Here in the Palm Springs Valley of California, the past 4 years have seen a pile of Short Sales listed and closed.  Unfortunately, there have also been some questionable methods to this short sale madness.  This article sums up some of the Short Sale fraudulent practices that are showing up more and more frequently.  If you are considering a Short Sale, be sure to use a list Agent that is experienced in your area and bone up on the Short Sale Law in your state.

Don’t let your Short Sale turn into a Lemon..

Short Sales are here to stay for another couple of years.  The Deficiency protections afforded to Sellers of Short Sales in California is ecpiring 12/31/2012.  Will it be extended?  Nobody knows for sure.  It would be the smart thing to do  in our non-recourse state to avoide a slew of Foreclosures..but Lenders are not know for their “smarts”..rather their bottom lines on their books.

There is alot of Short Sale fraud happening.  Be careful about your List Agents and document everything!

.  Orange County Register

Short sale fraud “heating up,” expert says A panel of short sale experts presenting at CALIFORNIA REALTOR® EXPO 2012 in Anaheim last week said that “fraud is heating up like a wildfire right now …” and “we’ve got to be aware that this fraud is changing directions, jumping containment lines.”

• Short sales involve the selling of a home for less than is owed on its mortgage.
• Among the most common forms of fraud are: Flopping, non-arm’s length transaction, side agreements, and false information.
• Flopping: Scammers arrange to buy a home at an artificially deflated price intending to flip it immediately at its actual value.
• Non-arm’s length transactions: The buyer in a short sale is related to the seller by blood, marriage, or some type of business or personal affiliation.  This istypically arranged by an underwater borrower to regain ownership of the property free from the mortgage debt.
• Side agreements: In addition to payments included in a lender’s “approval letter,” the buyer and seller have side agreements to pay off junior liens, short sale negotiators’ fees, or other third-party fees.
• False information: The transaction includes phony details in the closing settlement statement, or HUD-1, to hide buried costs and fees.

I will do NOTHING that is not disclosed on the HUD.  Sellers and Buyers may not have ANY knowledge of each other.  Short Sales must be taken very seriously..