Every jaw in the room dropped as the story unfolded. The story was about a local agent who created "straw buyers" for their short sales to help move the approval process along. Instead of waiting for a real offer to appear they would write up an offer and send it to the bank so that the BPO would be completed and the file processed to a negotiator. Once the file had approval the "buyer" would withdraw their offer and the agent could now advertise their listing as an approved short sale.
Thinking this must be just a crazy invention by one agent and after a heated discussion regarding ethics I put it in the back of my mind. Today while looking through responses on a national real estate forum there was an agent suggesting to a home owner that they could put them in touch with an agent who had "investors" who would write an offer on their property to get the short sale process started.
Good grief there is more than one agent that wants the Virginia Real Estate Board to take away their license. Short sales are what they are. They can be difficult, they can be time consuming and they can be frustrating but they are not worth losing your real estate license for.
What these agents may not realize, as it was clearly pointed out to us by the attorney leading our discussion, that once an offer on a property is withdrawn the approval process often starts all over again. An approval on one offer does not always translate to an approval on the next offer. In a few rare cases, depending on the lender you may be able to substitute a new offer at the last minute but it is a guarantee. However if you are following our local board rules of changing the status to under contract, how are you getting that second offer in the door?
Meanwhile the homeowner who hasn't make a payment in two, three or more months gets closer and closer to the delivery of the foreclosure notice. The idea of a "straw buyer" for a short sale listing shows how far some agents are willing to go in today's market to potentially make a sale.