Distressed property transactions and fraud are becoming more synonymous day by day in the real estate world in which we live. In Southern California, distressed property transactions account for the majority of the home sales (San Diego County 48%, Orange County 43%, Los Angeles County 48%, Riverside County 60%, San Bernardino County 65%, Ventura County 51%). A number of government agencies have created task forces to help against fraudulent activity and the Department of Real estate has also created a consumer alert web site. We all know that the lender is the one who dictates the rules on distressed property transactions, especially in short sale situations. These rules, when not complied with. could cause criminal charges to occur. In one case, an agent entered into two separate short sale listing agreements whereby the allowable compensation to be paid to the licensees would not exceed 7% of the sales price. However, he then required the buyers to pay an additional 3% short sale negotiation fee, a fee neither concealed nor disclosed to the lenders or sellers. This agent was forced to not only surrender his real estate license but also serve 90 days in jail, pay a restitution fee of about $25,000 and be on probation for three years. So here are things to be aware of: Were there any liens on the property that were originally shown on the HUD that are suddenly now paid out of escrow? Any red flags that the buyer and seller are connected and commiting lender fraud? Was there recent activity on the property like transfers, liens, etc? Are all disbursements being paid at COE shown on the HUD submitted to the short sale lender? Finally, Is the second lender getting a larger payoff than the first lender and the additional funds are not disclosed on the HUD? Protect yourself in San Diego real estate transactions.
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