How much short sale fraud is happening? I read that with the Home Affordable Foreclosure Alternatives (HAFA) program launch on April 5, 2010 there will be a rise in short sale mortgage fraud. I hate to say it but it is already going on and nobody is stopping it as of now.
Here are three examples of short sale fraud I have seen.
1.) A "investor" gets the home owner that is upside down to sign away their rights to the property. The "investor" hires a real estate agent. They find a buyer for the short sale. The "investor" makes money off the deal by either buying the short sale from the bank and then quickly selling the house to the real buyer after they close the short sale with the bank. The "investor" makes money off the misfortune of others and makes a buck without investing a dime.
2.) A real estate agent takes a short sale listing. He tries to influence the banks BPO agent to give a low price. If he is able to negotiate a low price below market value he has a "friend" buy the property. The friend buys the property and then the agent re-lists the property after a little fix up. The agent gets some of the profit from the sale and gets the listing commission too.
3.) A seller hires a real estate agent they know to get ready to list a short sale. The sellers friend or family member with a different name gets another agent. The buyer tells them they know of a short sale that is coming on the market. The same day the house comes on the market before anybody else can bid on it the sellers friend or family member puts in an offer. That offer goes into the bank because the listing agent is using first in only. I have seen this happen in Northville.
Other higher and better offers come in, but the sellers agent disreguards them because they use the "first in" rule. They dis reguard their obligation to get the best deal or highest offer for the bank. They protect the seller. The seller's friend or family member buys the house. The seller continues to live in the house. The seller's friend either leases it back to the seller, or has the seller pay the mortgage payment to them.
The short sale seller has bought their own house back at a much lower price than they originally bought it for with the aid of their real estate agent. They have beaten the bank out of money and helped commit mortgage fraud.
It's happening already and I don't think the banks or the FBI is going after these people individually.
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Russ Ravary your Metro Detroit realtor
This is so true...Friends of mine are doing this right now! Purchase property for $450k and are shortselling it to a "friend" for $170k only to buy it back. How can people get away with this? and they wonder why we have banking issues. The same people pulling off these scames are the very people that bought homes they couldnt afford. The hole thing makes me sick!
We are trying to purchase a house and just found out the seller is committing this short sale mortgage fraud. For months he has led is to believe it was our offer submitted to bank and that was who we were purchasing the house from. In reality the selling agent has promised it to an investment company buying it dirt cheap from the bank, unknown to the bank that we are offering more. Then that company had planned on selling it to us at the inflated price and make a quick profit. We just found this out and are devasted. We have invested so much time being mislead we do not know what to do. The selling agent had lead us to believe the entire time we were buying this short sale from the bank. Now my agent tells us we could be comitting fraud too if we purchase this house and not only that but no one will even touch this house for a motgage because of the "flipping" on the house. We do not know what to do. If any one has any advice or knows what we could do please contact me. We really want this house and want to get this seller for lieing to us all this time.
Jaclyn,
Yes there might be a 'flipping" issue. If you really want the house even though a third party is going to make money. That is something you need to discuss this situation with your lender. If they say they won't do the loan then you have to move on. Somebody will probably buy the house this way. So you have to decide how you will feel and how you will feel ethically.
It is the seller's agent that is up to his neck in trouble. The selling agent has a fiduciary duty to present all offers to his client. Which he is not doing. He is blind siding the selling bank.
Unfortunately the homeowner seller doesn't care. They only want out from under the mortgages. Sometimes they are even given a small amount of cash. Most times not. So yes the home owner is part of all the shenanigans. They know the bank is not getting the highest price. So basically they are cheating the bank out of more money.
Sadly it is hard to turn the agent in. Who would you call? And sometimes the selling bank only cares about getting rid of the bank. So the bottom line is yes the bank is being screwed by everybody that has knowledge of the deal.
Would you go to jail? I honestly doubt it. Is it mortgage fraud? I honestly don't know how a judge or the legal authorities would view it. So you have to decide what your ethics and morals are. It's up to you. Nobody can be your moral compass but you.