Short Sale Attorney Describes What Can Lead to Fraud Charge
Definition of Short Sale Fraud
Short sale fraud has become incredibly common due to so many home foreclosures following the financial crisis that began in 2008. Short sale fraud can involve a scheme to defraud a potential buyer or seller of a home. It can also involve a scheme to improperly obtain money from a financial institution. Typically, the most serious penalties are associated with any scheme that involves taking money from a lender, either directly or as a clear and likely outcome of the scam.
When you are accused of short sale fraud, it is imperative you understand your rights for responding to any criminal charges you face. A short sale attorney can help you to determine your best course of action when charged with a fraud crime related to the short sale of a home.
Bukh Law Firm has represented many clients involved in short sale scams and other types of real estate schemes. Our attorneys bring legal experience and extensive knowledge of federal laws to the table. Call today to schedule a consultation and learn more about how we can help.
Types of Short Sale Fraud Schemes
There are a wide variety of different kinds of short sale fraud schemes. The simplest scheme involves a conspirator making a very low offer on a home. The offer is presented to the lender, who treats the offer is bonafide and accepts it. The lender receives less than should have been received for the home, and the conspirators end up with a house at a discount.
It is also possible for more complex schemes to occur. Short sale scams can include:
- Off-the-books transactions. All money that changes hands as part of a real estate transaction must be listed on the HUD-1. If it is not, this can prompt the F.B.I. to investigate potential short sale fraud. In some short-sales, off the books deals are made in which agents reduce commissions, attorneys work for lesser pay, or other financial dealings occur. Whenever a transaction takes place off-the-books, someone benefits from the hidden money, making these transactions a type of short sale fraud.
- Second lender scams. Second lenders may refuse to approve a short sale unless a buyer meets a demand for cash. Since the first mortgage holder has the first claim to the proceeds of a foreclosure or sale, second mortgage holders may not receive any money when a home sells for less than what is owed. A second mortgage holder may convince the buyer or seller to make payments directly to the second lender, or the listing agent may agree to pay the second lender out of commission from the sale in order to get the deal approved.
- Reverse staging. With reverse staging, a home is made to look distressed because fixtures and appliances are taken out of it. The house is appraised for a low value and sold at a discount price to a co-conspirator. After the purchase has gone through, appliances, fixtures and other items are returned and the house is then sold at a higher price. The co-conspirators benefit and the mortgage lender loses out on the money that could have been received if the home had not been stripped down.
- Flopping: This scam involves a realtor presenting a low offer to a mortgage lender while failing to disclose a higher offer that has come in. The lender may agree to the short sale and the home is then resold almost immediately to the person with the higher offer, netting a profit for the realtor and homeowner and depriving the bank of thousands of dollars.
- False short sale service scams. People market their services as short sale “negotiators,” or as processors, expeditors, or coordinators. Promises are made that may not be kept and a desperate home buyers ends up paying money to a person or business who does not provide the advertised services during the short sale process.
Penalties for Short Sale Fraud
Penalties for short sale fraud vary depending upon whether you face state or federal charges and depending upon the type of short sale scams you allegedly participated in. You could face charges of bank fraud, wire fraud or mail fraud on the federal level as well as charges of residential mortgage fraud under New York penal code. Arms-length clauses typically must be signed under penalty of perjury, so perjury charges are also a possibility.
The penalties for any one of the offenses can be serious, but it is not uncommon for the defendant to face multiple counts in an indictment. Bank fraud and wire or postal fraud can each result in 30 years imprisonment and a $1 million fine when a financial institution is involved.
Get Help from a Short Sale Attorney
Bukh Law Firm can provide you with legal representation if you are accused of participation in short sale fraud schemes.
Call an attorney for help as soon as possible to learn about defense options and responses to accusations of short sale fraud.