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Beware of Fraudulent Short Sale Schemes - and the Fraudsters who perpetrate them. (Source: www.FBI.gov)

Posted by Becki Weaver on May 7, 2013 at 3:35am
Short Sale SchemesA real estate short sale is a type of pre-foreclosure sale in which the lender agrees to sell a property for less than the mortgage owed. Short sale fraud consists of false statements made to loan servicers or lenders that take the form of buyer or seller affirmations of no hidden relationships or agreements in place to resell the property, typically for a period of 90 days. One of the most common forms of a short sale scheme occurs when the subject is alleged to be purchasing foreclosed properties via short sale, but not submitting the “best offer” to the lender and subsequently selling the property in a dual closing the same day or within a short time frame for a significant profit. Reverse staging and comparable shopping techniques are currently being used by fraud perpetrators in the commission of short sale frauds. The fraud primarily occurs in areas of the country that are experiencing high rates of foreclosure or homeowner distress.Industry participants are reporting that short sale fraud schemes continue to be an increasing threat to the mortgage industry. A recent CoreLogic study indicated that short sale volume has tripled from 2009 to 2010.49 In June 2010, Freddie Mac reported that short sale transactions were up 700 percent compared to 2008.Industry sources report that in the process of committing short sale fraud, fraudsters are manipulating the Broker Price Opinions (BPOs) and MLS; engaging in non-arms-length transactions;50 using LLCs to hide their involvement in short sale transactions;51 failing to record short sale deeds of trust; using back-to-back and multiple real estate agent closings; selling properties to an LLC or trust months before the sale;52 selling the property to a family member or other party the fraudsters control and deeding the property back to themselves; engaging in escrow thefts, simultaneous double sales to Fannie Mae and Freddie Mac, and failing to pay off the original loan in a refinance transaction; property flopping;53 bribing brokers and appraisers; refusing to allow the broker or appraiser access to the property unless the fraudster is present; providing their own comparables to the appraiser; taking unflattering photographs of the property and pointing out defects in the property to the appraiser;54 providing false estimates of repair, rebuttal of appraisal, and selection of poor comparable properties;55 and facilitating the partnership of attorneys with non-attorneys to split fees acquired during short sale negotiations.56As reported in April 2013 on the FBI's official website:http://www.fbi.gov/stats-services/publications/mortgage-fraud-2010/2010-mortgage-fraud-report
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Watch Out For Blossom Valley Short Sales When The Seller is a Realtor

Posted by Marcy Moyer on October 8, 2012 at 7:29am

I was reading about short sales, as I do every Sunday morning on a great site for short sale information Short Sale Superstars. There was a discussion about a Bank of America Short Sale that had been approved, and then denied after the approval, a few days before closing. The reason:

The seller was a real estate broker and the listing agent works for the seller. The buyer used the listing agent to represent her.

Surprise Surprise, B of A said this is not an Arm's Length Transaction and rescinded the approval.

Blossom Valley Short Sale

 

There are multiple things wrong with transaction so let me see if I can organize the problems coherently.

1. All short sales must be an Arm's Length Transaction and an affidavit needs to be signed by all parties saying they are not related to each other in any way. The listing agent works for the seller so that is not arms length.

2. The seller may be offered a closing incentive by the bank, but is not allowed to receive any money from the buyer. Since the buyer is using the the listing agent who works for the seller and would have received commission for the sale, a portion of which would go to the broker, then the seller is getting money from the buyer.

3. Again, since the listing agent works for the seller and would get commission from the sale, a portion of which would go to the broker, the seller would be receiving money from the sale outside of the closing incentive.

4. The buyer has agreed to a dual agency and is entitled to the information that the listing agent works for the seller and that this can cause potential problems with The Arm's Length Transaction.

I do not know if the seller was trying to pull something over on the bank, or if he was just not familiar with short sales but this was totally avoidable.

Buyers: get your own agent to represent you.

Sellers: If you are a broker, get a different company to represent you. If you are an agent, get another agent to represent you, not your broker, and ask the bank if it is ok to be represented by someone else in your campany first, not after you are about to close.

If you have any questions about buying or selling a short sale in Santa Clara or San Mateo County please feel free to contact me.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E. 01191194

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