Should You Be Worried About Short Sale Fraud?

by blogger1
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on Aug 03 in BestTransactionFunding

There have been a number of stories about ‘short sale fraud’ circulating in the last couple of weeks. Short sales are of course one of the great sources of discounted properties investors using transactional funding tap into to make big profits flipping houses. So should you be worried as a real estate investor and consider staying away from short sales?

Not at all! According to one Washington, DC attorney and short sale expert in an interview this week ‘short sale fraud’ is mostly a concept dreamed up by greedy lenders who are jealous of the profits real estate investors are making.

So how are some getting in trouble for their involvement in short sale flips? It is important to note that it isn’t the investors using transactional funding to acquire and flip homes for quick profits that are finding themselves in hot water. It has been licensed real estate agents who have been found to have mislead and blatantly lied to the banks in order to get short sales approved that have been the ones catching the heat. Such is the case with the Realtor in Connecticut who just got 8 months in the slammer. It seems she found a buyer and instead of submitting that offer to the bank, had a fellow real estate agent buy the property and then had them flip it to the end buyer for an extra $30,000. Nothing wrong with making a quick profit. The issue was the agent in question clearly abused her position and deceived the bank by telling them the property couldn’t sell for more when the deal was already set up.

Should the banks care at all if the property is resold, who to, when and how much for? No, if they are happy to recoup what they can and complete the short sale that should be the end of the story. Though licensed agents do have a fiduciary responsibility and those required to sign an affidavit confirming full disclosure in the A-B side of the transaction ought to be upfront. However, again full time real estate investors may want to think twice before renewing their real estate licenses again just to avoid the extra potential heat.

Otherwise get out there, lock down wholesale deals, put offers on short sales and use your transactional lender to help you flip homes quickly for some nice paychecks.

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