Pacita:  Yes, I have heard of that being done.  Quite often in an area where a lot of short sales take place.  There are even companies that specialize in it.  And... this person you mention... she isn't selling it... it is all contingent upon her getting title to the home that is the subject of the short sale.  If handled correctly, it can work.  It is not something I would want to get involved in, but I have heard of it working out.

Hi Pacita,

What you have described has different names in different areas of the country.  Simultaneous Close, Double Close are two I am familiar with.  It is heavily reliant on the lawyers processing the deal properly and they need to be diligent with the title change as your investor friend will only have the title for a short time .  The banks can sometimes get a bit bothered by the process as many bankers aren't aware of how it works.  If improperly managed by the investor and lawyers your investor friend would have to buy the property and many investors who employ this technique might not be able to buy it and that makes everyone mad, especially in a short selling situation.

I cannot talk for every State or Province or Territory that uses English Common Law but it is not illegal, although many have the perception that it is because people think the investor is selling something they do not own.  I'd love to hear from some lawyer on the subject however, as I do not use this technique in my business.

Keenan 

Thanks, Karen and Keenan

The investor I am speaking of was told by some realtors that what she is doing is wrong, unethical, illegal, etc. But she's done this for a number of years.

I just got a little concerned that it is a hair-raising and risky way to do business.

Someone please correct me if I am wrong...

I'm pretty certain that it is okay for the investor-buyer/seller to advertise the property with proper disclosures HOWEVER I don't believe that you can list the property and the investor cannot put a sign on the property.

If you are working with/for this person be sure to get legal advice before proceeding.

TIm and Susan

I don't think a realtor can list a property for this investor if the investor doesn't own said property. And you're right, ,.. that investor can't and shouldn't put a sign on the property either, especially since the official listing agent will have his/her sign on it until it closes.

This investor advertises it on craiglist, yahoo, and other investor forums. She ought to know what she can/cannot do since she was a former realtor herself.

Thanks for reinforcing what she needs to do, but I don''t know what she can provide in terms of disclosures since she won't officially be the seller. So this is  quite tricky.

Every State will be different on their laws...from what I know (enough to be dangerous) that the investor can market the property with the consent of the party that is selling the parcel, so lona as their is a legal binding PA.  I would check with your Broker and or Association attys.  I know I will be doing that myself!

Great Question!

I would not be involved with type of transaction! I am not an attorney but I do not think this is legal, A person cannot accept an offer on a property that they do not own. It is not worth the risk of possibly losing your license. In California we have so many contracts and disclosures with each transaction because of someone losing a lawsuit

I have just come across this very situation today.  How fitting, lol.

This person is not only advertising but she's got it in the mls through a broker under 'limited service'.  I'm in the process of checking to see if this is legal in the state of Florida.  It's my understanding, again, with limited knowledge enough to be dangerous, it's not legal for her to advertise properties she does not yet hold title to without a license muchless put them on the mls.  I'm checking it all out from our state association and will report back what I find out.   I'm sure it's different in every state but at least we'll all know what Florida allows.

Cyd

I just don't know how an investor in this position can legally advertise the property on the MLS. Nearly all listing agreements have a question about legal ownership.

The more I read and hear about it, the more this is sounding to be a scam-like way of doing business. And what buyer in his right mind would want to buy a property from a seller who doesn't own the property? That's why it's so important to get all disclosures about the property. A simple preliminary title report would answer the question about ownership.

Good luck in your sleuthing.

Pacita

This is quite common with investors. There are some attorneys who won't perform what's called a double close - but increasingly many are.

Well, I did my sleuthing.  And here's what is going on with the person I was talking about.  Follow closely because it's pretty complicated.   She is a licensed sales associate in Fl that has allowed her license to go voluntarily inactive.  I'm thinking that it's because there could be ethics involved but then again it may just be she didn't want to 'work' for someone else anymore.

How this is working is as follows:  Ads are placed about how they can help you if you are in foreclosure, etc.  The distressed homeowner calls.  This person and possibly a partner go the the house.  Once they determine that the property is in foreclosure, what is owed to the bank, etc and that they want it, they have the homeowner put the property (via the deed)  in trust with the homeowner as the trustee.  Not an unusual occurance here, generates no transfer tax and doesn't raise any red flags for anyone.  This trust is filed with the county.  They then have the homeowner assign that trust to a corporation that has been set up.  This one is not filed, therefore even if the bank finds out it was deeded to a trust it looks as though it's the original owner...and there is no reason to enforce the escalation clause.  They then have the homeowner sign a P&S contract for the full amount of the loan and expenses accrued on the property, any liens, etc.  The corporation (trust) is now the owner & buyer.

Then they have them sign another contract for a lesser amount, one the corp would offer to the bank.  Then they start negotiating with the bank and advertising the property.   I checked this all out and in actuality, they have every right to advertise the property...they DO own it, the owner signed over the deed to them.  If they can negotiate with the bank, they close on the lesser amount contract and either flip it, rent it or simultaneously close it with someone else.  If they can't, they walk and leave the original owner to his own... no deed in his name and he still owes the bank. 

Now.  There are several things that can happen...the 'buyer' can be really scummy about it, rent the property out and keep the funds, do nothing with the bank at all and just collect money and walk trashing the original owners credit further,  or they can sell the trust to someone else, take that money and walk.  Or they can actually close and relieve the seller of their stress.   BUT.  All tax consequences lay on the seller.  ANYthing that may have been done, such as deeding the property to someone else without notifying the bank, any transfer taxes that may have been due but the state/county was cheated out of ALL falls on the original homeowner.    If the 'buyer' gives funds to the seller to sign over the property they do a bill of sale for personal property such as furniture, etc so it's not recorded.

Now, as a Realtor® I would think there would be some ethics involved here...there's no reason to do a trust, have someone sign over their deed to assist them with their short sale and I would think protection of the public and working in their best interests would come into play, but I don't know that.

I was told by the legal hotline to report the whole thing to the attorney general and to the state board to let them get to the bottom of everything and sort it out.   After sitting there and looking at the trail of paperwork and happenings, I decided against it.  The only person that would get in trouble would be the homeowner from what I can tell and who would want to put them in a worse position than they already are in?   As for the licensee...I haven't decided yet what to do.  If it got reported for unlicensed activity, actually it's not if she's a member of the trust, it's her property, she's allowed to sell it.  If it got reported for some sort of ethics, if there even is something unethical, which I'm not sure there is, she's not a Realtor® anymore.

So, here I sit.  A little more knowlegable about how to do some complicated convoluted real estate transactions, lol. 

Cyd:

The scenario you described sounds a lot like this scam. Read on.

http://abclocal.go.com/kgo/story?section=news/local&id=6044747

• homeowners who faced foreclosure would be solicited by direct mailings from Community Home Saver Program, who would retrieve their names from public records in the Alameda County Recorder's Office
• property owners transfer a fractional interest, usually 10 to 15 percent, of their property to fictitious company names via a grant deed
• grant deeds bearing the false company names were then recorded with the Recorder's office. The scammers would file a bankruptcy petition with the U.S. Bankruptcy Court under the fictitious company names. The bankruptcy petitions would act to automatically stay the foreclosure proceedings.
• Scammers charged a monthly fee between $1,500 and $2,500 on the promise of keeping the foreclosure forestalled.
• Legitimate lien holders would go to the bankruptcy courts, get the grant deeds with the fictitious company names overturned, and then foreclose on the properties
• homeowners would then lose whatever money they paid the scammers and would still end up losing their homes

Yes, something similar but they aren't charging the homeowner any money...their idea is to make money on the resale of the property if a short sale can be worked out.  Which is why I think it's sort of legit..it's a way for an investor to have a potential income without any of the consequences should it fail.

I don't understand why anyone would sign over their deed to allow someone to work out a short sale.  It makes no sense...but people that aren't 'in the know' and/or are so stressed out, they just want out and they see this as a way.  They forget..it's their credit still on the line, it's still their obligation to handle the mortgage, it's their tax consequences if there are any and if anything illegal happens in the house while they aren't there, they still are responsible.  The only trust filed is the one showing they are the owners.  The corp can just disolve.  Disappear.  

I found the format that this agent (or ex-agent) is using online.  It tells you word for word what to say, what to do, how to do it, when, etc and that you are totally protected from any liability as the 'buyer'.  It even tells you if they won't sign blank papers or the second contract just have them sign on the back of it. What that is for I don't know unless at some point if you just need that signature you can 'attach' it to something that needs a signature, copy it and then fax it.  No one would know it isn't legit.   

I'm not saying this person has gone that far, but it could be done.  I don't know how far she and her partners have gone or to what ends...I just know they have a minimum of 7 properties in various parts of Florida. 

I don't know.  Maybe I should report it and let the legal eagles sort it all out.  But I am concerned for the 'homeowner'.  Although, then again, maybe thinking they are so innocent or ignorant in the whole thing is incorrect.   And while there are people around me that I've spoken to about it, (very few but knowledgeable and in authority in our association/brokerage) tell me flat out, report that!!, they don't report it either, lol.  *sigh*   

Cyd -

Definitely report this.  Provide as much evidence as you can and sign your name to the complaint.  The state will investigate.  If what they are doing is legal then so be it... if not, they need to be busted! 

Just an update.  I was contacted by our association today.  Apparently someone else 'inside' was watching also and they are filing a complaint.  While the premise of what they are doing isn't illegal per se, if they are following the manual completely (yes, there's a manual out there on this stuff), it is deceptive and as a licensee, whether practicing or not, apparently there are violations.  So... I've been requested to follow suit.  I'm going to but I have to tell you, this is a first for me.  And quite frankly, it's very uncomfortable.  Kind of like a kid not wanting to snitch on their friend.   Guess it's time to grow up.  Dang it!  :)

 Pacita, I'm sorry for having hijacked your thread!   How is it going with your investigation of the practice of advertising something you don't own yet? 

Hi Cyd

Love it that you are taking such a proactive stance in investigating this. I, for one, am too chicken to get involved in this. I have enough trouble keeping up with short sales that I am afraid I'd stress out. The prospective buyer and seller I spoke of may have been turned down by other realtors because she wanted to meet with me personally and explain what she does and how she does it. She appeared to be trying to sell me to the idea.

Thanks for the extra info that is convincing me to stay away from it. :)

Pacita