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Short Sale Fraud Situation in Natomas About to Hit MLS
It is a federal crime to commit short sale fraud.
Talk about the signs of short sale fraud. My mouth fell open when I read the email from a short sale agent in southern California who proposed we work together on a Wells Fargo short sale in Natomas. He obviously found my name online because I am a well known Sacramento Realtor who also has closed more short sales over the past 10 years than any other single agent in town. I am sharing this story with my readers as a public service. I hope none of you ever get involved in a situation like this, whether you are a buyer, a seller or a Sacramento real estate agent.
What’s more astounding is after I pointed out at least 6 possible infractions, the agent still clung fast to his plan. He offered to split the commission with me, but the money is immaterial. I value my real estate license and my integrity.
This guy’s plan, let’s call him Moe, is to first underprice the property by about $100,000. He thinks he can do it because he’s been talking with Wells Fargo about this short sale supposedly for a year and pushing for that much lower sales price. It’s possible his clients have filed for bankruptcy as there seems to be a lawyer involved in this suspected short sale fraud. Not to mention, a year is too long to negotiate with Wells Fargo. Something else is up.
At first glance you might say the superficial price doesn’t matter because the property will be for sale on the open market and the highest offer will prevail, especially in a seller’s market like our present market in Sacramento; but the way Moe wants to structure this, that will not happen. Moe claims he has successfully closed lots of short sales over the past 8 years by doing what I imagine authorities would call committing mortgage fraud, short sale fraud, and / or violating the Code of Ethics.
Besides underpricing the property, Moe intends to cut out buyer’s agents from the sales equation by offering a ridiculously low commission in MLS to buyers’ agents. He was very clear in his mail about focusing solely on dual agency. Moe calls it “maximizing our work and sales commissions.” I call it price fixing, bulldozing the Sherman Act, and violating Articles 1, 2 and 3 of the Realtor Code of Ethics, but let’s not quibble. On top of this, he wants to charge the buyer $10,000 for negotiating the short sale, a service I offer FOR FREE to all of my sellers as part of my commission and fiduciary duty.
I considered simply paying Moe a referral fee and handling everything myself, to ensure the short sale was conducted in accordance with real estate law and the Code of Ethics. After reflection though, I have passed. Because there is really no way to enter into a relationship with Moe and keep my hands clean. Some of that icky shit would rub off somewhere. That’s not an association any Realtor needs. Nobody needs to get mixed up in short sale fraud for any reason. Oh, there’s never a dull moment in Sacramento real estate.
Selling a Short Sale to a Person You Know Could be Short Sale Fraud
A potential short sale seller in West Sacramento called a few days to ask questions about selling her home to a relative. Friends told her she could sell the home to a Living Trust, which her son controls, and then she wouldn’t really be selling the home to a relative — what bunk. This type of short sale transaction could very well violate an arms-length agreement. I can’t believe any lawyer would suggest that idea, but it’s possible because lawyers are not infallible. They make mistakes. Plus, they can then charge a client even more money to build a defense. Pretty good racket. Just think: Better call Saul.
This seller said she read in some of my blogs that it’s not a good idea to try to pull the wool over the lender’s eyes because it can come back to bite you. Hard. Right on the butt. I realize people get emotional about their homes and want the real estate to stay in the family, but if you’re doing a short sale in which you have to sign an arms length agreement, it’s not worth the consequences. The lender could say it’s mortgage fraud and reverse the seller’s release of personal liability, not to mention, prosecute everybody involved.
If you want to read about what recently happened to a seller and his real estate agent regarding short sale mortgage fraud, you should read this article in the Modesto Bee. There were so many alleged wrong doings, it made my head spin. The federal prosecutors say the agent and seller conspired. Here are some of the allegations:
- The agent wrote the short sale hardship letter for the seller.
- The hardship letter misrepresented the seller’s ability to make the mortgage payments.
- The seller and agent made false statements about the seller’s assets.
- The agent and seller misrepresented knowing the buyer.
- The seller sold to the buyer, which was the listing agent’s son, as a straw buyer.
- The seller gave the buyer the money to purchase the home in exchange for the buyer giving it back to the seller.
The buyer’s agent also gave the listing agent 75% of the buyer’s agent commission, which makes me wonder — what about the buyer’s agent in all of this? Is that agent’s broker liable? What about the listing agent’s son? Sounds like a group effort.
At this point, the seller apparently has pleaded guilty and is awaiting sentencing. If the agent is convicted, she could face 30 years in jail plus a $1 million fine. This might be a good time for the agent to watch the Netflex series Orange is the New Black.
Before you judge that listing agent too harshly, consider the fact that it’s possible she doesn’t really sell much real estate and just happens to hold a real estate license, like about 80% of the agents out there. It explains why she might not know any better but it doesn’t relieve her from responsibility to have known.
