Be very careful with who you do business with. Here lately, many Realtors are be contacted by people who claim they can expedite the Short Sale process or offer you double commission on your Short Sales. Be careful! These 3rd parties (typically investors or an investment firm) offers to negotiate the Short Sale on behalf of the homeowner and, all you (the original Realtor) have to do is set back and let them run the show. Sounds great...right? Well, it's not and let me explain why. First off, only 4 people are allowed to represent a homeowner when selling their home and they are.... 1. A licensed Realtor 2. A licensed Mortgage Broker or Loan Officer (available only in some states) 3. A qualified housing counselor by a government agency 4. An Attorney Because these "investors" are not one of the above but, you allow them to work the deal (because their recent advertisement to you said, they do it all and, well.....you let them) then you (the Realtor) just became negligent in your fiduciary duty to the client and they are involved in illegal representation. Ok, so the Realtor (original Realtor) got the bank to agree to a price of $100,000.00 for the Short Sale. The “investor / 3rd party ”, who wants to “help” the Realtor sell those horrible Short Sales, negotiates a deal with a buyer for $125,000.00. When the buyer goes to close, the bank is shown a closed deal for only $100,000.00 and the “investor / 3rd party” walks away with the additional $25,000.00. The really sad part is the original Realtor is none the wise and all he knows is he got double commission because the “investor / 3rd party” offered him the buyer’s side commission and he got the listing side commission from the bank. So, now the un-suspecting Realtor has broken his fiduciary responsibilities, mortgage fraud, un-ethical behavior and whatever else they can throw at you. I am really surprised to see some of those similar companies advertising in this group but, I guess scam bags can be anywhere. Realtors, if it sounds too good to be true, it most likely is.
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  • I know of one group that does this on homes with equity, but they inform the lender that they are an investor. They look at the properties in need of repairs, showing the lender the estimated cost of repairs with photographs, expenses to sell the home and the cost of time to get it sold. This estimate cost would be part of the reasons for buying the home at a lower price. They do provide the BPO and a couple of contractors' bids on each item that needs repair or upgrade. (It is like acting as an Asset Manager which got some of its duties skipped.) They do give the homeowners a nice amount of the equity, provided the homeowner has at least 30% equity. You could say it is either something for the homeowner before foreclosure or nothing to the homeowner after foreclosure. Which is better for the homeowner?

    This is taught by Alexis McGee and a few of her graduated students. She seems to have a good rating for helping the homeowners - Lots of Radio talk shows on her website at http://www.foreclosures.com/pages/alexis/MediaLibrary.asp. They are known as the White Knights.

    If a Realtor is involved, they can get the full commission, if it closes.

    They are using the same concept on REO properties that are fixer-uppers. The seller in this case, of course, does not get anything. It is an all cash deal with these transactions..
  • As listing agents we have an obligation to represent our Sellers. In regards to our short sale listings, we STILL have an obligation to insure that we do what is best for our Seller clients. Selling our short sale listings dramatically below market may is NOT in our client's best interest. Our Seller's face, not only foreclosure, but the potential for deficiency judgments, potential tax liabilities and re-payment plans negotiated through the short sale. It is our role to help minimize this gap for our short sale clients. I personally, would not want to be the agent working the above described short sale transaction as a dual agent, would you?
  • This is absolutely true! I just had an agent bringing an “Investor” at my office to talk to me in order to give permission to work with him. Guess what??? He proposed exactly what you said: A FRAUD. In no circumstances a Realtor should accept these so called “Wonderful Proposals”. I’m with you Jesse!
  • Hi Robb:

    Please refer to the article as I wrote it.

    Quote, "all these offers from the general public are being held back…they aren’t being submitted to the bank."

    "IF" you are telling me that you are disclosing to the bank that you are fielding offers and NOT submitting the highest and best to them but, they are cool with that.....then this blog post has nothing to do with the way you are doing business.

    On the other hand, I can't imagine any bank, a financial institution, agreeing to accept a lesser offer on a SHORT SALE, when they know the investor has better offers, who does that?

    Not to mention, in this state, Tennessee, unless you are licensed to practice realestate then you have no business negotiating anything with the bank on behalf of a client / homeowner.

    See my blog, http://reopro.ning.com/profiles/blogs/short-sale-scam-dupes

    For reference you can see the Official Manual of the Tennessee Real Estate Commission 2008 edition, (latest edition) page 8, 62-13-103 where it outlines when a person is identified as a broker or affeliate broker.

    See article (b) of the same code for license requirements as well as the Acts 1973, ch. 181 / 4;T.C.A./ 62-1304; Acts 1989, ch. 89 2.

    Now I am not an Attorney and this is just my opinion and should not be considered legal advice. I don't practice in any state other than Tennessee so if you live in another state please consult a real estate Attorney licensed in your area of practice.

    By the way, what the bank may or may not realize isn't the question. The question is what exactly are you disclosing. It's 2 different things to say, the bank should know and what you aren't telling them. Not to be rude but, this is ethics 101.
    Short Sale Scam Dupes Un-Suspecting Realtors...Are You One?
    Be very careful with who you do business with. Here lately, many Realtors are be contacted by people who claim they can expedite the Short Sale proc…
  • How is it fraud if this an option contract and there is full disclosure? Also, I have seen these as cash purchases where there is no fraud at all just a short sale. When the lender sees the option contract I think they can realize the property will be resold. The only real issue here is "seasoning," where the bank of the purchaser may require the property be held for a few months before being resold. Often this is highlighted on the title exception.
  • After reading the comment you left Steve, nope i don't have a problem with you posting it however, for your protection make sure you have the premissio of the article's author to republish the content. You don't want to get in any trouble.
  • Jesse, I hope you don't mind me quoting a topic that was posted this morning in our company's intranet. It goes into a little more detail of how this scam works and is quickly becoming a major issue all over the Country. Agents need to be aware of this as this scam could land them in JAIL!




    Q: I have been approached by an “investor” wanting to “help” the seller of my short sale listing. Supposedly this investor will negotiate a short sale with the seller’s lender(s) and sell the property to another “investor”. This would free up my time to work on other deals and not be bogged down in negotiating with my seller’s lender(s). The listing is not currently under contract. In fact, we don’t even have any offers on the table at this time. Is this legitimate? What should my concerns be?



    A: Broker Support has been practically BURIED in these calls nowadays. This is a MORTGAGE FRAUD SCAM which began appearing last year. Here’s how it typically works:

    · The scammer targets owners who owe more on their properties than they could hope to sell it for in today’s market, preferably with more than one mortgage owed, are behind on their payments and with foreclosure looming.

    · The scammer makes an “offer” to the seller (through you, the listing agent) which is usually nothing more than an Option Agreement but with no terms and conditions specified. If the seller signs this, he has granted the scammer the OPTION to buy the property at any time before a certain date (foreclosure date), but no price or terms are established. Since the seller won’t be getting any proceeds from the sale, seller isn’t really concerned about any “legalities”.

    · Often the scammer also asks the seller to sign a limited power of attorney, granting the scammer the ability to communicate directly with seller’s lender(s). One symptom of this scam is that the scammer INSISTS that he be able to negotiate with seller’s lender(s) directly.

    · The scammer’s offer requires that you NOT place the listing “under contract” in FMLS, GAMLS or NEGAMLS (which, in itself is a violation of the Code of Ethics Article 3 and License Law prohibiting misrepresenting the availability of property). Instead, the scammer wants you to WD the listing and to have his own real estate company list the property for sale. He may even offer the listing to you!

    · The scammer receives and negotiates offers from the public at the same time he is negotiating a much lower sales price for himself with the seller’s lender(s).

    · In the event a buyer makes an offer high enough above the price that the scammer has negotiated with the seller’s lender(s), the scammer exercises his Option to purchase the property at the low price negotiated with the seller’s lender(s) (commission to Metro Brokers paid here), immediately resells to the unsuspecting buyer (another commission paid here) and pockets the profit.

    · In the event no buyer makes any offer high enough before, the scammer simply does not exercise the Option; the property has been tied up unnecessarily and usually is lost to foreclosure.



    So where is the mortgage fraud? Both the seller’s lender(s) and the buyer’s lender (if there is one) are defrauded. The essence of mortgage fraud is deception – the omission or hiding of information which would have caused lender(s) to make a different decision. In the case of the seller’s lender(s), the fraud is concealing the existence of other, higher offers. The seller’s lender(s) is not aware that other buyers are willing to offer more for the property because those offers are hidden from them. Seller’s lender makes a decision to accept the scammer’s lower offer and suffers a larger loss on the loan than necessary. In the case of the buyer’s lender, they are not aware that the property could actually be purchased for a much lower price directly from seller’s lender(s) and may “over lend” on the property.



    The Georgia Residential Mortgage Fraud Act states that ANY PARTY who receives funds from a fraudulent closing is subject to prosecution under the Act, including real estate agents receiving commission. Ann Bone, Director of Broker Support, personally spoke with David McLaughlin, Georgia’s Senior Assistant Attorney General regarding this scenario and he has stated that this is considered “theft by deception” and subject to the Mortgage Fraud Act. Don’t jeopardize your license! Call Broker Support if you are approached with this “offer”. Remember, ORANGE ISN’T A GOOD COLOR ON ANYONE.
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