We've all heard about the investor short sale scams. You know, when the investor finds a desparate homeowner who is about to be foreclosed on and swoops in like they're going to "save" them. They convince the homeowner to sign a Quit Claim Deed to the property, then they write an offer on the home and put it back on the market for sale to procure a third-party buyer prior to closing. Once they receive an offer from a third-party buyer, they proceed to a double closing.....and their own money never even hits the closing table.
Guess what. It's bank fraud. Plain and simple.
Recently, when one of my clients wanted to write an offer on one of these, I told him he'd need to go to another agent to write the offer as I really don't want any part of this type of scam. He insisted I write it. After debating the issue with the listing agent's broker, attorneys and my own broker for over a week, I thought I'd finally found a solution to the problem. I simply wrote an offer to the original owners of the home and indicated that it was THEIR responsibility to figure out how to get the investor out of the way, release the Quit Claim Deed, but we wanted no part of this investor whatsoever.
That seemed to work.....until yesterday.....two days before closing. Wells Fargo approved this short sale last week. We were given a whole FIVE DAYS to get the appraisal done and the buyer's loan approved. Of course, the final HUD has to be sent to Wells Fargo at least 48 hours prior to closing for approval. We're scheduled to close on this tomorrow.
So yesterday, as we're waiting on final HUD approval from the buyer's lender, I received an email from the listing agent with the following message:
"We are having an issue with the second mortgage. They are wanting $2,500 more than Wells Fargo will give...and the sellers just don't have anything. Why it's a last minute craziness....I have no clue. I'm working on it, but it might be a deal breaker. I don't know, especially with the May 14th closing date. I hate to ask, but would the buyers think it worth it to come up with another $2,500? It's still a steal....."
Hold on.....there is no second lien on this home. What second mortgage is she talking about?
The next email I received was from the title company closing agent, which stated:
"We are having an issue with $2,500 that has to be sent to Wells Fargo for the difference on the payoff. I thought the buyers were going to be paying this, but I spoke with their lender and he says that they won't be able to pay it because they would be short on the amount of reserves they have to have. Has [the listing agent] spoken with you about this?"
Let me get this straight: they had the escrow agent contact MY buyer's lender to determine his financial capability? I scrambled to find the title work to the property. Guess what.....there is no second lienholder. I called my buyer's lender, and he confirmed that the closing agent had called him and asked if the buyers were financially capable of paying it. I had the buyer's lender send me a copy of the approval from Wells Fargo.
Wells Fargo approved the short sale....with a 7% commission. 4% going to the listing agent. The sales price of this home is $239,900. It doesn't take a rocket scientist to figure out that Wells Fargo only approved a 7% commission because the seller agreed to a cash contribution of $2,500.
I asked the listing agent about this and she said she couldn't afford to throw any in because she had to split her commission with "Sheri." "Sheri" was the original investor that had the sellers sign the Quit Claim Deed to her. "Sheri" was the person that we have been trying to avoid through this entire contract. "Sheri" claims to be a license agent in Arkansas. Since "Sheri" is not licensed in the State of Missouri, the listing agent has to pay her a referral fee....but "Sheri" has been negotiating this short sale the entire time.
So now they are asking ME to absorb $1,000 of the $2,500 cash contribution from the seller on the Wells Fargo approval.
IN ESSENSE, THEY WANT ME TO REDUCE MY COMMISSION TO PAY FOR THE ORIGINAL INVESTOR!
The worst part? If we refuse, then "Sheri" can refuse to quit claim the property back to the sellers.
To say I am angry right now would be the biggest understatement in history. What am I going to do about it? Well....my client really wants this house. We moved huge mountains and performed several miracles to get a loan processed in 5 days to close this thing. I will pay the $1,000 out of my commission, but I have a message for "Sheri" and the listing agent:
You'd better not spend this money too quickly. As a matter of fact, you should hope to invest it in a manner that will make it grow quickly, because by the time I'm done with MREC, AREC, the Attorney General, HUD and the FBI.....you're going to need it.....and a whole lot more.
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