The rave that seems to be making the rounds in the Real Estate community is the short sale option contract. It goes something like this: A Realtor gets a call from a prospect to list a property for sale which is worth less than owed (Short Sale Scenario). The agent does not want another short sale listing but reluctantly takes it and turns to an investor for help. The investor makes an extremely low offer with an option to sell. He then takes over the short sale negotiation from the agent who has agreed to let him do so.
The hitch is that the property is then actively marketed for a higher price while under contract. A buyer is found and a contract is written with the investor as the seller. Once it closes it is immediately sold to the buyer. Of course there are other variables and scenarios painted in different lights to try and masquerade what is going on but this is essentially what is happening. Oh by the way the listing agent is promised the second listing as well along with a reduced commission, but who cares the agent is getting two commissions days apart, nice!
The problem with that is the little thing called code of ethics. A Realtor has a fiduciary responsibility to get the highest and best price for the seller. The other wrinkle is this other little thing called fraud. If the agent knew full well he could get a higher sales price, why didn't the bank receive those funds? Especially when he listed it for the investor and sold it a few days later.
If this scheme is properly disclosed to all parties, I doubt the bank will accept the first offer, especially when they do their homework and find out what the property is worth. Most of the time it is not even called an option contract because that phrase raises red flags. You can see why the "investor" wants to control the negotiation process. This way he controls the information to the lender. He probably manipulates the BPO as well to get the sales price accepted. This is why the Realtor has to be in on the scam.
Most option contracts require either one of two elements to make them work ethically. The first is time, and the other more practical one is buying low with all parties aware of what is going on. The property needs to have enough equity and the seller needs to be sophisticated enough to know he is leaving money on the table in exchange for a quick sale.
Common sense should prevail here. Think about it, if the property can be sold at that much of a discount don't you think you can find plenty of buyers? Why use a middle man?
What I see happening is a bunch of Realtors being duped to buy a course that packages this type of transaction in the form of books, cd's and webinars in exchange for putting their license and freedom on the line. Heaven forbid an agent actually gets involved in a short sale option contract. The ones making the money are the endless amounts of gurus, so called investors and overnight experts. If it sounds too good to be true it usually is.
See this article for an actual case. http://www.nationalmortgagenews.com/fraud/stories/?id=289
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