Some of the Short Sale scams involve misrepresentations made in a Short Sale Package for the purpose of obtaining a Short Sale lender’s approval. These misrepresentations may be made in the original short sale package submitted to the lender or in subsequent dealings with the lender. Knowing a short sale lender’s general requirements, a scam artist will manipulate the truth to improve the chances that a short sale package will be approved by the lender and the deal will close escrow.
Some of the improper tactics that may be used include, but are not limited to, misstating the truth, making up stories, concealing important facts, submitting false documents, and forging signatures. More specifically, examples of improper tactics involving short sale packages include, without limitation, the following:
1) Fabricating a hardship situation for the seller by creating bogus documentation, when in fact the seller does not have a hardship that satisfies the short sale lender’s requirements.
2) Short Sale buyer is a a straw buyer (e.g., a relative with a different last name), while the sale is represented to the bank as an Arms Length Transaction.
3) Presenting the property as Owner-Occupied to improve the chances of a short sale approval, when in fact the property is occupied by a tenant. This is less significant now since the investment properties are now covered by Short Sales.
4) Fabricating the marketing effort as if the property has been actively listed for sale in an open market for many months and sold for fair market value, when no such effort is made and a straw buyer is presented to the bank as the only viable option. This technique is used to flip Short Sales from an AB Sale to AB-BC flip.
5) Making it appear as if the property has been sold in good faith to a buyer for fair market value, when in fact the improper means to ascertain the lowest price the short sale lender would approve and simply wrote that price into the sales contract.
6) Shielding any payments to the seller and other arrangement between buy and seller from the Short Sale Lender.
If you some how suspect that any improper activity is taking place, you need to notify your Lender and take steps to avoid getting involve with any activity that is against the law.
Contact Us if you have any questions.