Too Good To Be True?

Your home has been on the market a few months. Although you have had some showings, none of the buyers have expressed solid interest in making an offer. Just when you are considering withdrawing your home, viola! An offer comes in for $100,000 more than your list price! All you have to do, the buyer assures you, is refund the extra $100,000 at closing and you will walk away with full asking price.

At first, you might be a little hesitant. After all, why would the buyer pay an extra $100,000 just to receive it right back? "Don't worry about it", the buyer's agent, the appraiser, and the title company tell you. "It happens all the time." Relying on the advice of these professionals, you sign the offer and close according to the contract.

Six months later, you get a phone call. It's the State Attorney's office and they want to speak to you about the sale of your home. Three months after that conversation, you are found guilty of mortgage fraud, fined a huge sum of money, and placed on probation for five years.

What happened, you might ask? Here's what went on in the background. Once you signed the contract, it was forwarded to a mortgage broker in on the fraud. He arranged to pay an appraiser to inflate the value of the property $100,000. The false appraisal was sent to the lender, who approved the loan based on a purchase price $100,000 higher than you were asking.

While this was taking place, a title company, also in on the fraud, created two sets of closing statements. One showed the $100,000 being credited back to the buyer. The other closing statement, the only one the lender saw, did not show that credit.

This is a very simple, yet surprisingly effective way to cheat the lender out of $100,000. In most cases, the buyer doesn't make a single mortgage payment and the house goes into foreclosure. That's when the lender realizes the appraisal was fraudulent and goes after you, the agents, the mortgage broker, the appraiser, and the buyer. It makes no difference to them whether or not you actually knew it was fraud.

If you receive an offer on your house and it seems fishy, it probably is! Get an independent 3rd party, preferably a real estate attorney, to review the contract. If it's illegal, or even borderline, walk away!