In these instances, once the seller has been paid in full by the bank, he then reimburses the buyer with sufficient cash to cover the upfront extra costs involved in any property sale transaction. This practice is fraudulent.
When a bank grants a loan, it will base the amount granted on the purchase price or on its own valuation, whichever is the lower. If the price is then artificially raised in the way I have described, the bank is, in effect, being induced to lend money on false pretences - and the practice is therefore illegal.
Another way of bucking the system is by structuring the deal so that the seller agrees to allow the buyer to pay the 10% deposit in instalments after transfer, with no real money changing hands at the outset. This, too, is fraudulent because the bank is not aware of the true terms of the contract.
Estate agents must not go along with deals of this type, even though they may appear to be helpful to both buyers and sellers. I also warn the conveyancers and attorneys involved in property transactions. If they condone this type of deal and are discovered to have done so by any one of the banks, they will immediately lose their position on all banks' approved conveyancers panels, which in many cases could lead to their bankruptcy.
There have been quite enough scandals in the industry recently. We have to ensure now that, although some might see this as a minor offence, this practice must too be rooted out completely so that the industry is seen to keep its nose clean.
