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Ethics You Should abide When Investing In Real Estate

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Just like in every business or endeavor, there will always be certain ethics you have to follow. These ethics will allow you to find the best investment without compromising the norms that you should abide with. Here’s one story for you, an investor- was preparing to close on an investment property. He received a copy of the final loan documents via fax, and took the opportunity to look them over so he would be prepared to sign them at closing the following day. The investor was surprised to find that the loan application contained some glaring inaccuracies, including a gross overstatement of his income and a property usage declaration stating the property would be used as his second residence. In fact, he had clearly informed the mortgage broker he had no intention of ever living in the home. The investor was in a bad position. He was committed to closing on the property the next day, or he faced over P1,000 per day in penalties. Yet he knew that signing the application with the false statements was an act of fraud. What to do? What would you do? The answer to that question is at the heart of a growing split in the ranks of real estate investors. It also reflects a similar split in the society as a whole. Many would look at the investor's situation and claim, “It's not his fault- he didn't tell the lie, the broker did! Look at what he stands to lose if he doesn't close. Besides, he committed to close on that house- he can't back out now. He should just go ahead and sign the documents. It will work out alright in the end, especially since he's just going to flip or refinance the property within a year anyway.” The other side of the argument states, “Signing those documents is clearly loan fraud, and quite simply lying on the investor's part. Even though the original deceit wasn't his, once he signs his name he knowingly becomes a party to it, and the loan would be funded under false pretenses. Even though it may cost him money, and possible the deal, Bill should refuse to sign and try to work it out some other way.” There is no middle ground here, and if you plan to invest over the long term you WILL face some similar dilemma. The question is not if but when. Now, not when you are in the heat of the moment, is the right time to decide how you will respond. Simply stated, what kind of person are you? The kind for whom ethics are relative to the situation you are in, and how much pressure you're under? Or, are you a person who knows right from wrong and is prepared to do the right thing no matter the consequences? If you choose to be the second type of individual, who would opt for the right thing to do every time, then it will certainly be better for the industry, society and the rest of the world.  

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