Short Sale Fraud- What to Look Out For

There are always bottom feeders who will take advantage of people when they are at the lowest point of their life. In real estate it is no different. The latest scam is short sale fraud- real estate and miscellaneous agents are running 2 main schemes right now.
1. The agent negotiates for the seller with the lender to sell at a really low price, an accomplice of the agent, called a "straw man," buys at the low price, then the agent turns around and sells it for much more.
2. The seller has a friend or family member purchase the home from them as a short sale, then they turn it back over to the original owner. This may be seen by some as a way to have family "re-finance" the house, but it's fraud!
A review of sales nationwide by CoreLogic found that about 2% of short sales that sell are probably fraudulent. They looked at short sales that were flipped, and sold at a much higher price.
Since the number of short sales has risen dramatically- 400,000 so far in 2010 compared to 100,000 in 2008- more and more people could be at risk for this fraud, either as buyers or sellers.
Source: NYT 9-10-10 Bob Tedeschi