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FINANCIAL CRIMES SYMPOSIUM

FINANCIAL CRIMES SYMPOSIUM. Department of Business & Professional Regulation Division of Real Estate REAL ESTATE ENFORCEMENT: WHAT WE DO TO PROTECT YOU. Real Estate Enforcement: What We Do to Protect You. Overview How DRE Operates How DRE Combats License Law Violations

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FINANCIAL CRIMES SYMPOSIUM

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  1. FINANCIAL CRIMES SYMPOSIUM

  2. Department of Business & Professional Regulation Division of Real EstateREAL ESTATE ENFORCEMENT: WHAT WE DO TO PROTECT YOU

  3. Real Estate Enforcement: What We Do to Protect You • Overview • How DRE Operates • How DRE Combats License Law Violations • Bullet Proof Your Practice • Case Studies

  4. Real Estate Enforcement: What We Do To Protect You • How DRE Operates 1. DBPR / DRE / OGC 2. Our Boards: • Commission: brokers / sales associates (FREC) • Appraisal Board: appraisal licenses (FREAB)

  5. Real Estate Enforcement: What We Do To Protect You • How DRE Operates 3. What is a license law violation? • Governed by Florida Statutes Chapters 120, 455 and 475 plus Florida Administrative Rules • Administrative Law

  6. Real Estate Enforcement: What We Do To Protect You • How DRE Operates 4. Complaint Process • Complaint filed • Reviewed determining if colorable • Complaint sent to investigation • File sent to prosecutors • File sent to probable cause panel • Dismissed / Letter of Guidance; or • Administrative Complaint

  7. Real Estate Enforcement: What We Do To Protect You • How DRE Combats License Law Violations 1. Notification to the State Attorney • Criminal charges • Example: theft, unlicensed activity 2. Emergency Suspension Orders • Florida Statute Sections 120.60(6) and 455.225(8) 3. Escrow Disbursement Orders 4. Administrative Complaints .Top 5 Statutes FREC and FREAB

  8. Top 5 FREC Charging Statutes

  9. Top 5 FREAB Charging Statutes

  10. Real Estate Enforcement: What We Do To Protect You • Bullet Proof Your Practice – FREAB • Look up Licensee • http://www.myfloridalicense.com/dbpr/ • Attend a Meeting • Next FREC Meeting: November 13, 14, 2012 • Next FREAB Meeting: December 3, 4, 2012 • Document and Disclose

  11. Real Estate Enforcement: What We Do To Protect You • Bullet Proof Your Practice – FREC • Disclose, Disclose, Disclose • Keep Your Records • Don’t entrust others with your records • Maintain control of the escrow account • Prepare/review monthly account reconciliations

  12. Real Estate Enforcement: What We Do To Protect You • Case Study #1 • Facts: • Respondent was the listing agent for a property listed at 1827 SW 18th Avenue in Miami • The property was initially listed for $285,000 • The property sold for $350,000

  13. Real Estate Enforcement: What We Do To Protect You • Case Study #1 • Facts: • Respondent represented the buyer in a property located at 447 Aragon Avenue • The property was listed for $545,000 • Respondent submitted an offer to purchase the property for $595,000

  14. Real Estate Enforcement: What We Do To Protect You • Case Study #1 • Facts: • Respondent represented the buyer in the purchase of property located at 1852 SW 10th Street • The property was listed for $450,000 • Respondent’s buyer placed an offer to purchase the property for $499,000 • Respondent’s buyer purchased the property for $515,000

  15. Real Estate Enforcement: What We Do To Protect You • Case Study #1 • Facts: • Respondent represented a buyer in the purchase of property located at 903 Red Road • The property was listed for $499,000 • Respondent’s client purchased the property for $549,000

  16. Real Estate Enforcement: What We Do To Protect You • Case Study #1 • Facts: • Respondent represented the buyer in the purchase of property at 3707 Le Jeune Road • The property was listed $525,000 • The property was purchased for $575,000

  17. Real Estate Enforcement: What We Do To Protect You • Case Study #1 • Facts: • Respondent represented the buyer in the purchase of property located at 1631 SW 13th Avenue • The property was listed at $390,000 • The property was purchased for $500,000

  18. Real Estate Enforcement: What We Do To Protect You • Case Study #1 • Administrative Complaint Charge: • Brokerage business records.—Each broker shall keep and make available to the department such books, accounts, and records as will enable the department to determine whether such broker is in compliance with the provisions of this chapter. Each broker shall preserve at least one legible copy of all books, accounts, and records pertaining to her or his real estate brokerage business for at least 5 years from the date of receipt of any money, fund, deposit, check, or draft entrusted to the broker or, in the event no funds are entrusted to the broker, for at least 5 years from the date of execution by any party of any listing agreement, offer to purchase, rental property management agreement, rental or lease agreement, or any other written or verbal agreement which engages the services of the broker.

  19. Real Estate Enforcement: What We Do To Protect You • Case Study #1 • Administrative Complaint Charge: • The Respondent did not keep • Listing agreements • Offers to purchase • Counter offers • Contracts • Checks • ANYTHING!

  20. Real Estate Enforcement: What We Do To Protect You • Case Study #1 • Outcome: • Administrative Judge found for the Department (a win!) • License revoked

  21. Real Estate Enforcement:What We Do To Protect You • Case Study #2 • Facts in Administrative Complaint: • Husband and wife (sellers) had two properties. In 2006, Respondent entered into listing agreements with the sellers to list one of the properties at $359,000, and the other at $350,000 • In June 2006, Sellers entered into purchase contracts for the two properties, one for the amount of $329,000 and one for the amount of $325,000 • Without telling the Sellers, Respondent raised the listing price for each property to $450,000

  22. Real Estate Enforcement:What We Do To Protect You • Case Study #2 • Administrative Complaint Charge: • 475.25(1)(b) - Has been guilty of fraud, misrepresentation, concealment, false promises, false pretenses, dishonest dealing by trick, scheme, or device, culpable negligence or breach of trust.

  23. Real Estate Enforcement:What We Do To Protect You • Case Study #2 • Elements of Fraud: • Misrepresentation of material fact • Maker of statement knew it was false • Maker intended another to act or rely on it • Injury or damages

  24. Real Estate Enforcement:What We Do To Protect You • Case Study #2 • What Happened at Closing of Properties: • Sellers all along thought each property was being sold for about $350,000 • At some point, the transactions were assigned to a new buyer. • At the closing, sellers first learned of the increased listing price to $450,000 for each property • Also at the closing, the assigned ‘buyer’ showed up, looked like someone dragged off the street

  25. Real Estate Enforcement: What We Do To Protect You • Case Study #2 • What Happened at Closing (Continued): • Also at the closing, it came to light that the bank did not know about the original contract on each property for $350-something, they only saw the contracts at $450. • Sellers refused to complete the sale of these two properties.

  26. Real Estate Enforcement:What We Do To Protect You • Case Study #2 • What Was the Extra Hundred Thousand For: • In early stages Respondent told Sellers they’d use ‘creative financing’ – buyer wanted to make improvements and they’d have to give back twenty or thirty thousand above selling price. • Addendum - any difference in purchase price and appraisal value would be used to repair house. • Big difference between twenty thousand and one hundred thousand. Houses also didn’t require one hundred thousand worth of repairs

  27. Real Estate Enforcement:What We Do To Protect You • Case Study #2 • HUD: • HUD said sellers would receive roughly $412,000 per property, which was simply not true. They were only getting 350-something. Title company said an addendum to the HUD would state what sellers would really be getting. When sellers’ attorney asked why that couldn’t go in the HUD, she was told cause the lender couldn’t see the addendum

  28. Real Estate Enforcement:What We Do To Protect You • Case Study #2 • Missing Players in Action: • The appraiser in this case is now somewhere in Panama • Mortgage broker closed his office and disappeared

  29. Real Estate Enforcement:What We Do To Protect You • Case Study #2 • Listing Price: • Generally, someone’s trying to get a loan at a higher amount, so when the lender is making the loan they check the listing. If they don’t correlate, loan won’t go through. So if the listing price is above what it’s selling for, someone’s pocketing extra money

  30. Real Estate Enforcement:What We Do To Protect You • Case Study #2 • Witnesses at Trial: • Sellers • Sellers’ attorney • Respondent’s broker • Expert Witness • Why we use expert • Respondent

  31. Real Estate Enforcement:What We Do To Protect You • Case Study #2 • Administrative Law Judge’s Ruling: • In my proposed recommended order, I limited suggested charges to misrepresentation, concealment and breach of trust • Judge found him guilty of concealment, but not the other two. He relied on a couple of cases, has to do with intent

  32. Real Estate Enforcement:What We Do To Protect You • Case #2 • Cases Judge Relied Upon: • Munch v. DBPR, 592 So. 2d 1136 (1st DCA 1992) • Real estate salesman was receiving commissions on behalf of condo association, which broker didn’t know about. Realtor thought he was acting as community association manager, not real estate salesman. • For there to be “misrepresentation, concealment and breach of trust” in violation of 475.25(1)(b) there must be wrongful intent or scienter. • No intent to deceive here.

  33. Real Estate Enforcement:What We Do To Protect You • Case #2 • Cases Judge Relied Upon: • Morris v. DBPR, 474 So. 2d 841 (5th DCA 1985) • Broker accused of fraud for passing a worthless check for property he wanted to personally buy • Court found no evidence of fraudulent intent, because deposit was made on a Saturday, and even though insufficient funds on that day broker could have deposited sufficient funds on that Monday had he wanted to go through with the deal (he didn’t)

  34. Real Estate Enforcement:What We Do To Protect You • Case #2 • Administrative Law Judge’s Ruling: • Judge didn’t find Respondent guilty of fraud for the following reasons: • Complaint didn’t charge him that way, no notice • Insufficient evidence to prove Respondent was aware of fraudulent activity

  35. Real Estate Enforcement:What We Do To Protect You • Case #2 • Penalty: • Judge in his Recommended Order issued: One year suspension, $1000 fine, costs of investigation • Commission upped penalty to revocation

  36. Department of Business & Professional Regulation Division of Real EstateREAL ESTATE ENFORCEMENT: WHAT WE DO TO PROTECT YOU

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