Metro Atlanta Short Sale Fraud

With short sales becoming so prevalent in today’s real estate market, criminals have found new ways to take advantage of the situation.   It is the same scheme that took place during the housing boom when prices where rising rapidly, only now it is reversed and geared toward these changing real estate times.  Unfortunately, these folks looking to commit fraud are preying on poor homeowners who have fallen upon hard times and who are looking for an honest expert to aid them in a time of need with an honest and legal solution.

As a Realtor/Agent and short sale specialist who represents many sellers who are facing financial hardship,  my obligations are to represent my client and will always remain with my client throughout the process.   My goal is to LEGALLY sell a home for as much as possible and often this means requesting that lenders/banks accept a lower payoff on a mortgage balance in addition to relieving that seller of any additional liability if the market value falls short of what is outstanding on the home.  This legitimate practice is called a “Short Sale”.

The fraudster often enters the picture as an “investor” who is looking to flip the short sale and profit on the “spread”.  This person is most interested in making a large profit and will gladly commit fraud in order to do so.   Often these investors are in the form of other agents or have partnered with ignorant agents as a “team”.  What they do is approach the listing agent with the opportunity to double profit by selling the already listed home twice. I guess they feel this offer of a double commission will seduce a listing agent into forgetting his/her obligation to the seller and forget right from wrong.

The fraud enters the picture when this investor submits a low-ball offer to the bank/lenders (often called the A-B  transaction) while at the same time lining up a so-called “retail buyer” (often called the B-C transaction).  The investor then hopes to find an attorney who will “double-close” or “same-day” close the AB and BC deals.  The fraud enters when this second contract is not disclosed to the short selling lender.  These investors feel that just placing their intention to resell the property for a profit in the AB contract is full disclosure when it is clearly not.  This second contract (B to C) must be disclosed to the short sale lender prior to closing or you are committing fraud by withholding material facts to this lender. Secondly, the retail buyer’s lender (C-party) often is not made aware of the flip which is another undisclosed sale and fraud.  Most lenders in today’s tight lending environment will not approve a loan for a retail buyer without full disclosure of this “same-day” sale. This sale is an undisclosed sale if not listed on the appraisal used to underwrite this new loan.  In addition, many title insurance companies will not insure these “same-day” or “double-close” transactions.  Further more, most lenders have instituted title seasoning policies in an attempt to slow down the process of flipping because these fast flips are what led us into the real estate mess to begin with.

Lastly, if the spread or profit does not materialize for this so-called investor then what do you think happens to the deal? Well, they walk with no consequences and the short sale seller  is left with nothing and most likely goes into foreclosure.  What happened to looking out for their interests? Was bringing in this investor really looking out for them?

The final roadblock that these criminals now face are the short sale  lenders/banks who are starting to include language that approved short sales are not allowed to be resold for 30-days or the short sale can be voided. These dead restrictions are nothing new.  Fannie Mae owned homes have had them in their for years.

Bottom line, I am not saying all investors are bad or are out to commit fraud. In fact, I believe that investors have a key role in our real estate recovery but they MUST play by the rules.  Money can still be made but it will take added risk and cut down a bit on the profits to just do it the legitimate way.

If you are looking for short sale specialists who are honest, straightforward and play by the rules, contact us today.  If we determine that short sale is the best option for you after our consultation, you have our commitment that  it will be done by the book and with full disclosure to all parties involved.