Construction Alerts Announces New Scam Rocks Foundations of Construction Business.

CHICAGO -- A clutch of unscrupulous real estate agents are perpetrating a series of scams that are leaving builders and developers broke and helpless.

In a dangerous situation for the construction industry, a new type of scam, instigated by unscrupulous real estate agents, is duping builders and developers across America.

These scams involve real estate agents who produce a fake buyer for a property; the buyer will even put down the requisite down payment, and the builder will agree upon a commission for the agent.

Just before the deal is closed, however, the agent will convince the builder that the buyer is unable to come up with their required down payment and closing cost. The agent will further suggest, in a move that indicates good faith, that the commission should go towards the closing cost as well.

After the buyer has closed on the deal, fraudulent home inspectors - in cahoots with the agent - declare the new home defective and dangerous. These independent home inspectors are paid to find imperfections or hazards in the home; some agents and buyers have even built upon that to accuse city code inspectors of ignoring violations.

In such a situation, the seller is forced to buy the home back at the full purchase price, plus all costs accruing to the buyer, such as attorney fees. If these demands are not met, verbal and written threats ensue.

"The entire construction and real estate industry is being tarnished by a few bad apples that have managed to swindle builders," says Eric Allen, Editor of Construction Alerts. "As a new publication dedicated to the construction industry, we want to be a force for good, and our campaign against such scams is a part of that effort."

Allen points out that in most cases, the builder will almost invariably give in to these demands to avoid bad publicity. "When the developer is forced to buy the property back, he would essentially be paying double the commission, since originally the agent's commission was included as part of the closing cost," he says. Further, the law states that a real estate contract is an exception to the Caveat Emptor (Buyer Beware) rule, and that such contracts can be rescinded if the buyer can prove fraud.

The scale of these scams has now touched millions of dollars per year, but most builders refuse to discuss it simply out of sheer embarrassment. A builder, after all, often depends on word of mouth and reputation to ensure success. The scamsters' methods of fear and intimidation, as well as threats of legal action, are often enough to silence the builder and force his hand to pay.

Builders can however protect themselves by ensuring that they work only with legitimate real estate agencies. They should also refrain from directing sales commissions towards the buyer's costs. Builders should put every part of their deal down in writing, and any changes to properties should be made with the consent of local building authorities to defend against claims of building code violations. Builders who have already been taken in can contact the real estate board in their respective cities to report the agent as well as other individuals - buyers, lawyers, home inspectors etc. - involved in the case.

About Construction Alerts

Construction Alerts is a subscription-based newsletter that deals with key industry issues such as insurance regulation, proper construction practices and customer relations. Launching on January 15, 2006, Construction Alerts has over 1,200 advanced subscribers in Illinois alone. For more information, please email [e-mail]