Short Sale Agents And Investors Committing Fraud?

Original Source: Short Sale Agents And Investors Committing Fraud?

We all have our bad apples in our industries, and Realtors are no exception.

With the uprise in the amount of short sales in today’s real estate market, there is more and more short sale fraud being committed by unsavory agents.

A very good friend and colleague of mine Bill Gasset, a Massachusetts Realtor, recently wrote a blog post about short sale investor fraud. His blog post recieved some really heated comments, and I wanted to chime in on the subject.

Bill describes real estate agents taking short sale listings, finding buyers to pay the market value for the home, and than having an investor on the side offer less than market value.

The agent will then submit the investors offer, while telling the buyer who is willing to pay market value that their offer was submitted and they are waiting for approval. What ends up happening is the investors lower offer gets accepted, than the agent and investor use the leftover funds from the unknowing buyer to make an instant profit.

Who’s Committing The Fraud?

The fraud Bill describes makes it hard to determine the culprit. Many of the comments he received claimed that investors are not committing fraud, but the agents are.

They claim that the investors are just looking for a great deal. The fraud has nothing to do with investors purchasing a home for a great price and turning a profit by reselling the home in a flip. They say it’s the agents fault and the investors have nothing to do with it.

Here’s what I think. The short sale agent that is involved with this practice needs to go to jail, lose their license, and face civil liability for the parties who were hurt by their negligence. Of course, I am not an officer of the law, a judge, or a lawyer – this is just my opinion.

Second, the investor may or may not have known what was going on. I understand that an agent could put all of this together without the investor knowing. If that’s the case, I don’t think they should be punished for buying a home for a great deal. However, this is most likely not the case, and here’s my thoughts on why.

If a short sale agent does this once, they probably will do it again or they have been doing it many times before they will get caught. They would need a trusted investor or group of investors to continually submit offers for this scheme to work.

For this to work long term, you would think these investors would know what was going on. They would be ready to submit an offer at anytime once the agent tells them they have a buyer for their listing.

So, to know if an investor is committing fraud along with the agent, we would need to see a pattern, but it would still be very hard to determine investor fraud unless the agent ratted them out.

I do think that if the agent is involved there is a good chance the investor is involved as well, but it’s much harder to prove. Unfortunately, homeowners are in the middle of this fraud, and they are the losers in the end.

Bill’s article is a great read, and the comments were filled with some heated arguments on both sides. If anything can be learned from this debate it’s the fact of how important it is to do your research before putting your financial future in the hands of a real estate agent, a mortgage officer, or any other profession related to real estate.

Be careful out there folks, there are people out there who are trying to profit from your misfortune, and it’s only going to get worse as some agents become more desperate for a paycheck.