Short Sale Fraud is Rampant Nationally

By Sari R. Updated on 10/8/2012

Experts are worried that short sale fraud has become rampant and is skipping containment lines.  This past Wednesday, experts spoke about these details at the California Association of Realtors conference.

Since short sales pertain to selling homes for less than the mortgage’s worth, agents have been trying to get the lowest prices for the homes. This is done by staging the home to look its worst and being advertised in a multiple listing service that is far away from the property.

As soon as the lender concedes to selling the house at the low price, the house is quickly flipped and sold at its true value – leading to thousands of dollars in gains.
Experts think that agents and brokers need to be vigilant in order to prevent losses.  The most common schemes that experts think agents and brokers need to be on the search for are:

•    False information: phony details are included in the closing settlement statement to conceal costs and fees
•    Side agreements: the seller and buyer have a side agreement to pay off short sale negotiator fees
•    Non-arm’s length transactions: the short sale buyer and seller are related (normally arranged by underwater borrowers to repossess ownership of the house without mortgage debt)

One big problem contributing to this short sale corruption is the fact that seminars are popping up everywhere targeting agents who want to make an “easy short sale.”  The other huge problem is due to the “sovereign citizens movement.”  This refers to those individuals who are anti-government and believe they are “sovereign” from the United States and thus try to forego paying off their mortgages.

Many agents have complained that they are losing clients because they won’t participate in short sale fraud.  As of 2012, the agents who are refusing to participate in the fraud are in the minority.  Experts say the solution to making this short sale problem better is for brokers and agents to report tangible problems and violations of the law.

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