Posted by: Catherine | September 14, 2010

Beware of short sale fraud – it’s out there!

Usually fraud feels like fraud, but sometimes fraud is masked by someone who acts “well meaning” and in fact, very professional.  First thing that sellers need to know, is that NO ONE should be asking you for any money up front to work on a short sale for you.  Do your research, there are very few local companies that have permission from the state to collect “advance fees.”  As a buyer, if you are asked to cooperate in paying a negotiators fee, it needs to be disclosed to the short sale lender. Any monies that change hands between parties, or for the benefit of, or result from, the transaction – needs to be documented on the HUD statement.  From the article Real Estate Department warns of rising short sale fraud:

For one thing, a growing number of short sale negotiators are demanding upfront payments to work out an agreement with a lender on a borrower’s behalf, then failing to do anything in return for that fee.

Upfront payments are illegal without prior approval from the state, which mandates that money is held in escrow until after services are rendered and there’s a full accounting of how the money was spent.

Some short sale negotiators also are compelling buyers to pay their fee and failing to disclose that payment to lenders.

The other type of fraud becoming more and more prevalent, however not new, is short sale flipping. Just remember the old adage, if something sounds too good to be true, it probably is.   Short sale flippers take many forms.  But in our market remember one thing, priced right, you will get an offer – in fact in many areas, multiple offers. You don’t need someone on their white horse to come in with an artificially low offer buying your home only to turn around and flip it for a higher price days later.  Lenders need to be told the whole truth, if they are told that is the most they can get for the home, and later it is sold at a profit following the close of escrow, you don’t want to be a part of that kind of fraud.  In fact, many lenders now have verbiage in their short sale approvals that all parties are to sign, that no transfer of ownership may take place in so many days (30 or 60) following close.  Again, from the article:

A more costly form of fraud is short sale flipping. That’s when a lender is told of a short sale purchase offer that is described as reflective of a property’s fair market value, when in fact the offer is much too low.

The lender accepts the offer, believing it’s the most it can get, and after the deal closes the house is immediately resold for its true, higher value. The perpetrators of the fraud, who could be agents, brokers, appraisers or straw buyers, then pocket the difference between the two sale prices.

You only need one good offer from a legitimate buyer. There’s no reason to play games with the price, or assist someone in convincing the lender of an artificially low market value.  Stay above board, enlist a seasoned short sale real estate professional and do your homework.

If you need help, contact Catherine Myers short sale team. Servicing sellers and buyers in Contra Costa and Alameda Counties including Walnut Creek, Concord, Clayton, Pleasant Hill, Martinez, Lafayette, Orinda, Moraga, Alamo, Danville, San Ramon, Dublin, Livermore, Pleasanton, Ruby Hills, Pittsburg, Bay Point, Brentwood, Antioch, Oakley.

I’ve had dozens of short sales completed in the last year and hundreds serviced in the last 3 years.  Experience counts. I am your short sale resource (SFR) REALTOR.  I’m a broker with over 9 years experience in our area.  Don’t believe the rumors – MOST SHORT SALES close.

Contact me at the above contact tab, or by calling 925-683-2125Confidential free consultation available. Resources and referrals to attorney and tax professionals.

Catherine Myers
Broker Associate
DRE Lic 01337828

Windermere Walnut Creek
1981 No Broadway, Suite 120
Walnut Creek, CA 94596


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