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1. MBN said at April 27th, 2009 at 11:23 pm

   Isn’t most business done by people buying things for price x and selling for price y? Does Walmart have to disclose to its manufacturers what end price it is going to sell its goods retail at? Does Mc Donalds sell hamburger patties for the same price they buy them at? Can you cite the exact federal code that is being broken here? What about the risk the investor takes if they buy the property and aren’t able to re-sell it? This is a very irresponsible article. The person you mention in your article ( http://agentgenius.com/?p=8356 ) assumed because a real estate agent blogged about it, the content was legally accurate. If I were you I’d take this post down before the investor and seller connect the dots, I’m not a lawyer but I bet you are exposing yourself to alot more liability than you think with these accusations of fraud. Fraud is a very serious accusation and I don’t think what you are referring to here would be fraud in a court of law.

2. Mariana Wagner said at April 28th, 2009 at 8:14 am

   Thank you for your comment.

   What I am talking about here IS FRAUD and DOES hold up in the Colorado courts of law. People go to JAIL by lying to lending institutions. This is NOT about buying low and selling HIGH. This is about telling a bank that a home is NOT worth what the borrower owes on it and the very same moment SELLING it for that very same amount. That is fraud.

3. Maurice said at April 29th, 2009 at 6:17 pm

   Another example of irresponsible press. What is the federal statute that declares reselling a property (FLIP) a crime? you should look it up, and once you can’t find it, retract this blog.

   Once an investor buys a property, it is his to sell and is has nothing to do with the previous owner’s note holder (bank).

   The only possible illegal aspect of fraud would be a scenario in which someone works in conjunction with an appraiser and materially inflates the price above market.

   Investors (the are bad apples in any profession, including yours) can and do buy properties at a market discount from banks. then turn around, rehab/clean and sell them at market. Where is this fraud? To claim all short sales from investors are fraudulent is downright irresponsible – do you want a defamation of character lawsuit on your hands?

   Last but not least, an example. I buy a car from someone who needs to sell it today. I offer him 500 in cash on the spot. we both agree knowing the car is probably worth 800, but this person needs it sold now and hasn’t found a buyer. He takes 500 for it.

   I then take the beat up car, replace the failing alternator and polish and wax it. It is now a driveable car. I list it for 1200 and sell it for 1000. Where is the fraud? this is not fraud. Did I have to call the bank that financed the car to tell them I was going to sell it for 1000? That is what is called After Repair Value or ARV and is and cannot be valued the same when it was a beat up/broekn dirty car.

   I hope this helps shed so light. by the way the FBI page on mortgage fraud only exemplifies the insider appraisal. That does not occur now when banks perform multiple BPO’s and second appraisals on new financing, that is the true way to counter insider appraising where the root of mortgage fraud is, not investors.

   One last thought to reiterate, The bank does not take the investors word as far as how much the house is worth. they perform at least one, and typically two independent broker opinions on price and take a discount on that, based on THEIR guidelines, and their need to get the house off their books today.

   Double closings, are not illegal either. it is simply a more complex escrow transaction with 3 parties in escrow. No laws against it.

   http://www.fbi.gov/publications/financial/fcs_report2006/financial_crime_2006.htm

   Thanks

4. Mariana Wagner said at April 29th, 2009 at 8:15 pm

   Maurice – I am not talking about FLIPS. If you actually READ this post you would understand what I was talking about. IN THE STATE OF COLORADO DUAL CLOSINGS LIKE THIS ARE ILLEGAL. Please research your STATE laws before telling me what I am writing about is wrong. NOTHING about what I wrote here is wrong or inaccurate. – Mariana

5. Maurice said at May 2nd, 2009 at 4:48 pm

   Ok, then for my benefit, would you please post the status of Colorado law? I couldn’t find it.

   I would agree with you, some lenders and title companies don’t like them, because of the past association of appraisal fraud, but if you have a specific statute from the Colorado code, I would really appreciate it.

6. Mariana Wagner said at May 2nd, 2009 at 5:46 pm

   I do not understand how you can think that lying to a lender regarding a property’s value is NOT Fraud.

   What I am talking about, here, is telling a bank that they are going to have to take LESS Money for a property because the property is worth less, while in the same breath, selling re-selling the property, in the exact same moment for more. OBVIOUSLY the property is worth more than was told the bank.

   = FRAUD.

   I am not talking about buying a home and re-selling it for a profit – even a day later.

   Here is the way to avoid the fraud charges:
   * 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 BANK and to the SELLER.
   * 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.
   * 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.

7. Mariana Wagner said at May 2nd, 2009 at 5:47 pm

   http://www.fbi.gov/publications/financial/fcs_report052005/fcs_report052005.htm#a1

8. Shane said at August 10th, 2009 at 10:22 am

   You keep stating that the investor buyer is telling the bank the property is worth X and re selling it for more immediatley. To complete a short sale the lender gets their OWN appraisal or BPO and does their own evaluation of what they value the property. The investor is simply making a tender. How is this fraud? Now if the investor stated they were not going to sell the property for a profit immediatly and then did, that would be fraud. It is irresponsible to post information that you clearly haven’t researched.

9. Shane said at August 10th, 2009 at 10:25 am

   Double closings are NOT illegal in Colorado and the more you talk the more credibility your argument loses. You simply don’t have the facts. You’ve been asked to state the code that states double closings are illegal. You have failed to provide the information.

10. Mariana said at August 10th, 2009 at 10:30 am

    * 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 BANK and to the SELLER.
    * 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.
    * 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.

11. Mariana said at August 10th, 2009 at 2:50 pm

    Erin Toll (Division Director Colorado Division of Real
    Estate) is working on getting all this into a written law. What is ALREADY in writing is on the DRE’s website stating that there MUST be wet money at the table. It is ILLEGAL to use buyer’s funds to do the double closing.

12. Mariana Wagner said at March 23rd, 2010 at 4:26 pm

    Here is a link to a lender’s perspective: http://www.simplifiedmortgagellc.com/SHORT+SALE+SCAMS+AND+THE+FREE+ENTERPRISE+SYSTEM

13. Maryann said at April 16th, 2010 at 3:39 pm

    Mariana, This all comes down to due diligence on EVERYONE’S part – ESPECIALLY the lender. Reputable short sale flip investors have a very specific statement in their purchase and sale that states their intention is to immediately resell for a profit. The homeowner knows it, the lender knows it and the end buyer knows it as it’s on the first page of my p&s and the only thing in the entire contract that’s bolded. It’s not my job to convince the lender to take a certain value…it’s THEIR JOB to get a value on the property via an appraisal or BPO. I have a figure pre-calculated that is a % price of Market value and that’s what I offer. MOST lenders will take a % of market or BPO value. This is a win win for everyone involved.

    Also, unless there is an actual written law in your state NOT to do a simultaneous close to be honest, I wouldn’t put that on this page. It’s legal in most states. I bring funds to the table, the homeowner wins, realtor wins, lender wins, I win and the end buyer wins.

14. Ted Akers said at April 19th, 2010 at 6:21 am

    “Simultaneous Closings” where the investor uses the end-buyers funds to complete his/her purchase have not been allowed by title companies for some time. “Back to Back” closings where the investor brings his own funds, or loaned funds, to complete the purchase as a seperate transaction are not illegal in Colorado or any other state in the nation. Investors I provide funding for all disclose they intend to resell. It is a long stretch legally to say it is fraud for the investor, who is the “purchaser”, to not disclose he has a contract to resell the property. The bank is either accepting or rejecting his/her offer based upon their other alternatives, such as incurring substantial additional foreclosure costs. The bank determines their own value baseed on BPO’s or appraisals THEY do. The purchaser/investor has no fiduciary responsibility to the bank. He/she is a business that buys and resells for a profit just like any other type of business you can think of. Do you expect that any other wholesale business of any type is under an obligation to pass on their contract to resell at a higher price to the finance company that funded whatever item it is that is being resold? It would be fraud it the investor paid off the BPO agent to artificially reduce the BPO value, but again the bank is determining value. Are we going to argue fraud for all types of wholesale operations that obtain a legal right to purchase any type of property just because the intend to resell for a profit?

15. Matt said at April 30th, 2010 at 4:39 pm

    Well…. I have to tell you that this article created quite a situation of panic for me the last few days! After speaking with many investors, and my real estate attorney, I have learned that you are in fact committing fraud by displaying this false information to the public as truth. I will say thanks though as you made me work harder to know my business better than I originally have but you may be legally liable for for certain damages if someone decided to pursue you. I am not an attorney but my wife is and her suggestion was to either take down this information or correct it and apologize to all that have read it.

16. Mariana Wagner said at May 7th, 2010 at 6:53 am

    Thank you for your comment. As I said in my article, if everything is disclosed, then there is no issue.

17. MARCIA said at May 21st, 2010 at 2:37 pm

    MATT,
    I was very glad to see your post, I am tired of all the name calling against honest, hard working investor, that invest time, effort, and resources in getting a property ready for a retail buyer, helping to stabilize this real estate market… Anyway, I was in panic as well.. because I know when things go wrong they want to blame someone…So would you be so kind to email me your attorney info, or maybe just point me in the right direction. I want to make sure i get my disclosures reviewd again. I would appreciate a good attorney recommendation. Thanks!

18. Mariana Wagner said at May 21st, 2010 at 5:21 pm

    Thank you for your comment. Although I disagree with your comment, I respect the fact that you are trying to be legal, regardless of your intentions. If you wish to communicate further with another commenter, please visit them on their sites (found by clicking on their name).

19. Mariana Wagner said at May 21st, 2010 at 6:02 pm

    Taken from the Freddie Mac Website:

    What is short payoff fraud?

    According to a member of Freddie Mac’s Fraud Investigation Unit, a slight variation of our general definition of mortgage fraud also defines short payoff fraud – “Any misrepresentation or deliberate omission of fact that would induce the lender, investor or insurer to agree to the terms of a short payoff that it would not approve had all facts been known.” Misrepresentations in these schemes may include the buyer of the short payoff property, a subsequent transaction at a higher price, and/or the selling borrower’s hardship reason used to qualify for the short payoff. In many instances, the short payoff fraud will involve a “facilitator,” engaged by either the listing agent or the selling borrower, to assist with negotiating the transaction.
    How is short payoff fraud committed?

    There are many variations of short payoff fraud. The example below is just one way this type of mortgage fraud can occur.

    * A seller (delinquent borrower) owes $100,000 on a property that is worth $80,000.
    * The short payoff facilitator negotiates with the bank to accept a $70,000 offer to purchase the property. In several instances, Freddie Mac has seen that this offer will be made directly by the facilitator or through an entity under his/her control.
    * The lender/investor accepts the offer for $70,000.
    * The facilitator neglects to disclose to the lender/investor that there is an outstanding offer between the facilitator and a second end-buyer for $95,000.
    * Both transactions close on the same day with the net difference being pocketed by the facilitator and increasing the lender/investor’s net losses.

    At first glance, this may look like a legitimate short payoff. However, in this example, the fraud is the failure to disclose the second, higher offer. The facilitator is willfully withholding important information the same way a scam artist would, and the lender does not realize they are walking into a premeditated short payoff fraud scheme. Because the facilitator is deliberately withholding the higher offer, Freddie Mac also experiences a larger than necessary loss on this sale.

    READ MORE: http://www.freddiemac.com/singlefamily/news/2010/0412_payoff_fraud.html

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