There is a dark secret that still haunts the Real Estate Industry, yet nobody seems to be speaking about it. Predatory lending and adjustable rate mortgages are thought of as reasons for the recent Real Estate meltdown, however there remains today another practice that factors in heavily and cannot be overlooked in this crisis. There are many terms for this: Joint Ventures, Associated Business Arrangements (ABA’s), Pods, and In House.
Regardless of what they are called, they create an inherent conflict of interest by allowing one party to be involved in multiple aspects of Real Estate transactions. Simply this means that, for example, a Real Estate Broker whose company is representing the buyer or seller in a transaction also may have an ownership position in a Mortgage Company, and or a Title Agency. The clearly defined separation of these critical components of a transaction has become blurred. How can a Title Agency remain the neutral third party representing both buyer and seller equally when the Broker for either the buyer or seller has an ownership position? It immediately puts the other party at a disadvantage that they should never suffer.
The potential for impropriety and harm to the consumer is so great in these arrangements that one has to wonder of their legitimacy and legality. With all of the effort and attention paid to giving the transaction process transparency, how can this be ignored? What one will find upon inquiring is that the majority of these companies charge their customers higher fees and offer a much lower level of service than an independent company. If a rational person were to think it through, the only logical conclusion to reach is that it is imperative for a Title Agency be completely independent. No external influences, perceived or real, should ever conflict with a Title Agency’s duty of ensuring that the contract is followed exactly to the letter and that the transaction clean and free of defect.
In short the practice must end. No benefit can be derived by the consumer whatsoever. If these so called “one stop shops” are allowed to remain, the Real Estate industry will continue to be viewed as unsavory and unethical. Ultimately there can be no real, lasting Real Estate recovery until all of the cancer is removed from the patient.
