What is a Short Sale?
A short sale occurs when the house owner is in danger of forfeiting on the mortgage and is allowed to sell the house for less than the mortgage. For example, if a home is about to be foreclosed, the bank may agree to sell the house for $130,000 even though there is still a $150,000 mortgage on a home. Financial institutions agree to this because they are hoping to get at least some of their money back and not end up having to take a loss for the whole amount.
Before the lender agrees to a short sale, a few conditions are usually put in place. One condition is that the owner of the house doesn’t receive any financial benefits from selling the house. The real estate agents who are involved in the short sale are usually required to take a reduced commission and the lender will reduce or refuse to allow payments to anyone else involved in the short sale. Other people who could be involved in a short sale include attorneys and short sale negotiators.
If there is another loan on the property, the second lender also needs to agree to the sale even though the primary bank will place a cap on the amount of money the second lender is allowed to receive.
Who Commits Short Sale Fraud?
The people who attempt short sale fraud will depend on the type of short sale fraud being perpetrated. Sellers, buyers, real estate agents, lenders and short sale negotiators can all be involved in some form of short sale fraud. Sometimes, people may not even know that what they are doing is fraudulent so it is important that if you are involved in short sales that you know what is and isn’t allowed and ensure that everything gets documented, notarized and recorded in a notary journal.