Foreclosure Fraud

Every real estate market (good or bad) brings con artists ready to take advantage of those who are desperate and/or in need. This is a very upsetting story; one which I truly hope finds its way to Sellers who are facing foreclosure.

As agents, we see it in the MLS listings, "Approved Short Sale, contingent upon 3rd party/lender approval." Although I am not an expert on this subject; I can only report true stories and situations I experience on a daily basis.

There is one listing that I am almost positive is Foreclosure Fraud. The listing shows that a home is being sold as a short sale. When I contacted the listing agent, he informed me that the contract needed to be made out to someone other than the person who appeared on the Tax rolls and Owner of the property. The house was being offered about $100,000 below current market values, but the contract had a limited time frame of 30 days; after which, the house price would increase at an undetermined price.

My client placed an offer on Sunday morning with a hefty deposit, offering $10,000 less than asking price with no other contingency other than inspection and lender approval of the short sale contract. This was a cash transaction. The agent was thrilled to have such a great offer, but informed me that the Seller could not sign the contract until they received lender approval. (Please keep in mind that this is false...the purpose of making the contract contingent upon Lender approval of a short sale contract is to protect the Seller and the Buyer. If the lender doesn't approve the contract, the contract is therefore voided/rejected.)

The listing agent directed me to write the contract in the name of a Family Trust. When I checked the Clerk of Court records and Tax Records, the owner of the property was of an individual. I contacted the agent who promptly proclaimed that the Owner of the home provided a Power of Attorney to a representative of the Family Trust. I then requested a Notarized copy of the documents supporting this Power of Attorney and the agent replied that it would not be a problem. That was on Monday. By Friday, the agent still had not provided a Seller accepted sales contract nor did he provide a copy of the Power of Attorney.

The following Monday, I contacted the agent again. He apologized that he had not provided me with the requested information, but he had received the lender approval and needed to make an adjustment to the closing date. BUT, before he could do that, my buyer would have to make the escrow deposit non-refundable to the Seller's representative along with a guaranteed closing date of May 29th. I told him that my client would not be able to move forward without a signed contract agreement to all of the lender approved terms. I still needed the proof of the Power of Attorney along with a letter from the lender that the contract terms had been approved. Well, that's when I heard it from the agent, "This isn't exactly a short sale for your buyer; this is a short sale for the Seller's representative. The representative was unwilling to sign the contract until the day of closing, at which time, he would do an assignment of his agreement with the lender.

RED FLAGS!!!! HELLO! STOP!!!! DO NOT PROCEED PAST GO!

So, let's review: A large non-refundable escrow deposit to someone that does not have the legal authority to sell a home. A "Seller" that is unwilling to sign a sales contract until the day of closing. No official letter or document providing proof that the Short Sale has been approved. Hmmmm....

The sad thing is this: The Sellers are clueless of what is happening. They were approached by this "Foreclosure Company" and convinced them to sign a Power of Attorney and to sign over the deed of the property. The Foreclosure Company does not record this change of ownership at the County. They present the Lender with an authorization letter allowing them to negotiate a "Short Sale". From there, they have 30 days on average to secure a buyer, at which time, they sell their assignment. They sell their assignment for a higher price than what the lender approves. The Foreclosure Company only has their own best interests at heart. This is the kicker...if the Foreclosure Company cannot secure a buyer for the property, they give the property back to the unsuspecting owners who truly believe that they have no further obligations to their mortgage company nor to the house. OR, they begin the process all over again and since the negotiated short sale could increase, the "representative" protects himself by making the Buyer agree to pay more if needed.

I'm sure there are other scenarios out there and many homeowners have been scammed with these Foreclosure Companies. It is scary. Again, I'm not an expert; just reporting from the trenches.

This NEEDS to be a lesson to everyone....seek the advice of an Attorney that represents YOU. Don't trust anyone; especially when promises are made-promises that seem too good to be true. If you think you maybe going into a pre-foreclosure situation, PLEASE talk this over with your CPA and attorney. This should be done PRIOR to missing a house payment.