A realtor offering this deal, is it fishy?

A realtor is trying to convince a friend to buy a house even if he has no down payment. The realtor explained, that they can look in an area for a house that is below the market value for any reason and ask for a bank loan at the market value. Example, if the house market value is $280K and the seller is willing to sell it at $250K, the buyer can apply for a $280K loan, and having the $30 in his bank account as if he is ready to pay them as down payment (assuming my friend can get the $30K from a relative as a loan to pay back once this is done). When the bank approve the loan based on this ($280K house, 30K down and 250 loan), the buyer pay back the 30K to his relative, and finalize the $250 loan.

I told my friend, it can not be legal, even though it is legal somehow, it sounds fishy deal. First, I know the bank is involved in every detail, the bank will know the exact final selling price which is $250K, let alone that the bank is involved of delivering the down payment to the seller. Am I right? Is it fishy? If so, does this practice have a name so I can google it up and send links to my friend to convince him to stay away of that game?

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