Comments on: Short Sale Fraud on the rise…

By: Todd Alaniz

Todd Alaniz — Fri, 07 May 2010 20:53:31 +0000

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By: Maria

Maria — Sat, 27 Mar 2010 21:19:41 +0000

friend purchased a house, short sale, paid cash. the seller signed a contract with her friend stating she was the buyer. This was convient because the friends boyfriend provided her with a preapproved mortgage letter as a requirement for the sellers short sale package. The friend, once the short sale was approved, went into full speed to find a buyer for her “assignment” of her short sale in the amount of $60,000.00!2 weeks after the seller signed a contract with her friend, she signed one with me, I submitted it to the settlement attorney, and closed, paid cash.
The seller’s friend that didn’t find a $60,000.00 buyer for her assignment of contract was the “buyer” named on the short sale agreement between the seller’s lender and seller. So, the “friend” called my settlement attorney and instructed him to send my cash to the sellers lender in her name, and he did! No lie.
The seller also told the settlement attorney to send the money to lender in her friend’s name to back up friends story.
The “friend” signed settlement papers with her friend three days prior to my scheduled settlement, I didn’t know this happened, and the three of them (settlement attorney, friend, seller) all waited for me to go to my settlement, and pay for my house with cash.
The settlement attorney deposited my funds into a new trust account for the “friend”, and dispersed the funds in her name-not mine. He never ask me if it was okay or not! The “friend” is claiming she wants $5,000.00 for her “assignment” of contract that clearly was not a part of the contractual deal. Her contract was signed 2 weeks prior to mine, and I relied upon mine to close, so I thought. Settlement attorney sent ‘friends’ settlement docs to pay off sellers loans, and gave me the deed, and told me to just pay the “friend” the $5,000.00!
Friend claims she couldn’t sign the assignment of contract because she was with her boyfriend at the hospital the day of settlement-actually, I believe that she knew that she couldn’t show up at settlement, sign the assignment, collect $5,000.00 because she wanted to keep the lender from knowing she was trying to assign the contract for $5,000.00.
So, almost two years post settlement, she is trying to sue me for $5,000.00 for her assignment of contract, and her “negotiations” with seller’s lender.
Someone please tell me if this is standard operating procedures for short sales, because I just can’t imagine that it is. PS-I reported the settlement attorney to the State Bar Association.

By: Hank Favorito

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By: mrshortsales

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By: Sylvester Hartnett

Sylvester Hartnett — Sat, 06 Feb 2010 14:54:20 +0000

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By: AB

AB — Wed, 13 Jan 2010 22:23:39 +0000

Actually, there is another popular fraud is for the seller to ask a buyer to pay him cash in exchange for a lower offer to be accepted. The buyer will lower the property tax, the seller will pocket the cashe and leave the bank with the loss.

Don’t know how the lender deal with this.

By: FP

FP — Thu, 24 Dec 2009 21:11:42 +0000

A 3rd example that makes this more clear is if you remove the Bank from the situation. In the case above, you have the ‘Investor’ acting as the Sellers Listing Agent. In that case the Listing Agent has a duty to get the Seller the Highest + Best Offer possible. Now consider that an offer for $200,000 was received from a buyer and the Listing Agent failed to present it to the Seller, and INSTEAD told the Seller that no one will buy the property and that it should be sold to them for $150,000 because ‘that is all someone is willing to pay’. The Seller Agrees and closes with the Investor, then the investor turns around that same day and closes with the End-Buyer. That is Fraud because they had a fiduciary duty as the LISTING AGENT duty to present all offers.

By: FP

FP — Thu, 24 Dec 2009 08:04:00 +0000

If you look at the dates of the ‘End-Buyer’ Contracts and the dates the ‘Short Sale Investor’ Contracts, you can see that the Investor always executed their contracts AFTER the original contracts were received thus an illegal fraud contract.

By: FP

FP — Thu, 24 Dec 2009 07:59:36 +0000

Hi Tom, In My Opinion you may be spreading misunderstood information. If I am reading the article properly .. what the Connecticut ‘Scammers’ were doing was ..

- 1st getting an ‘end-buyer’ contract at market-value SIGNED BY THE SELLERS (now bank has ‘interest’ in this contract).
- SWAPPING the buyers contract with a 2nd ‘straw-buyer’ offer to submit to the bank instead of the ‘real’ contract.
- Getting the ‘staw’ contract approved and then going to the ‘end-buyer’ and telling them they are all set to close, without anyone knowing their was even a middle-man contract in place. Then obviously pocketing the difference.

That is by all means clearly fraud bc the ‘scammer’ literally SWAPPED a contract to the original owner (With bank interest) with their own ‘straw contract’.

BUT that is not the same thing as ..

- 1st Putting in a Short Sale Offer SIGNED BY THE SELLERS.
- Getting the short sale approved.
- Before closing, securing an end-buyer to pay a little bit more money than yourself and having that ‘end-buyer’ purchase from the ‘middle-man’ Short Sale Seller DIRECTLY.

In the first example, the sequence of offers is out of sync and so is the sequence of sellers. The first example the ‘Investor’ BREAKS the flow of contracts between the Seller and End-Buyer by REPLACING the short sale offer with their own. The 2nd example is a clear transition from Seller to Investor to End-Buyer.

1st example (illegal):
A) The original offer SIGNED BY THE OWNER should be sent to the bank and not ‘hidden’, since it is THE Short Sale Offer sold/signed by the home owner.
B) The ‘Short Sellers’ clearly played a trick by SWAPPING a contract between the homeowner and the end-buyer, with their own discounted offer.

2nd example:
- If the investors Short Sale Offer was SIGNED BY THE SELLERS and presented to the bank as THE offer (which it is), then everything is ok thus far. THEN the Short Sale Investor with ‘Vested Interest’ has every right to resell their ‘interest’ (property) to a 3rd party for more money.

This is EXTREMELY two different scenarios. The first REPLACES AND/OR HIDES an offer made TO THE bank (FRAUD), while the 2nd has an end-buyer contract with no ties to the homeowner or the lender (between investor and retail buyer only).