Massachusetts Real Estate

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Short Sale Realtors v.s Short Sale Investors|Do Lawsuits Wait in The Wings?

Flipping, flopping and the potential future lawsuits with short sales                                                                                                                                                       Short sales in Massachusetts

If you are a Realtor and work with short sales you may want to check out the article I wrote about one type of short sale fraud. The blog article is a very transparent battle between my view points, views of a few other Realtors and those of short sale investors.

If you are into controversy go visit the article because you are in for a real treat! In fact the article was plagiarized on Active Rain and I had to ask the powers that be take it down!

Many of the short sale investors who made comments have a problem with the title of the article as they believe that I am casting a negative light on all short sale investors. Actually this was not my intention in writing the article at all.

I truly want to make all consumers aware of what is going on in the world of short sales. There is short sale fraud taking place on a monthly basis throughout the country.

Don't tell an investor that though....they won't believe you. In fact they believe the national media has it all wrong.

Short sale fraud comes in many forms but the example I discussed was when a short sale that is listed for $175,000 receives an offer from a couple that wants to buy the home for $160,000.

Instead of submitting the offer to the lender, the agent calls up an investor friend and has them submit an offer for $140,000. The agent does not let the lender or seller know about the $160,000 offer but instead submits the investors offer of $140,000.

The investors offer of $140,000 gets accepted and the investor turns around and sells the property to the couple who was willing to pay $160,000. Folks this is what is known as MORTGAGE FRAUD! The other term for this practice is known as “flopping”. Someone caught doing this will more than likely find themselves in Federal Court. Both the Realtor and investor in this example are obviously criminals.

The article goes on to talk about why a consumer should do their home work when deciding to work with an investor or not.

There were some very good points made from some of the investors along with some ridiculous statements from others that don't have a clue about Real Estate laws and what the term fiduciary responsibility means. The ones that really get me are the investors who are also Realtors. Frankly they should know better.

They were all trying to poke holes in everything I wrote and were even bashing me in their investor forums (Bigger Pockets) all the while thinking I would not see it. Most of them obviously don't know how the internet and search engines operate. It was very comical to watch it all unfold behind the scenes.

All these investors were writing things like "I am the dumbest Realtor in the Northeast", "I can't believe this guy can even get business he's so stupid and that's putting it nicely", "I can't even believe he got a license". While I certainly have strong opinions, I did not post any disparaging remarks. I truly was LMAO looking at some of the comments being written.

I have been fortunate that I have closed every short sale I have listed. I will admit there is some luck involved with that and my streak will come to an end at some point. A couple of investors did not believe me and went so far as to call me a liar. Real Classy. And investors wonder why they get a bad rap with Realtors!

What you can take away from this article and the comments from investor land is that they absolutely hate it when Realtors mention anything negative about them. We all know there are good and bad eggs in every business. There is no exception for those in the investment world. Don't tell them that though. Every one of them is walking on water in their eyes. The media is just providing sensational journalism folks!

They will tell you that they are providing a service and helping home owners escape foreclosure. Fine..I have no problem with that. In fact I believe that all of the investors that visited my blog and made comments are probably honorable, trustworthy and good at what they do.

I repeatedly stated over and over that I don't have a problem with their business. If they can free a short seller from their debt and make a profit all the power to them.

There is a very big difference however, when a property is listed with a REALTOR and here is why!

Realtors should not let short sale investors take over negotiations with a lender!

The reason why short sale Realtors should not let a short sale investor take over negotions with a lender is fairly obvious.

If you are a Realtor who does short sales or is thinking about doing them here is where you really need to pay attention. Without a doubt we live in a very litigious society today. There is going to be lawsuits that come out of many of the short sale transactions that are taking place or should I say don't take place.

                                                                                                                                                        Dumb short sale Realtor

When you sign a listing contract to represent a seller they are YOUR client. YOU are THEIR trusted adviser and advocate. You need to be thinking about doing everything possible that benefits THEM.

The same holds true when it is a short sale transaction. The rules of the game don't change! This is where investors don't understand that we are held to different legal standards than they are.

What do you mean by that Bill? Simple...when a person needs to short sell their home and they hire me they can expect that I am going to do everything that I normally do for every other seller. My goal is to get my client the best terms and conditions.

Once I get a good offer from a buyer that has a strong probability of closing, an attorney, who is part of my team, takes over the negotiations with the lender. The attorney I use is very good at what he does. This is part of the reason why the seller hired me. Most of the sellers have done their research and selected me because of my track record with closing short sales.

When an investor approaches you about making an offer they will undoubtedly want to negotiate the deal for the seller. Well guess what the seller didn't hire an investor to get them out of the financial mess they are in... they hired YOU!

If you go along with this arrangement and the transaction goes sour for any reason causing the seller to be foreclosed on guess where the fingers are going to be pointed. Do you have a mirror handy? This is akin to letting a buyer's agent negotiate for the seller!

I can already hear the seller's attorney in court:

"The Realtor said this was a good idea and told you should let the investor take over the short sale negotiations Mrs. Jones. Is this correct? Yes sir it is.

"Didn't you hire this Realtor and his team to help you with your short sale mam"? Yes I did sir.

"Did the Realtor advise you to work with this investor mam"? Yes sir they did.

"Do you know this short sale investor MR. Gassett?" No sir I do not.

"Mr. Gassett do you think the investor was working on behalf of the interests of your client"

Well Um Err they told me they were going to do everything in the best interests of Mrs. Jones.

Your honor.... no further questions.

NO THANKS! I certainly don't want to find myself in court and neither should you. Do yourself a favor and don't end up looking like the dude above.

Other short sale reading:

Strategic default vs strategic short sale

Short Sale debt release

When to do home inspection for short sale

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About the Author: The above Real Estate information on Short sale Realtors and short sale investors do lawsuits wait in the wings was provided by BillRE/MAX Executive Realty Metrowest Massachusetts Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-435-5356.

Have a home to sell in Metrowest Mass? I have a passion for Real Estate and love to share my marketing expertise!

For Metrowest Massachusetts Real Estate and short sales see Massachusetts Short Sales. Want to have MLS access to beat other buyers to your dream home? Sign up with no obligation at my MLS Property Finder Site.

I service short sales in the following towns in and around Metrowest Massachusetts: Hopkinton, Milford, Upton, Bellingham, Southboro, Westboro, Ashland, Holliston, Mendon, Northboro, Shrewsbury, Hopedale, Medway, Grafton, Northbridge, Uxbridge, Franklin, Framingham, Natick and Douglas MA.

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Comment balloon 106 commentsBill Gassett • September 08 2010 07:52AM

Comments

THanks for the information Bill. I haven't had this occur with any of my short sales yet, but it's nice to know that it could happen.

Posted by Larry Brewer - Benchmark Realty llc (Benchmark Realty LLc) about 7 years ago

WOW! Never heard that one Bill!

Short sales are not easy!

Posted by Michele Miller ~ REALTOR®, LMC, HSE, CHS, SRES, CMRS, 'Helping You Make the Best Move" (ERA Key Realty~Worcester County Realty Group) about 7 years ago

Larry & Michele - Mortgage fraud in short sales has become a bigger part of our landscape. The most recent one that made national news was in CT with a Realtor who was doing what I described above. This kind of activity has been happening a lot and the FBI has stepped up their efforts to crack down on it.

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) about 7 years ago

Bill ~  I had a huge argument with 2 Realtors(r) in my area on this very point... I advised my clients not to get near this type of transaction, or if they chose to do so, they needed to seek legal counsel and I would not be able to represent them.  This is just one type of scheme out there.  What I don't get is where are the regulators... these types of things are easy to find and why wait until there is so much harm done?

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) about 7 years ago

Bill:  Hope this becomes a feature, as you've covered some very salient points every agent should familiarize themselves with.  I do believe you hit the nail on the head here, especially 'inviting' anyone else to negotiate on behalf of the Sellers.  If the Sellers want to hire a negotiator in addition to yourself, then that needs to be done by them directly!

Your points regarding Mortgage Fraud happen all too often and are a symptom of greed, which contributed to the mess our real estate market is in right now.  Thanks for shedding the light on the dark side of our business!!!

Posted by Tish Lloyd, Broker - Wilmington NC and Surrounding Beaches (BlueCoast Realty Corporation) about 7 years ago

Bill. I too have been very lucky so far and have all short sales contracts I have written close. Further the buyers were end user and all still own what they purchased. But you do bring to light the dark underbelly of the investor flip for profit no matter how close to the edge they are willing to skate for a profit. I'm glad you have taken a sticks and stones attitude with your detractors...the ones that scream the loudest are usually the biggest offenders.

Posted by Steve Loynd, 800-926-5653, White Mountains NH ( Alpine Lakes Real Estate Inc., ) about 7 years ago

I think there will be a lot of lawsuits over some of the fraud that is out there.  Think of the case of the seller that is never told about additional offers that later find out about simultaneous closings after they get a deficiency judgement!

Posted by Jim Paulson, Owner,Broker (Progressive Realty (Boise Idaho) www.Progressive-Realty.info) about 7 years ago

Great Article.  I do short sales for clients as well as my husband and I are real estate investors.   We purposely have stayed away from the "double closing" on short sales; and don't feel it's legally or ethically correct.   But I attend many real estate investor meetings and they often talk about buying short sales with another "buyer" already in the wings.   I agree, there will be lawsuits over this.

Posted by Kathy Torline, Colorado Springs Real Estate Blog 719-287-1049 (ERA Herman Group Real Estate) about 7 years ago

Really great article, Bill.  And it could get a lot worse than getting sued.  Bad actors among us could wind up an an unpaid vacation at the Realtor's Wing at Club Fed.

Posted by Patricia Kennedy, For Your Home in the Capital (Evers & Company Real Estate, Inc.) about 7 years ago

Bill, I couldn't agree with you more. I loved the other post too by the way.

I am very vocal about this, when I am acting on behalf of a buyer I ask directly if this is the case, then warn my buyers they will pay a significantly larger amount than the bank has agreed to accept and will be lining the pockets of these negotiators/investors. No one has wanted to see those homes so far.

As a listing agent, I tell them if this is the route they want to go, they need another agent. I will not participate in this.

I am still chucking at Pats comment (#9). I for one do not think that the Realtors Wing at Club Fed would be a good place to vacation!

Posted by Andrea Swiedler, Realtor, Southern Litchfield County CT (Coldwell Banker Residential Brokerage) about 7 years ago

Thanks everyone for your comments. Short sale fraud is certainly something every Realtor should pay attention to! There will be a lot more lawsuits that will come out of many short sale transactions.

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) about 7 years ago

Bill - I remember that articel but didn't know about all the scuttlebut behind the scenes.

An agent friend of mine in Orange County described pretty much that same scene on a house in her neighhood. Can't say I'm surprised folks are workin' it. LEt's hope they DO end up at Club Fed.

Jeff

Posted by Jeff Dowler, The Southern California Relocation Dude - Carlsbad (Solutions Real Estate ) about 7 years ago

OK, I had to come back. Although I mentioned it in my comment above, how could I, in all good conscience, and adhering to my fiduciary responsibilities to a buyer, walk them into a situation where I know they will be OVERPAYING FOR A HOUSE according to what the lender has already agreed to take? I want someone to explain that one to me. How the hell is that right, on any level, on any planet?

I will stop now Bill, am in the midst of reading the comments on your Wordpress blog, and guess what is coming out of my ears? STEAM!

Ghesh Bill, thanks for getting me started this morning, LOLOL.

Posted by Andrea Swiedler, Realtor, Southern Litchfield County CT (Coldwell Banker Residential Brokerage) about 7 years ago

Jeff - Talk about getting beat up by investor land:)

Andrea - It was really comical to watch the investor geniuses make their derogatory remarks about me thinking I would not see them!

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) about 7 years ago

I can't believe that those readers hadn't gone to the FBI website.  It's all fun and games until you go to club fed! (sorry to steal a line from the commenters above)

Not all investors are doing this wrong, just some.  Some state SOL are VERY long for deficiencies and they don't realize that we are no where NEAR the deficiency time since the bust.......yet.  Give it another two years and see how that is workin out for ya!

Nevada does have a law that specifically deals with short sale and loan mod negotiations now.  Only licensed individuals and attorneys can negotiate.  I don't think that is necessarily a bad law and I wonder how many people do not realize it exists.

Posted by Renée Burrows, Las Vegas Real Estate Broker - www.urLVhome.com (Savvy Home Strategies Realty, LLC-REALTOR®-Estate-Probate) about 7 years ago

Renee the law that Nevada institued makes perfect sense! Why should a buyer be allowed to negotiate for a seller? That makes no sense at all. I applaud them for making the change!

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) about 7 years ago

Bill, i read your other article & you were very clear about these short sale realtors...i'm seeing alot of them too...have not had trouble with any investors trying to take over my transaction..they know Not to approach me in any way with workarounds...good for you for firing right back...i suggested it..

Posted by Ginny Gorman, Homes for Sale in North Kingstown RI and beyond (RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate) about 7 years ago

Bill,

Times have changed! Today, the only thing worse than a total idiot negotiating a short sale on behalf of a troubled seller is letting an investor or his agent do the negotiating!

If an honest investor doesn't trust the listing agent's ability they can insist on an agreed upon pro'.

It wasn't this way even 5 years ago, but times have in deed changed!

Bill

Posted by William J. Archambault, Jr. (The Real Estate Investment Institute ) about 7 years ago

Sadly, there will always be folks who think they can "work the system". Since short sales are now commonplace, this was bound to happen.

Posted by Craig Rutman, Raleigh, Cary, Apex area Realtor (Helping people in transition) about 7 years ago

Bill--Wow...I was not surprised to read about the practice but shocked by some of the comments they used against you for exposing the practice. I feel for that original owner that might be on the hook in some way for that additional $20K too....It isn't like this is a practice where "nobody but the bank" is getting hurt. Fraud, like shoplifting, hurts everyone in the long run. Kudos for exposing the practice.

Posted by Teri Eckholm, REALTOR Serving Mpls/St Paul North & East Metro (Boardman Realty) about 7 years ago

Bill, like Jeff I to "remember that articel but didn't know about all the scuttlebut behind the scenes."

What I find amazing is that those that will come out in support of this behavior will be the one screaming the loudest when it all goes down the toilet.  I can still hear load and clear some of those that defended some of the questionable practices that were going on with Subprime Loans and the fraud that took place then, and to some extent still continues to take place.

Making money is not an excuse to turn a blind eye to what is going on.  Fraud is fraud, and they can come up with what ever politically correct phrase that they want, at the end of the day it is still fraud.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) about 7 years ago

Bill:  Amen!  I couldn't agree with you more.  These investors have inside contacts at the mortgage company that are also committing fraud.  They have a fidiciary responsibility to the investors backing the loan to get the best price.  Meanwhile, our tax dollars are going to make up for these daily crimes against banks.

Posted by Chris Ann Cleland, Associate Broker, Northern VA (Long and Foster REALTORS®, Gainesville, VA) about 7 years ago

Awe Shucks!  I've seen it all. 

Recently had investment buyers who tried to flip a regular listing to their LLC at closing which LLC had a contract with a buyer to buy for about 15% over appraisal.  Neither Buyer nor Seller have a clue.  The title company caught it and alerted us.

Over the years, I heve never and will never permit a buyer or investor to speak directly with a seller.  Never.  My listing partners are often tempted when under pressure, but, in the end, they listen to reason when I tell them of the risks involved.  

Fiduciary is not to be ignored.   

Posted by Lenn Harley, Real Estate Broker - Virginia & Maryland (Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate) about 7 years ago

I can't see that short sales are such a good deal for the investor.  The ones I know want 70% off market, and you know a bank is not going to do that. 

Posted by Pat Yoest, 702-521-1442 (Century 21 Aadvantage Gold, 702-719-2100) about 7 years ago

These investors have contacted me ad nauseum. The question they cannot answer is why I would ever, in my right mind, recommend to my client that he or she make the buyer an authorized 3rd party to negotiate on his behalf with the mortgage company. 

Posted by J. Philip Faranda, Broker-Owner (J. Philip Faranda (J. Philip R.E. LLC) Westchester County NY) about 7 years ago

I have also written a number of posts about short sales with investor buyers. They hardly ever work out anyway, so to me they would not be worth the time. Then, there is that little issue of fraud, conspiracy to defraud the FDIC or the mortgage lender, and of course that little itty bitty piece of paper called my Broker's license. Nice post, Bill!

Posted by Melissa Zavala, Broker, Escondido Real Estate, San Diego County (Broadpoint Properties) about 7 years ago

Bill,

I'm sure you'll be getting some comments from a few investors on this..I'd be curious to hear them chime in with their views.

Posted by Neal Bloom, Realtor CRS-Weston FL Real Estate (eXp Realty) about 7 years ago

Excellent post and I am right there with you.  I also have sold and closed every short sale I have listed.  You are absolutely correct.  I have also pointed this out regarding investors and these idiots that call you and say "let me handle everything and you will still get your 6%."  I think everyone forgets if its too good to be true well then you know the rest.

What is most upsetting is some of these pose themselves as attorneys, etc. and sell their services no less to these desperate sellers.   Sometimes it just makes be sad that people who already in a terrible emotional and financial bind are being preyed upon by unscrupulous individuals. 

Posted by Esther Camarotte (Keller Williams Capital Properties) about 7 years ago

Bill, even in the first few paragraphs, I was gasping. Any agent who does not submit an offer to a bank but instead solicits another offer is breaching their fiduciary right? Am I missing something? The agent is taking a huge risk for a very short term payoff - basically risking losing your license. Not worth it for me!

Posted by Christianne O'Malley, Exceptional Service - Delivering Results in Reno! (RE/MAX Realty Affiliates) about 7 years ago

Very simply, and well put! Fraud is fraud, stay away!

Posted by Chris and Berna Sloan, Tooele UT (Group 1 Real Estate) about 7 years ago

Bill - Again you have written a fantastic article.  Many lenders on the seller side now have an "arm's lengths" language in place.  

Posted by Petra Norris, Realtor, Lakeland FL Homes for Sale (CDV TransAtlantic, Inc.) about 7 years ago

Bill- I see it here in CO all the time. We started seeing short sales as early as 2003. I am amazed at how many agents don't realize that these investors in some cases have had the seller " quit claim" the property to them to DO the negotiating. They also don't realize the buyer's lender is going to have a problem when they see title flipped that quickly in alot of cases- especially if there is a sizeable jump in value.

Great article- I stopped working with a large investment group here because most people I talked to were taught all these techniques which DIRECTLY contradict my ethics.

Posted by Mark Smith (Cherry Creek Properties, LLC) about 7 years ago

Wow, what a great post, and the comments were great too!  Thanks for this one!

Posted by Chris Alston, Silicon Valley, California (Chris Alston (Keller Williams Realty, Cupertino California)) about 7 years ago

Great post.  These types of listings, where the listing agent is trying to do a sale within a sale is bad.  Very very bad. 

Posted by Carla Muss-Jacobs, Principal Broker (503) 810-7192, Buyer Focused ~ Buyer Results (BuyersAgentPortland.com | Portland Metro Exclusive Buyers Agent | 100% Buyer Representation ~ 100% of the Time) about 7 years ago

Bill, congrats on a well deserved featured post.  Short sale fraud is certainly something every Realtor should pay attention to and I am forwarding this post to my broker.

Posted by Rebecca Gaujot, Lewisburg WV, the go to agent for all real estate (Perry Wellington Realty, Adam Conrad, Broker) about 7 years ago

Excellent article!  I've been to many meetings and seminars  with attorneys present talking about this exact thing.  Investors do fill a vital role in the market and flipping is perfectly acceptable, but taking advantage of the seller through mortgage fraud should be prosecuted to the limit of the law.

Some of this is actually encourage in California and both investors and agents have been caught and jailed as a result.  A lot rides on the agents doing the ethical thing and steering potential investors away if it looks like something illegal could or will occur.  I think a number of especially hungry agents don't do their duty for the client and the media pounces on it.  We're likely to see less of this as the industry recovers.

Posted by Bryan Robertson, Broker, Author, Speaker (Intero Real Estate) about 7 years ago

Bill - What a great article, I can NOT fathom allowing a buyer (investor or not) negotiate on my client's behalf and I can't believe there are folks out there who do!  I find it interesting that the investors got all puffed up when you weren't at all disparaging their trade, only the crooks who do it wrong!  Have a great Wednesday!

Posted by Jeanna Martinez (RE/MAX Access) about 7 years ago

BILL I really enjoyed this article. I found it to be insightful and informative. Working short sales, I have not encountered this yet, but will be mindful in the future.  Thank you.

Posted by Allison Stewart, St. Cloud Fl Realtor, Osceola County Real Estate 407-616-9904 (St.Cloud Homes ) about 7 years ago

This fraud happens all the time, in addition to REO sales where not all offers are submitted. I'm certain a percentage will be discovered and criminal charges brought against them but probably a lot of small-fry fraudsters will get away with it. I can't imagine doing something like this knowing you could actually go to PRISON.

Posted by Shari Posey (Berkshire Hathaway HSCP) about 7 years ago

Great post (can I still say that without sounding shallow?).  Short sales are ugly all the way through, in my opinion.  Our firm hired an attorney firm that specializes in short sales so they have someone to refer people to to be safe...

Posted by Jeff R. Geoghan, REALTOR, Marketing Manager (Coldwell Banker Residential Brokerage) about 7 years ago

Bill - it makes ya wanna cry as my little sister used to say!  Have you reported them to the REB ?

Posted by Peggy Noel, Bouchard, ABR, CDPE, SFR (RE/MAX Commonwealth) about 7 years ago

I actually just gave some counsel to a colleague considering presenting an offer to his seller from an investor willing to take over short sale negotiations. Bad idea all around! Thank you for your comments. 

Posted by Street Russell (Short Sale Asylum) about 7 years ago

What part of YOU REPRESENT THE SELLER don't they understand? Fiduciary duty should be sacred.

Posted by Erica Ramus, MRE, Schuylkill County PA Real Estate (Erica Ramus - Ramus Realty Group - Pottsville, PA ) about 7 years ago

Bill, I have a to tell you, I was at investor meeting about a year ago.

 There was a guru up there touting this fraud as being very legal and the arguement that a clause is in the contract indicating A to B then B-C.  and said they said realtors love this because they get to make more money.. after waiting patiently for this person to finish the pitch ( wanted to spit nails). waited for  Q and A and in front of over 100 people. I boldy but politely asked if anybody there thought that this could be illegal. Nobody spoke up including my colleagues from various agencies. I further asked "Do you think the bank would be angry if later on they found out they could have sold the house for thousands more?" next question: "Who does the Realtor represent?" "Isn't it the realtor's fiduciary, legal obligation to submit the highest and best offer on the home to the seller and the seller's bank?" "Who loses their license when banks start scrutinizing the deals later on?" Are investors liable.. their answer is no because of "full disclosure"

Then there's the whole assignment of purchase and sales, banks aren't agreeing to this fraud. Thank you for calling a spade a spade. Many agents aren't bold enought to take a stand on this.

I'm with you, Bill, I love my investor clients, but right is right and legal is legal.  They still disagree with me! 

Posted by Lori Lincoln Team, Top Agent Serving Taunton,Dighton Rehoboth and mo (Top Agent Serving Dighton Taunton, Rehoboth and more!) about 7 years ago

What about the Deed? FL. lawyer has filed a class action suit under the RICO Act against(at last count over 10k plaintiffs) servicers/lenders that did not have an interest in the property and foreclosed the property anyway.. Short Sale or Foreclosure need to check the deed to make sure the Servicer/Lender has an interest in the property before taking a listing or submitting an offer on a short sale or foreclosure. The RED FLAG is M E R S, if that is anywhere in the chain of title run the other way.

And Yes, Realtors will be deposed in this one. Just something ELSE we have to look out for.Just MTC.

Posted by Mike Morrison (Will & Will Real Estate Brokers, The Woodlands, Texas) about 7 years ago

One more thing:  All agents should have an attorney involved. In lawsuits,Even if it isn't the agent's fault, they are still invited to the party.. cross T's.. dot the I's and do things the legal way. No amount of money is worth your license.

Posted by Lori Lincoln Team, Top Agent Serving Taunton,Dighton Rehoboth and mo (Top Agent Serving Dighton Taunton, Rehoboth and more!) about 7 years ago

This is extremely common here, especially on the higher dollar short sales.  Apart of my listing consultation with my clients is to tell them to expect this.  I even had one come though an open house this weekend posing as an actual buyer.  The more we talked, he opened up and let me in on his plan.  Unfortunately, many agents are taking short sale listings and have no clue what they are getting involved in...that is until the FBI is on their doorstep (not hyperbole - that's happening now locally).  

Posted by Jonathan Osman, Charlotte House Hunter Group (Jonathan and Associates, Inc) about 7 years ago

Bill - I need to go check out your other article, but this one makes lots of sense to me.

Posted by Christine Donovan, Broker/Attorney 714-319-9751 DRE01267479 - Costa M (Donovan Blatt Realty) about 7 years ago

I get solicitations daily from these so called investors, its such a waste of time and by no means a service to my clients good post.

Posted by Victor T. Gurrola, Diamond Bar Real Estate Professional (Remax Realty 100) about 7 years ago

Almost every day I get Twitter Spam and Email Spam and/or  Phone Calls from people telling me how to Get Rich Quick in "Flipping"" or "Flopping" or "Wholesaling" or "3rd Party Investing", or some other BS or quasi-criminal suggestion.

Run, don't walk.

Posted by Fred Griffin, Licensed Florida Real Estate Broker (Fred Griffin Real Estate) about 7 years ago

I don't blame the investors as much as I blame the real estate agents. In fact I see more fraudulent or unethical behavior going on now than in the 2003-2006 hey-days since back then a listing agent usually had to involve a loan officer and an appraiser at a minimum to conduct their questionable activities. Now a single listing agent on a short sale or REO can easily control what offers get submitted and who benefits the most from having them accepted.

Posted by Tony Cannon, Real Estate - Oceanside Carlsbad (Bressi Realty Carlsbad) about 7 years ago

I had a friend call me about getting involved in these deals. She said a co-worker was telling her about all the riches that can be made. The co-worker taught classes, and knew all about how to do it. I asked my friend to find out how many successful transactions the co-worker had done. The answer was, none. Which is another really sad part of this story - the homeowners that could have had a successful short sale, but it was scammed away from them. BTW - my friend and the co-worker who knew how to make all the riches in short sales worked at the airport. Hmmmmm 

Posted by Joetta Fort, Independent Broker, Homes Denver to Boulder (The DiGiorgio Group) about 7 years ago

I had a similar situation, representing the buyer.  The real estate agent had submitted a contract on a short sale for X dollars - a contract that was in the works but not executed.  He then listed the property for sale on the MLS for X dollars "Not a short sale, great investment..."  I found that listing, my buyer liked the property and we submitted an offer.

I get an email (yes, he was dumb enough to put everything in writing) explaining that due to financial constrants, he couldn't fulfill his contract to buy. So he'd be willing to step aside and let my buyer take his position - for a fee.  He even detailed "put it on line 377, as a $3000 fee to John Doe at COE"  Don't call it a commission - call it a fee.

I sent him a scathing email in response - with a copy to his broker. Totally unethical individual.  His excuse - he was a new agent and didn't know that was wrong!

Posted by Bea Lueck (Coldwell Banker Rox Realty) about 7 years ago

Bill - Kudos for your passion on this topic.  It's great to come across someone who feels as strongly as we do about the bad aspects of Short Sales - particularly agents claiming closing ratios in the 90%+ range when the MLS clearly shows the dismal truth of less than half of that.

Posted by Tony and Suzanne Marriott, Associate Brokers, Serving Scottsdale, Phoenix and Maricopa County AZ (Haven Express @ Keller Williams Arizona Realty) about 7 years ago

The LA Times just did a piece on "flopping."  I didn't realize it had a name, but I have certainly encountered it as a buyer's agent.  There are so many grey areas, you are right, that agents/investors don't think it is "wrong."  However, anyone who has an ethical bone in their body should know right from wrong. 

Thank you for having the courage to call it like it is.

 

 

Posted by Carolynn Santaniello (Seven Gables Real Estate) about 7 years ago

Bill, you summed it all up very succinctly. Thank you. I have a few short sales in my portfolio of listings, and there isn't a week that goes by unless one of those investors/realtors gives me a call. Here's my best answer, the FBI is in town looking for people like you, what's your name and phone number again?

Posted by Richard Bazinet /MBA, CRS, ABR, Phoenix Scottsdale Real Estate (AZuRE Team - Realty ONE Group) about 7 years ago

What about where you have an offer at the bank that is being negotiated, the offer is with an investor.  60 days after that offer is written and sent to the bank, someone else writes an offer on the home, can the investor sell it to this person if the bank acepts their offer.  Do you consider this fraudulent.  Thanks.

Posted by Craig Van Assen about 7 years ago

Amen Brother... Amen!! I can not believe how many shorts sale I come across and it has this BS written ALL over it.

I think I am going to go and pass the bar... There are going to be a whole slew of law suit coming because of this...

Get ready and make sure you are doing things by the book! Realtors need to stop thinking about a commission and

start thinking about how best to serve their clients....here is a tip.. it is not letting some out of town investor buy the property!

Posted by James Baxter Encinitas Realtor (Realty Place) about 7 years ago

Bill,

Why would anyone want to let their profession fall into scenerios like this? VERY TROUBLING...

Posted by David Evans, HUD NLB Cumming GA (RE/MAX TOWN AND COUNTRY) about 7 years ago

Great Post!  I was made aware last week that the banks now have in place (and banks signing onto) a program that tracks addresses from loan applications, so that a flop will be tracked.  I guess it will be perhaps more difficult if it is with all cash buyers, but it is a start.

Posted by Gary Frimann, REALTOR and Broker (Eagle Ridge Realty / Signature Homes & Estates) about 7 years ago

Have to be extremely careful with investor offers on short sale properties and in most cases advise the seller against accepting them. Sellers can also be sued down the road for improper dealings and it is our job to protect their interests. 

I do think there are going to be a slew of lawsuits stemming from short sales in the future. Best to cover your bases with appropriate disclosures and hold harmless documentation. Operate in an way that will hold up to scrutiny.

Posted by Bruce Swedal, Denver Real Estate about 7 years ago

What happens when the investor buys the property and does improvements before selling it to the buyer who wants to get an FHA loan?  Is this fraud, ir is the investor supplying a service? 

Posted by Dennis Herman, Dennis Herman (Realty Executives Elite) about 7 years ago

So many allegations of fraud, yet nobody is fearless about specifics, so why? I'm not only a Realtor but also an investor, I invest in many areas including RE, don't you and doesn't everybody in AR?

Many of the commentators, I believe, do not comprehend the SS process and your double standard of representing the seller yourself as a Realtor in the negotiations as credible, yet you transfer that phase to an attorney? Let's see, Mr. Seller, do you know Mr. Attorney who negotiated your SS transaction, um, no?

Tens of thousands of SS transactions have closed successfully with investors and RE agents working together and how many of them were fraudulent? Can you provide all the statistics of fraud to the AR community? There is a SS process that's legal, so those that know the process can and do complete SS transactions successfully.

The bottom line for the RE agent is to ensure his client, the seller, sells the home without any financial deficiencies and discloses to the seller and lender that the buyer intends to flip the property after repairs to the property. Investors are in the profit or money business, aren't you? So when you see an opportunity, do you really think or care about the circumstances about the opportunity, I doubt it? 

 

 

Posted by Kimo Jarrett, Pro Lifestyle Solutions (WikiWiki Realty) about 7 years ago

I agree with your points and I have been turning down offers from investors that want to negotiate their own deals.  My opinion is I am getting paid and it is up to me or my in house negotiator to handle the transaction.  I don't blame the investor.  There purpose for buying is to be able to get the property for as little as possible and then turn around and sell it quickly for as much as possible.  There is nothing wrong with that.  The problem fall squarely on the Realtors shoulders as they are the ones defrauding the lender by manipulating the deal.

Posted by Simon Mills (Mills Realty) about 7 years ago

Fantastic blog - wish everyone had  your ethics.

Posted by Kimberly Brandon, Broker/Owner (Smart Moves Real Estate) about 7 years ago

I am so happy when somebody publishes an accurate assesment of these types of deals.  Thank you for your writtings, and for allowing me to re-blog it.  I hope some action is taken against these individuals that manipulate the banks and the sellers into giving them money for nothing.  The worst part of it is that the law firms are not likely to actively pursue cases against people that commit fraud because the E and O insurance policy will not cover an agent who commits fraud...

Posted by Garth Jones (Prudential Tropical) about 7 years ago

Excellent article.  I was approached by this type of "investor" last year.  It was a phone solicitation looking for an agent to represent the thief investor. For about five minutes I was full of excitement and then by the end of the call I was extremely upset with what they wanted to do. Of course they called me from a "private" number and when I tried to call back to the name and number they gave me at the end of our conversation (and after I had said no way) the person who answered had no idea what I was talking about.

Posted by Mike McCann - Nebraska Farm Land Broker, Farm Land For Sale 308-627-3700 or 800-241-3940 (Mike McCann - Broker, Farmland Broker-Auctioneer Serving Rural Nebraska) about 7 years ago

Bill, you hit the nail on the head.  What many Realtors do not grasp - and what you have made clear - is that short sales must be approached as if every action might have to be justified in court one day.  Be careful, be ethical and keep good records.

Posted by Al Kernek (Pacifica Endeavors LLC) about 7 years ago

HI Bill,  I agree with all your points.  I'm often contacted by "short sale" investors and interestingly "mortgage brokers working with investors".  The pitch is "Let me know if you get any short sale property.  We'll offer to buy it AND take care of all the work associated with the seller's lender.  That way, you don't have to do any of the work.  OF COURSE we'll list the property with you after we renovate it." 

YEAH RIGHT - I'm going to give my potential listing away, forfeit my commission and suggest a person who DOES NOT represent the Seller handle their financial affairs, all in the hopes of getting the listing on the flip side????

How many ways could I say DO YOU THINK I'M STUPID?? 

Posted by Catherine Marrone, West Newbury MA real estate, Essex County (Integrity Residential Brokerage LLC) about 7 years ago

Bill;

GREAT POST!  As a REO and short-sale contractor working for the banks as well as Realtors I have seen all too many fraud transactions. Once a month? How about every 4th or 5th property I come in contact with. I'm the guy that does the BPO for the bank after an offer is submitted. Not you normal BPO where the property is valued against the market, but instead I investigate the factors that the offering agent or investor have argued were the extenuating circumstances that "pushed" offer so low.

Heres some of the things I have found from speaking to the occupant that were said by the realtor or investor;

"If you let you kick a few holes in the walls and beat up the place a bit I can get an investor to buy your property quicker". "If your property is in average or better condition the chances of a quick sale are greatly reduced, so the poorer the condition the better". "Your property is in pristine condition and top of the market. "I'll list it on the high side so nobody will make an offer. In a few month, I can bring an investor who's offer will be accepted shortly thereafter".

Short-sales WILL be a lawyers dream once the banks realize they are being duped. The previous owner, probably not unless he finds he was ripped off too!

Posted by Bristol Restoration, When you need it done right and done right now! (Bristol Restoration, Inc 661-294-1812) about 7 years ago

Hi Bill:  There is a bulletin put out by Freedie Mac on this subject. Here is the link:  Your absolutely right.

http://www.freddiemac.com/singlefamily/news/2010/0412_payoff_fraud.html 

I think if any lawyer has the ability to sue a Realtor for a home that went to foreclosure than NAR should stop Realtors from having anything to do with the short sale process other than market the home.  Putting the financial blame on a Realtor for a seller's foreclosure problems is sad step for America.  

Posted by Dawn Rupersburg ABR, CRS, AHWD, Coral Shores Realty, Full Time Realtor (Coral Shores Realty Inc.) about 7 years ago

I think you hit the nail on the head.  There is a lot of fraud and dirty business, this is just one of them.  What really hurts is I am trying to do it honest and right and loosing to these people.

Posted by Gene Riemenschneider, Turning Houses into Homes (Home Point Real Estate) about 7 years ago

Great article. I steer clear of the floppers. One ting many agents fail to do is make sure the mortgage/note is completely satisfied. I can bet you 10 years down the road some short sellers are going to be getting collections calls. The next call will be to their attorney to go after the realtor that told them the case was closed.

Posted by Phil Hanner, Phil at http://www.findahomeinportorange.com/ (Keller Williams) about 7 years ago

Great Post!  I was wondering when someone would write something really good about these types of problems. 

Posted by Nathan Strauch, Colorado Real Estate Photography & Video (Hot Shots Digital (HotShotPros.com)) about 7 years ago

There are some fine lines between fraud and smart investing.  Most investors don't know where the line is. 

At the same time many states require someone who is doing negotiations on a short sale to have a license. My state Florida is one of those states.  If you are not an attorney, a mortgage broker, real estate broker, or a legit non-profit, then you need a license to negotiate these deals in Florida.

Several of the large title companies have specific guidelines on how to insure these short sale flips, so they are not illegal on their face as many people would believe.  However if you don't follow their guidelines you are just asking for trouble.

Posted by Rob Arnold, Metro Orlando Full Service - Investor Friendly & F (Sand Dollar Realty Group, Inc.) about 7 years ago

Wonderful post!  I have had investors want me to let them handle my short sale negotiations and I flat out turned them down.  I totally agree with you - the seller hired me and it is my job to represent them.  I do believe we will see lots of court cases in the future involving the exact thing you wrote about.

Posted by Terry McCarley, REALTOR, SRES, CDPE - Cape Coral, FL (REMAX Realty Team - Cape Coral FL) about 7 years ago

Hi Bill,   Terrific example of how this scam works !  Why am I not surprised that the investor bunch dissed you ?

Posted by Bill Gillhespy, Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos (16 Sunview Blvd) about 7 years ago

Thanks everyone for all your comments on my article about short sale fraud.

Kimo - I do not think you understand there is a very big difference between an investor taking over a transaction that is listed by a Realtor. It seems you have no understanding of what the word fiduciary means. Sure there are lots of short sales that are bought by investors. Many of them are NOT listed with Realtors. The ones that have been bought and the investor has taken over the deal could result in problems for that Realtor.

To answer your question an opportunity never leads me to want to do something that is not ethical - EVER!

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) about 7 years ago

Timely Advice. An investor called me just yeaterday asking me to list a short sale for a saller he has already negotiated with. When he got to the bank, the bank insisted the Seller hire an agent. That's when I got the call. I see extreme care will need to be taken. Thanks,

Posted by Dale Falkowski, The Honest Agent Full Time Pro (Remax Town & Country) about 7 years ago

Where you are gonna have real trouble is when the banks come against the seller for the difference in amount. The seller finds out you stole $20K from them and he sues you and your company. If a fast gain is worth the lost of your future your license and your business then its your world. Second you have a duty to your seller if you get a offer and you tell they the offer is actually less and withhold the 1st offer..bye bye... get ready to look at bars for a long time......You defrauded your seller..ad the bank!!!!!

Posted by Joel Jadofsky, One of the Top Realtors in Panama City Beach Area (Keller Williams - homes for sale - Florida - Gulf - Beach ) about 7 years ago

Nice scenario - the bank and the buyer both got shafted. What do you bet the Realtor got a kickback for handing the transaction to his or her investor friend - earning money twice on the same transaction?

I can see where it would be legal if the investor purchased the house and then found the buyer... but what you describe here is pure fraud.

There are crooks in every profession.

Posted by Marte Cliff, your real estate writer (Marte Cliff Copywriting) about 7 years ago

So glad you are talking about ths topic.  Thanks.

Posted by Brad Yzermans, Temecula-Murrieta-Menifee FHA/VA Mortgage Lender (First Time Home Buyer & Down Payment Assistance Specialist in So Cal.) about 7 years ago

This has been going on for so long now 'underground' that I think most investors & their investor clubs are sorry that you've brought their dealings out into the open. Rats scurry when you shine a light on them right?

Posted by Lyn Sims, Schaumburg IL Area Real Estate (RE/MAX Suburban) about 7 years ago

People are still trying to trick the system when it's already weakened?  sigh...

Posted by Torgie Madison, Websites and Contact Management (Quicksilver Real Estate Solutions, LLC) about 7 years ago

Bill, Very nicely done!  Right on target.

Hard to believe that anyone wouldn't know this is wrong and not have a conscience...apparently not!

Posted by Gena Riede, Real Estate Broker - Sacramento CA Real Estate (916) 417-2699 (Riede Real Estate, Lic. 01310792) about 7 years ago

Great post.  Thank you for another resource that I can direct "investors" to.  As a short sale listing agent that sells many short sales, about once per month I get contacted by someone interested in working with me to in effect commit fraud.  Of course my answer is always a NO!!!!  

Bill, for those that argue with your point of view, encourage them to Google "Ruben Rojas mortgage Fraud".  They will find an interesting tail of why they should pay attention to your advice.

Thanks again for your contribution.

Posted by Dan Rochon, Top Realtor in Northern Virginia (Greetings Virginia - Keller Williams Realty) about 7 years ago

Bill, as long as the investor discloses to the lender that they are going to sell the property immediately for a profit, there is no fraud. But what you described is where they do not disclose this and I would love to see how any Realtor® could explain how that is legal. It is common sense to know that you are deceiving another party, what's so hard about that?

Posted by Sharon Alters, Realtor - Homes for Sale Fleming Island FL (Coldwell Banker Vanguard Realty - 904-673-2308) about 7 years ago

In reading all the comments, I forgot the most important part about your post which is letting an investor take over a negotiation. This may be tempting for agents who know nothing about short sales. They shouldn't be doing them alone anyhow but letting the buyer/investor take over is definitely not the way to go!

Posted by Sharon Alters, Realtor - Homes for Sale Fleming Island FL (Coldwell Banker Vanguard Realty - 904-673-2308) about 7 years ago

I had an investor contact me and told me up front that he wanted to make an offer on my short sale, and that his negotiator had to do the negotiation, and he emphasized that it would be "at no cost to me".

It was a neat pitch: "We'll do all the work and you don't have to do anything but collect your commission check." He also said that their offer would be low.

Perhaps that's why so many agents are biting on this. They hear "no work, no cost, plus commission"

They aren't seeing that to have a buyer do the negotiating that the agent is violating their fiduciary duty to the client because the negotiator is working for the buyer not the seller. And that's is in addition to the possible mortgage fraud that they are engaging in (possibily unwittingly).

Of course my answer was NO. No way would I have the buyer do the negotiating for my seller, and put me at risk of losing my license and spending time in Sheriff Joe's Tent City

Posted by Bill Travis, Broker/Owner (Captain Bill Realty, LLC) about 7 years ago

Hi Bill

 I don't care if its being done legally or what might have you...I just do not feel comfortable doing it and neither do my clients. Also you end up losing total control of the transaction and that can become dangerous. I have been approached by these types of investors claiming that they have some super negotiator. I turn them away and I even go as far as disclosing it to the seller and they don't feel comfortable with it either. Their deal is if you let them handle the transaction...they'll let you list it right after it closes. Also I do not agree that they have any type of financial interest while it's still owned by the seller. I can and also have attorneys who help us do everything but I've done them myself as well..there isn't any special recipe.

Posted by Neal Bloom, Realtor CRS-Weston FL Real Estate (eXp Realty) about 7 years ago

I have never heard of this...thanks for giving me a heads up.  

Posted by Kim Mulroy (Exit Elite Realty) about 7 years ago

Great post and information.  Here in Arizona, over 40% of our sales are short sales and the game you mentioned is most likely going on in our sunny state.  Too bad for the rest of us doing an honest business as we will end up with the same negative position with the public.  Good for you that you have such a good track record!

Posted by Anonymous about 7 years ago

Bill - Another great article on this topic !  The other one was amazing as well.  You and I have talked about this in the past.  It is SO risky for any Realtor to turn over negotiations on a short sale or even worse get involved with the purchase somehow as it becomes DEFRAUDING the lender.  I am going to share this on Facebook : ) .  ~ Chris

Posted by Christopher and Stephanie Somers - Realtors - Philadelphia Real Estate (Realtor / Owner - RE/MAX Access) about 7 years ago

Bill,

I was just faced with a circumstance very close to the one you describe here.  I felt the hair on the back of my nect stand up when the listing agent tried to explain the terms of the sale to me.  I am going to write a post about it tonight.  I wonder how many Realtors out there believe this practice to be safe and in the best interest of their seller or their buyer for that matter.  Your well written post is the type of attention this subject needs.  A career, reputation and assets at risk for one transaction that is not above board....IS JUST NOT WORTH IT!

 

Wendy

 

Posted by Wendy Rich-Soto Realtor,Real Estate Coach & Consultant, "Bridging Your Way Home" (Keller Williams Realty, LA Harbor) about 7 years ago

I have been approached by a short sale investor. He was looking for short sale deals, so I put him on an automated email alert for properties that he was interested in.

Once he found a property he liked I was totally confused as to what he was asking me to do. I am still confused and I told him I didn't think I could help him and advised him perhaps he should talk directly to the listing agent.  I rather give away a commission than get involved in possible misconduct.  

He tried to explain to me what he wanted to do.  He wanted to submit a lowball cash offer for a short sale property.  Then the investor does all types of investigating and finds every horrible thing about the house and the area that could lower the BPO.  When a BPO is ordered the investment company approaches the agent doing the BPO and somehow convinces him to lower the BPO to match the lowball offer (that put up a red flag to me...it sounds like they are going to bribe the BPO agent).  If the bank agrees to lets say a low cash offer like $200,000 for a home once worth $500,000 and with an original short sale asking price of $400K, the listing agent then drops the price on the MLS to $300,000 in order to find another buyer.  Somebody sees $300K and makes an offer, but that buyer's offer doesn't go in, the investor instead buys the property for $200K and then turns around and sells it to this other buyer for a profit.  The investor said this was perfectly legal since he is actually buying the property and then reselling it, but it really sounded fishy to me so I stayed away. 

Posted by Donna Sweeney about 7 years ago

Donna - If it smells fishy it usually is. Your instinct was correct. I would stay away from the scenario you describe.

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) about 7 years ago

Bill - Thanks for bringing this fraudulent practice out in the open. I have seen signs that this maybe happening in my market and steer my clients away from these homes (a certain group of investors preying on distressed homeowners). Eventually (hopefully) this shameful practice of defrauding the bank and the distressed homeowner will come back to haunt these investors (and the agents who helped facilitate the fraud).

Posted by Kathie Burby, REALTOR, SFR, Tuolumne County Real Estate Guide (Real Living Sugar Pine Realty) about 7 years ago

There's another spin on this I'm waiting to see blow up. The short sale listing agents who also represent the buyer and do the loan.  None of it's illegal,but I'll bet some of those deals bear further inspection.

Posted by Karen Crowson, Your Agent for Change (Coldwell Banker Residential Brokerage) about 7 years ago

Bill, excellent post as always! I've run into people trying to commit short sale fraud too.  They seem to get annoyed when I explain that it's fraud.  I also say that neither one of us will look good in head to toe orange jumpsuits if we go to jail.  I'm steering clear, it's not worth it.  

Posted by Jen Bowman, Realtor - Anna Maria Island & Bradenton FL (Keller Williams on the Water) about 7 years ago

This is a good post Bill. I also thought you had some instructive comments.

Posted by Wayne B. Pruner, Tigard Oregon Homes for Sale, Realtor, GRI (Oregon First) about 7 years ago

Great post! I do think when the dust settles after the economy improves, there are going to be a lot of lawsuits, and we'll see both agents and investors doing time. As has been said numerous times, not all investors are crooks. But those who engage in unscrupulous activities are going to get their wings clipped. Two Connecticut realtors Sergio Natera and Anna McElaney are going to prison for engaging in mortgage fraud based on flopping. I hope they have a good long time to really think about what they did, why they thought it was okay, and how they thought they could get away with it.

I just had a deal go south for some friends of mine that I was representing as buyers, and I'm very relieved it did. It was a "flop" deal, and the intermediary investor is nothing more than a straw purchaser. The warning signs were everywhere, but these buyers wanted to move forward, even after I spent considerable time disclosing the process to them. Unfortunately, my friends are not talking to me presently, since they think they lost a once-in-a-lifetime, fantastic deal because I was asking too many questions. The intermediary investor decided to accept someone else's offer...likely someone who would just go with the flow, and not poke around.

NOTHING on the contract was disclosed, except to note that the buyers' funds would be used to close a first transaction. The buyers  weren't worried that the contract showed the intermediary investor as the seller, even though that person doesn't own the home...yet. The intermediary did not want to talk with me, in fact, didn't return my phone calls until after the deal went south. On the contract that the investor presented to the buyers, (after spending a considerable amount of time on the phone with them noting why the company does not like working with realtors,) the ability to purchase extended coverage for title insurance was not allowed. As well, no appraisal was allowed, and no survey was allowed. (Even though this was to be a cash deal, at the very least, that verbiage should be allowed in the contract, whether it's needed or not.)

The investor would not allow us to close at any other title company, either. The title company the investor uses does simultaneous closings, even though most every other title company I know won't touch them. When I called the title company, the closer said they do simultaneous closings ALL the time. She became very guarded when I pressed a bit regarding chain of title in their simultaneous closings. The closer would not entertain contacting the intermediary investor to consider doing a back to back closing, so that at the very least, each transaction could stand alone. She was also guarded about the short sale approval letter, when I pressed her about it. She said they had it, and that's all I needed to know. That was the last straw for me. But, the buyers still wanted to move forward.

The investor even went ballistic on my buyers when they started asking about the short sale approval letter, and even THAT was not enough for these buyers to walk. And finally, no one at the title company wanted to answer my questions when I mentioned that a realtor was noted as the listing agent on the Closing Instructions. We were never told, and the realtor's name was not disclosed. Also, the list price on the property was so ridiculously low, I couldn't imagine how any lender would agree to accept that amount, particularly since the comps even for foreclosed homes in the area don't support that price. And I imagine that the intermediary investor was getting the lender to take an additional $30K less on that property in order to cover the investor's fee, which means the property is almost being given away. This is mortgage fraud, plain and simple. Yet, this investor is making a KILLING in the particular area the company works for doing this kind of thing. This investor is not just making a living, but is making a KILLING. The title company confirmed that for me, as this investor has many, many closings every month.

Really, the situation regarding this property needs to be investigated. Along with all the other NUMEROUS deals investor has going on. Unfortunately, I wouldn't be surprised if my friends buy a house directly from this person, and get themselves into trouble down the road.

Posted by Kathleen Kennedy - REALTOR®, SFR, Making All Your Real Estate Dreams Come True! (Keller Williams Avenues Realty, Wheat Ridge, CO) about 7 years ago

Kathleen this kind of thing goes on all the time. I find it amusing how so many investors that actually do it right get all worked up when I right a post like this. They like to turn a blind eye and pretend that every investor out there is a saint. Far from it!

Realtors that participate in short sales need to make sure they are doing everything above board!

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) about 7 years ago

Bill, I have no idea how I missed this fabulous post!!  Must have been during the REBCRDU time crunch BUT I'm glad I went back over your posts (as my guru you know I have to do that from time to time...)

I haven't had nor do I seek short sales here in our market.  They are out there I know but we don't see that many come across our desks.  So I have to tell you reading this made my jaw drop!  What makes me even sicker is that this stuff is being done on the backs of people.  Human beings.  Folks like us who have fallen on hard times - as the saying goes there but by the grace of God go I

Makes me sad to think that we people are capable of this type of stealing.  It's shameful!  All under the disguise of what business?

Thank YOU for having the guts to stand up to them.

Pam

Posted by Lee & Pamela St. Peter, Making Connections to Success in Real Estate (Berkshire Hathaway HomeServices YSU Realty: (919) 645-2522) about 7 years ago

Thanks for the timely information. I shared this with other agent in my office.

Posted by Dennis & Terri Neal, Your Home Sold in 45 Days or We Se (RE/MAX, Big Bear) about 7 years ago

Great post Bill.  Most lenders here will not approve double closings.  Colorado has a new disclosure requirement coming out in January where investors have to disclose to the seller and seller's lender prior to closing a short sale transaction if they plan on selling the property in less than 14 days to a purchaser.  This will definitely slow down investors involved in Short Sale Fraud.

Posted by Patricia Beck, Colorado Springs Realty (RE/MAX Properties, Inc., GRI, CDPE) almost 7 years ago

Patricia, Dennis, & Pam - Thanks for your comments. There is a right and wrong way to participate in short sales.

Posted by Bill Gassett, Metrowest Massachusetts Real Estate (RE/MAX Executive Realty) almost 7 years ago

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