Colorado Springs Short Sale Scam Could Be Mortgage Fraud

PREFACE:

THERE SEEMS TO BE SOME DISSENT AMONG  “INVESTORS” (AKA “OPPORTUNISTS“) REGARDING MY ARTICLE HERE, SO I WILL BE EDITING IT TO REFLECT MY OPINIONS AND TO CLARIFY HOW THIS COULD BE MORTGAGE FRAUD, AS WELL AS SHARE THE MORAL IMPLICATIONS THAT THIS TYPE OF TRANSACTION HAS.

This article is NOT just about buying a property and selling it for a profit. This article is about sticking a hand into the middle of a transaction to grab money out of a pocket of a seller and lender in a distressed situation.

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The Colorado Springs real estate market is shifting. There are more Colorado Springs foreclosures than there has been in years, and because of that, there are more short sales.

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Well, with any shifting market, comes people who will take advantage of the kinks in the system it for their own gain. Well, this market is no different.

There is a new scam that is happening in the Colorado Springs real estate market. According to the Pikes Peak Realtor® Services Center,

“The Association has become aware of a scenario that appears to involve concealing important information from lenders. The scenario typically involves an investor/buyer negotiating a purchase contract with a seller/borrower subject to a successful short sale. The investor/buyer then negotiates a short sale with the lender. The investor/buyer simultaneously markets the property for a higher price. Once a new buyer is found, the investor conducts a simultaneous closing–pocketing the difference between the short sale price and the new purchase price. Apparently, the lender is unaware of the new contract for a higher price. In summary, simultaneous closings involving short sales and significant sales price adjustments could be a red flag.

This COULD BE mortgage fraud and DOES raise a RED FLAG to the FBI. Mortgage fraud is a federal crime and punishable by thousands of dollars in fines and years in prison. The FBI does not take mortgage fraud lightly.

If you are a seller facing a foreclosure on your Colorado Springs home, and you suspect that this may be happening, please report it immediately. (Even if you just suspect it, you should request an investigation.)

FBI Field Office, Mortgage Fraud
Denver FBI Website
White Collar Crime Supervisor
Federal Office Building, Room 1823
1961 Stout Street, 18th Floor
Denver, CO 80294-1823
Phone: (303) 629-7171

If you have any questions about the legality of your home sale, please contact the FBI Field Office.

How ELSE could this be illegal?? Interesting read: FraudProblem.com/short-sale-scam

However shady this is, there are technically-LEGAL ways to work deals like this.

  • The investor MUST make a FULL DISCLOSURE of the intent to make a profit off of the immediate re-selling of the home – to both the CURRENT BANK, the FINAL BUYER’s BANK and to the SELLER. (The final lender needs to be “ok” with lending MORE money on a home that just sold for significantly less.)  And to quote a friend of mine:
    “For those out there that say they are doing this “with disclosure” so it is okay….ask yourself if you are REALLY being clear about that disclosure. Vague or ambiguous disclosure is not disclosure.”
  • In most cases, the investor CANNOT have a simultaneous close – meaning: The home must belong to the Investor for a period of time before being resold to another Buyer, even if it is only for just 24 hours.
  • In most cases, the investor MUST have WET (available) FUNDS to purchase the home even WITHOUT a new buyer. Basically, each deal should be able to stand alone.

YES. There are “technically-legal” ways around this and you should contact a competent real estate attorney to figure out the details, if this is the road that you choose to go down.

HOWEVER … just because something is “legal” does not make it right. And (of course) everyone’s definition of “right” varies, but let me share this …

MORAL IMPLICATIONS (as an “investor” AKA opportunist …):

  • The original seller WILL BE on the hook, legally and financially for the ENTIRE deficit of the short sale. – A deficit that has now become a sudden “profit” to an “investor”.
  • The original seller could be on the hook for significantly LESS if they dealt with the final Buyer without the “investor/middleman” sticking their hands in the middle of the transaction.
  • Question: How do these people call themselves “investors” when they have NO RISK involved and invest NONE of their own money in the transaction?

I understand that this article will STILL anger plenty of people who feel the need to justify their “investing” actions, but so be it.

As a business person, I need to sleep at night with every business decision I make – regardless how “technically legal” it may be. It is the “morally-poor-technically-legal” business decisions, like these, that bring our great country into some of the tragic economic places that we are seeing today.

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