Short scale scams are prevalent in the metro Detroit real estate market. I wrote a blog on short sale scams a while back and I got this comment from a reader who had entered into a short sale purchase agreement >>>>
We are trying to purchase a house and just found out the seller is committing this short sale mortgage fraud. For months he has led is to believe it was our offer submitted to bank and that was who we were purchasing the house from. In reality the selling agent has promised it to an investment company buying it dirt cheap from the bank, unknown to the bank that we are offering more. Then that company had planned on selling it to us at the inflated price and make a quick profit. We just found this out and are devasted. We have invested so much time being mislead we do not know what to do. The selling agent had lead us to believe the entire time we were buying this short sale from the bank. Now my agent tells us we could be comitting fraud too if we purchase this house and not only that but no one will even touch this house for a motgage because of the "flipping" on the house. We do not know what to do. If any one has any advice or knows what we could do please contact me. We really want this house and want to get this seller for lieing to us all this time.
So I responded back>>>>
Yes there might be a 'flipping" issue. If you really want the house even though a third party is going to make money. That is something you need to discuss this situation with your lender. If they say they won't do the loan then you have to move on. Somebody will probably buy the house this way. So you have to decide how you will feel and how you will feel ethically.
It is the seller's agent that is up to his neck in trouble. The selling agent has a fiduciary duty to present all offers to his client. Which he is not doing. He is blind siding the selling bank.
Unfortunately the homeowner (seller) doesn't care. They only want out from under the mortgages. Sometimes they are even given a small amount of cash from the investor. Most times not. So yes the home owner is part of all the shenanigans. They know the bank is not getting the highest price. So basically they are cheating the bank out of more money.
Sadly it is hard to turn the listing agent in. Who would you call? And sometimes the selling bank only cares about getting rid of the home. So the bottom line is yes the bank is being screwed by everybody that has knowledge of the deal.
Would you go to jail? I honestly doubt it. Is it mortgage fraud? I honestly don't know how a judge or the legal authorities would view it. So you have to decide what your ethics and morals are. It's up to you. Nobody can be your moral compass but you.
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