How Freddie Mac Aims To Stop Your Short Sale
Short Sale Fraud – Freddie Mac Drops A Huge Bomb On Real Estate Investors
Short Sale Fraud – The newest problem in real estate is not yet a law or an official policy, but it is definitely going to create issues in the market. Freddie Mac’s new short sale opinion – for lack of a better word – could create serious legal and practical issues for real estate investors.
On Friday, April 16, 2010, the organization posted an educational article titled “Emerging Fraud Trends: Short Payoff Fraud.” The article described a new trend in short sale fraud that happens when a short sale buyer flips a newly acquired property to another buyer and “pockets the difference.” This could spell trouble for investors who have been short-sale flipping, which means negotiating a short sale with the bank, then selling the property immediately to another buyer for a profit of a few thousand to tens of thousands of dollars.
The Freddie Mac poster went on to describe scenarios and red flags for short payoff fraud. The scenario revolved around a short sale facilitator who set up a deal with a lender to purchase a home worth 80K for 70K while the lender took a 30K loss. In the scenario, the facilitator fails to notify the bank he has a higher offer, 95,000, on the house. The second the facilitator puts his profits in his pocket, Freddie Mac considers him guilty of fraud because his negotiations caused Freddie Mac to ultimately take a “larger than necessary” loss on the sale of the property.
The article urges buyers, sellers and lenders to be on the lookout for short payoff fraud red flags. Freddie Mac considers entities buying property, borrowers who are suddenly in default and borrowers who have not reneged on all of their loans to be red flags for short payoff fraud. The article also tells readers to keep an eye out for resale options in their purchase agreement.
Everyone involved in a short payoff is encouraged by Freddie Mac to report potential short payoff fraud the second they become aware of a second purchase contract for a higher price. It may not be considered breaking the law, but it certainly looks like Freddie Mac wants to make short sales as difficult as possible for real estate investors.
Filed Under: Marketing Strategy
