An article in the SF Chronicle caught my attention this morning : 10 indicted in Calif. alleged real-estate scheme.
When money was cheap and pretty much everyone could get mortgage, the so called ‘golden years’ (they were not golden by the way) some interesting schemes were going around. There were also rumors that special FBI units would go after all those who committed loan fraud in the 2004-2007 market place. Well the article above is proof that they are after the ones who did so…
Rachel Dollar has a great blog as to Mortgage Fraud: www.mortgagefraudblog.com.
Well right now we have new schemes going around, never a dull moment in real estate… I hear wild stories about short sales, interesting ones and even if half is true well it’s still illegal/fraudulent. One of them is short sale ‘flipping’ -> it is like the scheme mentioned in the article above but then with short sales. An other popular one is selling the home to a family member and not disclosing this to the bank. And at this point, in the ‘short sale flurry’ some short sales might be approved based on incorrect information -fraud-…
I discussed this with my broker and her prediction is that in a few years, when short sales are done, the banks will go back in the files and do an audit… Ask your attorney about the statue of limitations on fraud…
Please when you consider a short sale, be upfront with your real estate agent and the bank about your situation, should a real estate agent promise you a quick turn around or some other to good to be true story, be very leery and interview an other Realtor, preferably one that has the CDPE designation.
And READ the short pay approval letter: a Short Sale has to be an arm’s length transaction, you CANNOT financially benefit from the sale -except for cash for keys etc approved by the bank-, your Realtor CANNOT be a family member and there are a few more. If there is a special situation, disclose this to the bank, have their approval : for instance when you rent the house back from the person who bought the house.
And last but not least: selling the house on paper for $450,000 and on the couch selling the couch for $50,000… probably not a good idea either.
Still you can plan short sale carefully and there are many more benefits short sales offer, that is for a later post.
Have a great day, Sonoma County is beautiful this time of the year: the mustard is starting to bloom!!!
Mirjam