SYLLABUS

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In re Opinion 710 of the Advisory Committee on Professional Ethics (A-130-06)

Argued January 8, 2008 -- Decided February 6, 2006

PER CURIAM

The Advisory Committee on Professional Ethics (ACPE) received an inquiry seeking an advisory opinion on the ethical propriety of a real estate transaction that the inquirer believed was a fraudulent practice perpetrated on the ultimate investor. The inquirer provided the ACPE with the factual scenario underlying his inquiry. A contract for sale of residential property has been prepared by a realtor and signed by both the seller and buyer for a set price with a mortgage contingency. Either during attorney review or sometime thereafter, the lawyers for the seller and the buyer are requested to amend the contract by increasing the purchase price and the mortgage contingency amount in like amounts. In addition, the attorneys are asked to amend the contract to provide that the seller give a credit to the purchaser at closing for the same amount, calling it a “seller’s concession” or “seller’s payment of purchaser’s closing costs.”

In that scenario provided to the ACPE, the inquirer further declared that the amendments to the contract are intended to “increase the size of the purchaser’s mortgage loan,” with the understanding that “the originating lender or secondary investor may be deceived as to the true market price of the house.” The ACPE assumed that the seller’s concession in that scenario did not involve legitimate or actual costs “payable to the buyer.” Therefore, the ACPE reviewed a factual supposition in which a lawyer actively participated in a real estate transaction likely to perpetrate a fraud on the ultimate investor, namely the mortgage lender, a purchaser of the mortgage on a secondary market, or a buyer of mortgage-backed securities.