Posts tagged abc short sale

Short Sale Fraud – While not yet a law or an official policy, problems loom on the horizon thanks to a new take on short sales. The latest opinion released from Freddie Mac on short sales presents legal and practical issues for short sale investors.

On Friday, April 16, 2010, the organization posted an educational article titled “Emerging Fraud Trends: Short Payoff Fraud.” The article stated, in short, that short sales could be fraudulent if the lender does not have information about a pre-arranged flip of the property after the short sale to another buyer. This is a serious yellow flag for short sale investors who make their living negotiating good short sale deals with banks, then selling their new properties to other buyers for a profit.

The article described scenarios and red flags for short sale payoff fraud. The scenario revolved around a short sale facilitator who set up a deal with a lender to purchase a home worth 80K for 70K while the lender took a 30K loss. In the scenario, the facilitator fails to notify the bank he has a higher offer, 95,000, on the house. The second the facilitator puts his profits in his pocket, Freddie Mac considers him guilty of fraud because his negotiations caused Freddie Mac to ultimately take a “larger than necessary” loss on the sale of the property.

The article urges buyers, sellers and lenders to be on the lookout for short payoff fraud red flags. These flags include sudden borrower default, a borrower who is current on other obligations and the buyer of the property being an entity rather than a person. The article also tells readers to keep an eye out for resale options in their purchase agreement.

Everyone involved in a short payoff is encouraged by Freddie Mac to report potential short payoff fraud the second they become aware of a second purchase contract for a higher price. It may not be considered breaking the law, but it certainly looks like Freddie Mac wants to make short sales as difficult as possible for real estate investors.

Short Sale Fraud – The newest problem in real estate is not yet a law or an official policy, but it is definitely going to create issues in the market. The news from Freddie Mac on short sales could cause serious legal and practical issues for real estate investors.

Last Friday, April 16, 2010, Freddie Mac posted a new article entitled :Emerging Fraud Trends: Short Payoff Fraud.” Essentially, the article stated that a short payoff or a short sale can be considered fraudulent if the lender agrees to a short sale that already has a third-party buyer in place that is paying a higher amount than the agreed-upon loan payoff amount. This could spell trouble for investors who have been short-sale flipping, which means negotiating a short sale with the bank, then selling the property immediately to another buyer for a profit of a few thousand to tens of thousands of dollars.

The article described scenarios and red flags for short sale payoff fraud. The scenario was set up around a short sale negotiator or facilitator that engineered a short sale of an 80,000 dollar home with outstanding debt of 100,000 for 70,000 dollars. The facilitator does not disclose that he already has an outstanding offer for $95,000 from a second end-buyer. When the transactions close – in this case on the same day – and the facilitator pockets the difference, according to Freddie Mac he has just committed fraud because he withheld information about a higher offer and causes Freddie Mac to take a “larger than necessary” loss on the sale.

The writer encourages everyone involved in short payoffs to look out for short payoff flags. Flags include sudden default without explanation, borrowers current on other debts and buying entities. Additionally, they encourage people to look for an option clause in their purchase contracts that allow the buyer to resell the property.

Buyers, sellers and lenders all are encouraged to report short sale fraud the second they become aware of or suspect a second purchase contract for a higher price. This may not yet be a law, but the signs are not good when Freddie Mac has posted such a direct attack on short sale investors.

Short Sale Fraud – While not yet a law or an official policy, problems loom on the horizon thanks to a new take on short sales. The latest opinion released from Freddie Mac on short sales presents legal and practical issues for short sale investors.

On Friday, April 16, 2010, the organization posted an educational article titled “Emerging Fraud Trends: Short Payoff Fraud.” The article stated, in short, that short sales could be fraudulent if the lender does not have information about a pre-arranged flip of the property after the short sale to another buyer. This is a serious yellow flag for short sale investors who make their living negotiating good short sale deals with banks, then selling their new properties to other buyers for a profit.

The article described scenarios and red flags for short sale payoff fraud. The scenario revolved around a short sale facilitator who set up a deal with a lender to purchase a home worth 80K for 70K while the lender took a 30K loss. In the scenario, the facilitator fails to notify the bank he has a higher offer, 95,000, on the house. The second the facilitator puts his profits in his pocket, Freddie Mac considers him guilty of fraud because his negotiations caused Freddie Mac to ultimately take a “larger than necessary” loss on the sale of the property.

The article urges buyers, sellers and lenders to be on the lookout for short payoff fraud red flags. These flags include sudden borrower default, a borrower who is current on other obligations and the buyer of the property being an entity rather than a person. The article also tells readers to keep an eye out for resale options in their purchase agreement.

Everyone involved in a short payoff is encouraged by Freddie Mac to report potential short payoff fraud the second they become aware of a second purchase contract for a higher price. It may not be considered breaking the law, but it certainly looks like Freddie Mac wants to make short sales as difficult as possible for real estate investors.