REAL ESTATE FRAUD STORIES: The Report They Forgot to Destroy
One of the worst examples of real estate fraud in my career was actually done by my client. My client was a pest control company and was called out by the listing or selling realtor to inspect the house for termites. There was no buyer involved at the time so the realtor probably already knew there was a problem, otherwise, why would he call out a pest control operator to perform a termite inspection? That was not a common practice.
So the pest control operator goes out to the house and guess what? He found termites. He writes a report ? the Texas Official Wood Destroying Insect Report ? and shows the house has active or live termites.
Now here is a dirty little secret in real estate transactions. Once a house is treated for termites and by that, I mean some (maybe not enough?) pesticide is applied, the house is considered to no longer be ?active? with termites or to have live termites. Theoretically, the termites are eradicated and the house no longer has live termites. (Did you know it takes most termiticides, the pesticide for termites, at least 30 days to accomplish its objective, killing the termites?)
The realtor, now having just treated the vacant house, no longer had to reveal that the house had live termites. Of course, she also chose not to reveal that the house had EVER had ANY termites or that it was just treated. Instead, she thought she had solved the problem and no one would be the wiser.
So one day, a young couple, looking to buy their first house, came along without their own realtor and liked the cute little cottage. And since it had NO PROBLEMS, AS IN NO TERMITES, they decided to buy it. The realtor, taking advantage of their inexperience, told them she knew the perfect termite inspector and referred them to the pest control operator who had just treated the house. She told him to mark the house as having no active termites (based on the recent treatment.) She also told him, the pest control operator, not to mark the house as having been treated even though he did it. Sadly, he agreed to do so.
Once they were in, they became wiser and found live termites all over the house. They started opening up walls and they found substantial termite damage.
So they sued the inspector for not finding the termites and the realtor who sold the house. Of course, no one would have ever known about the little secret between the realtor and the pest control operator except that once the little couple found the termites, they asked the pest control operator for a copy of their report on the house. They had actually lost theirs. So the secretary at the pest control operator sends them what is in her file and guess what? The pest control operator had forgotten to destroy the first report and the secretary, not knowing that the fraud was on, let the first termite report go to the homeowner.
It was pretty cut and dried in the lawsuit. The realtor and the pest control operator were both guilty of fraud in a real estate transaction and they ended up buying the house back from the little couple.