There are hundreds if not thousands of laws that come into play when investing in real estate at both the state and federal level. This is particularly true when it comes to borrowing money. Even if they don’t realize it, many people are probably breaking a number of laws in their business on a regular basis. Does this mean they are going to jail? Probably not, because more than likely their violation is not substantial, willful, or significant enough to catch the attention of a prosecutor, and, in many cases, the “powers that be” aren’t likely to go after someone who is innocently walking over a few rules without bad intentions. If you do and you’re caught, you’re likely to get off with a warning.
Nevertheless, just because you aren’t likely to get caught doesn’t mean you should operate with complete disregard for the rules. More than once, you’ll be asked to bend a rule, do things “under the table,” or stretch the truth. Everyone walks near that fine line at one time or another in his or her own business. People often justify such behavior by saying “everyone does it” or “who’s going to find out?” People often lie on a loan application, get away with it, then do it again, particularly when it comes to their income. The problem is that all it takes is once to get caught, and you’ll face criminal prosecution. Remember, just because you are “stating” your income on a loan without submitting proof, this does not mean you have carte blanche to lie. A lender can check your tax returns after closing to see if the income you have stated on your application is consistent with your tax returns. If a seller, a buyer, a mortgage broker, or real estate broker asks you to lie, “fudge,” or conceal substantial facts on a transaction, walk away from the deal.
Avoid doing business with people who operate in this fashion. Even if you play a minor part in a scam, you can be unwittingly dragged into a big mess and have your name ruined by a criminal or civil investigation. Long-term survival in real estate or any other field means keeping your business free from practices, associations, or ties with people who disregard the rules and engage in suspect practices.
