Many people cannot sell their homes in our stagnant real estate market, and unfortunately, they cannot afford to wait for an upturn. As a result, “short sales” are becoming quite common. Short sales occur when a property is sold for less than the amount of the property’s mortgage. With short sales, borrowers avoid foreclosure, and lenders recover at least some of the amount owed to them, while also avoiding the fees and hassles of yet another foreclosed property.
Unfortunately, the new short sale trend may leave sellers vulnerable to real estate schemes. In Utah, a seller became the victim of real estate fraud when she had trouble selling her home for more, or even as much as, her mortgage.
In order to avoid foreclosure, the seller began working with a real estate agent with short sale experience. The real estate agent brought in an investment group to look at the home and property. Unbeknownst to the seller, the agent was also a member of the investment group. The seller permitted the investment group to list her home at a short sale price that was almost $30,000 less than what she owed on her mortgage.
After listing the new price, the wife of another investment group member offered to buy the property at the short sale price. Of course, the seller had no idea that her potential buyer was in cahoots with her real estate agent and the investment group.
After some negotiation, the seller’s mortgage company agreed to the short sale. Once they did, the real estate agent immediately “flipped” the house, putting it back on the market. Lo and behold, the property achieved an offer that was over $40,000 more than the seller’s original asking price. Of course, the agent and investors did not tell the seller or the mortgage company that the property achieved this high offer. Rather, the agent and investors completed the short sale with the mortgage company, and then they split the remaining profit of almost $60,000.
The plot came to light when the seller filed for bankruptcy. While investigating the sale, the bankruptcy trustee uncovered the scheme, and as a result, the agent and investors were charged with fraud and breach of contract, among other violations. The U.S. Bankruptcy Court for the District of Utah went on to find that the seller had been misled in numerous ways and that the real estate agent and investors could be liable for punitive damages.
Sadly, a bad economy often breeds bad behavior, as the unscrupulous see opportunities in other people’s desperation. Therefore, it is imperative to retain an attorney who can protect your interests during real estate transactions, foreclosure proceedings, and bankruptcy. If you face foreclosure or are considering bankruptcy, hire an experienced attorney to protect your rights and your property.