Go to jail
Mary wrote:
Like JGC, I wish regulators would look more closely at short sales. My suspicion is that not only are some brokers not submitting all offers, they are in collusion with the seller to sell the property to a relative or friend (a not "at arm's length" buyer). I have buyers putting in very good offers on short sales who are not getting the properties, and watching the properties sell for less than their bid. Where are the regulators?
There are a lot of accusations in what Mary wrote above. She’s not the only one. I also got this email from another commenter and blog-buddy of mine:
Rona, I’ve heard tales of people taking out cash loans on credit cards and cars in order to appear in dire straits and qualify for a short sale. If a savvy person knows the rules, I could see it working in this business/banking climate.
They'd be short selling it to someone they know as cheaply as possible, then renting it back. The idea is also to buy back after some time. Works well with tight knit ethnic groups. I think this is happening more where similar, although arms length, deals are common. Say, CA, FL, NV, AZ.
So, here’s the scam:
1. Get behind in your bills, so you can prove that you can’t keep the house that has depreciated below to loan amount.
2. Make a case for a short sale with your lender.
3. Go through the motions of selling on the open market with a crooked agent. Have the agent send only the low Offer of your confederate to the lender.
4. Once you sell to your not-arm’s-length partner, rent it back from him/her or buy it back at a later date.
(I have, in the past, run into agents who don’t present Offers. But, I can’t prove it is happening now, or for this reason, based on my experience in the marketplace. I am experiencing the inability to see properties, which may be a symptom of the same disease.)
Readers, I don’t recommend that you try this for a number of practical reasons that go beyond the obvious moral reason: it is stealing and bank fraud. You go to jail if you are caught; it’s a nice jail (Devons or Danbury), but it is still jail.
Underwater sellers: if you mess your credit up even more, you could end up with no house and no credit. Your lender could get wise to you and sell the property to a real buyer. If you get caught orchestrating the scam, you go to that nice jail, too.
Crooked agents: This is a clear-cut violation of licensing law. It has a written paper-trail. It is very easy to get caught (see below.) You get caught, welcome to Danbury.
Honest agents: You don’t need a regulator to nail the agent(s) involved. Mary, if this happens again, you can confirm whether your Offer was presented by requiring receipt from the Loss Mitigation Department of the lender. (Lance knew this!) Look up the lien on line, then contact the lender. If you think this is beyond your scope, ask the buyer’s attorney to do it.
If you are sure your buyer’s Offer was not presented in previous sales, go after them now, if your buyer is willing. Same drill: contact the lender and review the file with someone in the Loss Mitigation Department.
Loss Mitigation personnel: You can identify the stinkers by calling to see the houses. The agents who don’t follow up to show it are more likely to be crooked. Hire some temps to see and make Offers on your portfolio of houses to sell. You’ll catch yourselves some stinker-agents and be a hero in your department. Once word is out that your lender does spot checks, the fraud will go down quickly! It seems like easy due diligence to me.
Although the reports are piling up, I have no first-hand experience that this is happening here. Has anyone had first-hand experience in nailing someone on this scam? Am I a cock-eyed optimist to think this can be stopped without further regulation?
