, bright one. Of course, as Barnum was heard to say, “You can never cheat an honest man.” If those buyers had really thought it through, they would never have allowed Jim to falsify their verifications. Picking the right agent is certainly the second most important decision you’ll make after picking the right house. Take the time to make it wisely.