Developers/Builders/Sellers, Crediting Back Buyers Thousands for Purchase, Is This Fraud?

An on going trend in the Mortgage Industry, which has truly been around for years is, Developers/Builders/Sellers, crediting back buyers thousands of dollars to purchase their properties. This Kickback, money given to a buyer, in this case, for completing a real estate transaction, is paid outside of the transaction leaving no paper trail for investigators to find. Is this considered to be fraudulent? If every cent in any Mortgage loan transaction is not recorded, You Bet Your Ass!
This is considered to be fraud and it raises several questions with respect to the transaction as a whole. By the way, a Kickback is an illegal practice as well but that is a whole new topic in and of itself.
The HUD, in any mortgage loan transaction must reflect every penny being transferred. If the record dose not reflect one red cent, then a Red Flag goes up. In depressed real estate markets, and often with FTHB (First Time Home Buyers), Sellers/Builders/Developers can get really creative on making their properties appealling.
An example of this is when they place their properties in the market to be sold. The properties are listed for X amount of dollars. For this example, we will say $500,000. The interested buyer has the property appraised and his appraiser, appraises the property at $530,000 give or take a few hundreds. The Developer/Builder/Seller has a strong desire to move the properties so, he sweetens the deal for the buyer and offers to give him/her the $30,000 if he/she applies for a loan $30,000 more than the selling price of the property. The buyer complies. Hey thirty grand is a lot of money toward decorating the new diggs. The deal is written at an inflated sales price of $530,000.
As a FTHB (first time home buyer) or for anyone looking to purchase this property, this added attraction would be hard to turn down. Most people would give this offer a whirl and make this home purchase.
Is this illegal? This would be consider as fraudulent. Why? The Fact of the matter would be that this property's original sales price is $500,000. The property would be financed at $530,000. This is miss-leading to the lender and it is a lie. It is a total misrepresentation of the value of the property.
For a Lender, the property was listed at X amount of dollars, purchase price, and the amount of the loan to which most if not all lenders will lend, is the exact amount of X. This property transfers at $500,000 in the eyes of a Lender and not a penny more or less.
However, this kind of agreement between Developer/Builder/Seller and Buyer, would not be written in a Purchase Contract. It could never be written anywhere, for it is considered an illegal practice.
Although, it is an on going practice and while some are being brought up on charges for conducting such practices, others are continuing to operate in such a fashion.
One of the obvious reasons for this is the fact that many Developers/Builders/Sellers, have lots of property to sell. Too much property on the books that need to be moved stops him from operating. As with any business, when working capital is tied up, production come to a hault.
Developers/Builders/Sellers, have to keep moving. The only way for him to continue to do what a he does is to have the finances available. Move the property buy any means necessary.
By no means am I claiming to be an expert or an authority on the practices of building, buying and selling Real Estate. I am only making an observation and sharing my opinion.

C Rucker