“World's Most Complete Neighborpedia”
Sponsor a Community — What is Localism? | Register or Sign In
Explore:   What's happening in your neck of the woods?
Home Richard Zaretsky, Florida Real Estate Attorney

Richard Zaretsky, Florida Real Estate Attorney

Blog_tag

TRUE STORY - Renter forges deed, then conspires to sell house and pocket mortgage proceeds

11-03-07
Richard Zaretsky, Florida Real Estate Attorney

FRAUD - LOSING YOUR HOME - IDENTITY THEFT

It is a day past Halloween, but here is a scary TRUE story:

My office is presently working on a case that is so prevalent that I thought posting it on my blog would be helpful. The matter involves a single person who bought a home 5 years ago.

It is a nice house, in a great community. He bought is for investment, paying about $400,000 and getting an 80% mortgage. It is his second home in South Florida, and his other home is about 5 miles away, but that is seldom used as he works in another state.

He put a renter into the house, using an established Realtor for find her. The renter paid her rent regularly without any problem every month. About one year into the lease, the homeowner paid off the mortgage with extra cash he earned. He also extended the lease for the renter, using the Realtor for the paperwork.

The renter apparently had a friend with whom (we would later learn) lived in a previous house with her. Shortly after the extension to the lease was executed, the renter created a quit claim deed from the owner to herself, and recorded it for nominal consideration. About 3 months later she sold the house to her friend for $500,000. Her friend took out a conventional mortgage for 80% and the renter took back a purchase money mortgage in 2nd position, which covered most of the remaining cash to close.

The owner was alerted to the deeds when his Realtor called him because she was just updating her files and checked online for his real estate taxes - seeing the tax collector was showing the wrong owner for the property. She went to the property and it was vacant.

No mortgage payments were ever made on the home by the "new" purchaser.

After more than two years of litigation, the Quiet Title case is going to court. The real owner has not had title to the home and missed the ability to sell it in the right market. Plus he has the legal expenses associated with the recovery of title of the house. Fortunately the title underwriter paid off the fraudulently acquired mortgage, so we only have to get rid of the 2nd mortgage and the fraudulent deed and the deed subsequent to it.

The perpetrators are no where to be found.

Of course a glaring question is the notary on the Quit Claim Deed - we are gathering evidence that should put that person out of business - or at least authenticate the claim on the insurance bond (which is limited to a nominal amount). This is a primary example for notary publics to keep a log of what they notarize along with copies of identification of the signing parties for every transaction. It is a HUGE pain, but is there a better way?

I don't know the moral of this story. I guess it is .... IT CAN HAPPEN TO YOU (or your clients)!

If anyone has a similar story to relate - please share it!

Copyright 2009 Richard P. Zaretsky, Esq.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com.

See our easy to understand articles at:

TABLE OF CONTENTS - SHORT SALE AND LOAN MODIFICATION ARTICLES

0 Comments
Blog_tag

Some Sellers Think They Are ENTITLED To A SHORT SALE

11-03-07
Richard Zaretsky, Florida Real Estate Attorney

I had just too many borrowers that "should have known better" in the office this week - so I feel very conservative just now - just to the right of Bill O'Reilly.

We do a lot of short sales in my law and title agency offices. They come in from all sources - Realtors, referrals, lenders, friends, developers. Some borrowers have one investment property and some have eleven, and all the numbers in between. Most are upside down and don't want to put more good money (if they have any left) into a bad investment.

When they ask us to negotiate with the lender to lower the payoff we naturally ask them what their financial situation is today and what savings and other credit they have that could be used to pay the shortfall in the cash flow of the property. We also need to know what resources they have to pay the resulting cash needed to clear title at the closing.

It is just amazing the number of borrowers that have other assets (ok, not necessarily "liquid" assets) and are just belly aching about their "financial indigestion". "Get the lender to share in my loss," they ask. I then ask, "What was your arrangement with the lender on sharing the profit you expected to make?"

Now I don't want to seem insensitive, but you would think that a borrower would understand that they are asking for a retroactive sharing partnership with the bank, and probably they are asking the bank to take a loss while they pocketed a borrowed profit through over-leverage of the property. This does not apply to every short seller for sure - but I see enough in this class of borrower that makes you wonder who was guiding them amongst the real estate and mortgage brokers that lead them to this concept of real estate investment.

This brings us to Economics 101 - if it does not make economic sense to invest then don't do it. "Economic sense" is unfortunately a subjectively defined phrase. I like to think it means that using basic unembellished accounting principles will the property support the investment being made by providing reasonable return vs the risk. Unembellished means regular old IRR (Internal Rate of Return) without the accellerated tax depreciation, leverage borrowing, and cash out financing scenarios.

The unembellished part is what is most often overlooked by the borrower. They focus on the embellishments. They see or believe inflated appraisals and aggressive lending practices as a way to finance out and use the additional cash to buy a car or another property that they do the same thing again - never realizing that they put themselves into an "infinity loop" that they cannot escape.

Never the less, a short sale is still a solution for them, since like the infinity loop they are stuck in, the short sale and deficiency note payment plans will likely be in the lender's best short term economic interest. Even though the borrower may not be the insolvent seller that helps define short sale qualification, the combination of the seller's financial indigestion and being stuck on the infinity loop is recognized by the lender as a problem not only for the borrower, but the lender as well. The sale of the property is still - using Economics 101 - in the best interest of the lender - with a lot of weight given to the "velocity of capital" (which means that a dollar in hand today is better than a dollar ten cents in a year).

As I see it, the only way off the borrower's infinity loop is going to be winning the lottery - or bankruptcy - or a really good faith attempt to negotiate the best terms for a short sale with the lenders.

Copyright 2008 Richard P. Zaretsky, Esq.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader.

Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com New Website www.Florida-Counsel.com. See our easy to find articles at Need Short Sale and Modification Information? - These Articles Probably Answer Your Question

1 Comment